Ladies and gentlemen, good day and welcome to the Q3 and nine months FY 2025 results conference call of Bajaj Consumer, 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 and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhuwania from ICICI Securities. Thank you, and over to you, sir.
Thank you, Larry. Good evening, everyone. It's our pleasure at ICICI Securities to host Q3 FY 2025 results conference call of Bajaj Consumer Call. From the management, we have Mr. Jaideep Nandi, Managing Director, Mr. Dilip Kumar Maloo, Chief Financial Officer, and Mr. Richard D'Souza, AVP Finance. I'll hand over the call to management for the opening remarks, after which we can open for Q&A. Thank you, sir.
So thank you, Karan, and good afternoon, everyone. And thank you for participating in this Q3 FY 2025 earnings call. First, let me apologize for this delay of half an hour. Actually, the board meeting got a little delayed because the board was deliberating on a special matter, and I'll cover this in the later part of my opening remarks. So before that, let me take you through the company's performance for the third quarter and the nine months ended December 31, 2024, before we open the floor for questions. The consolidated sales for the company stood at INR 230.7 crores for the third quarter and INR 703 crores for the nine months ended FY 2025. Consolidated sales declined by 2.4% in quarter and 4.2% for the nine months.
Gross margin for Q3 FY 2024 on a standalone basis stood at 61.8%, lower by 150 basis points year-on-year, while on nine months, the margin stood at 53.2%, lower by 97 basis points. The contraction in gross margin was partially on account of lower margins in coconut oil portfolio. While we took a price increase in Q3 in coconut oil portfolio of about 5%, it could not completely offset the higher copra price inflation during the quarter. Subsequently, we have taken another round of price increase in high single digits in the portfolio in January 2025 to mitigate the cost inflation, and we plan to take further price increase to cross the inflation that has been seen in the copra prices. Also, higher salience of coconut oil also resulted in a little bit of gross margin dilution.
The standalone EBITDA for the quarter stood at INR 29.3 crores, while for the nine months, EBITDA stood at INR 102.5 crores, with margins of 13% and 15% respectively. The EBITDA margins for the quarter were impacted year-on-year on account of a combination of specific factors like gross margin dilution, as explained above, investments in Project Aarohan for improving our representation reach and ways of working in GT channel, one-time investments in IT infrastructure in Q3 for improving our technology enablement, and increasing number of ISRs to improve retail coverage. The standalone profit after tax stood at INR 27.5 crores for Q3 FY 2025 and INR 98.7 crores for nine months FY 2025. GT channel registered a single-digit decline in Q3 FY 2025 and nine months FY 2025.
On a sequential basis, secondary sales grew by 4%, driven by marginal growth in retail and double-digit growth in wholesale channel, and we see wholesale stabilizing now as a result. Initiatives were taken to reduce inventory levels also of distributors by four days in the quarter to improve ROI. The secondary sales for the quarter was higher than primary by INR 7 crores. Our Retail Loyalty Program registered a growth of 27% for Q3 FY 2025 and 35% for nine months FY 2025. The program contribution now stands at 11% for Q3 and nine months FY 2025, and this will continue to remain a focus area for the company. We have been streamlining our distribution network to improve efficiency and reach. Our Arohan network during COVID period, which was crucial for reaching remote rural markets, is now being optimized to also optimize costs.
High-throughput vans are being converted into direct coverage through sub-stockists based on Project Aarohan recommendations. Further rationalization vans are expected to be done in Phase II of Project Aarohan, which would lead to further optimization of costs. While van rationalization has resulted in some temporary disruption business, we expect the rural sub-stockists business to streamline and deliver strong performance going forward with rationalized cost savings.
In relation to improving quality of distributor channel, we have automated the appointment and separation process via new workflow enforced through technology enablement, where we have incurred quality costs. The RTM revamped Project Aarohan has made significant progress as of December 2024 and is now operational across entire states of UP and MP. Representation changes have been identified in terms of sub-DB to direct DB, van and satellite coverage to sub-DB.
Nearly 90% of these identified changes have already been actioned upon in both states of UP and MP. Similarly, a large number of previously unrepresented towns have been brought under coverage. Direct reach has also expanded substantially, with UP coverage increasing from 42,000 to about 58,000 outlets, which is about 1.4 x, and NP from 15,000- 24,000 outlets, which is about an increase of 1.6 x. These changes are expected to increase sales significantly in the near to medium term. In the Phase II of Project Aarohan, we plan to cover all other major states in India over the next four quarters. Our geotagging initiative has made significant progress with all 3.3 lakh urban outlets now geotagged and geofenced. This initiative will help us to enhance sales for efficiency and optimize cost of sales in coming quarters.
The organized trade business continues to register a robust growth of 22% year-on-year in Q3 and 14% for nine months FY 2025. Modern trade channels registered a growth of 10% led by BYOL activations, with ADHO achieving an impressive 18% growth in the channels, while value-added hair oils in D-Mart saw a decline. Bajaj was the only brand to record growth, gaining 300 basis points share. The launch of 525 ml bottle Bajaj 100% Pure Coconut Oil in all resulted in 44% growth in Q3 FY 2025. Modern trade B2B posted a 40% growth, driven by the addition of 175 new stores in Metro Cash & Carry. E-commerce channel continued to witness robust growth of 39% in Q3 year-on-year and 28% in nine months FY 2025.
Quick commerce, which has been a focus area for the company, grew by 72% year-on-year, contributing to 10% of their business compared to 7% last year, with Swiggy and Zepto recording their highest-ever secondary sales. Bajaj 100% Pure Coconut Oil registered a growth of 40% year-on-year. ADH Lotion achieved its highest secondary sales in Q3 FY 2025. Nykaa recorded its highest-ever offtake in Q3, driven by ADHO and NPD. CPC and CSD institution sales grew by 25% in the quarter. Growth in institutional was enhanced by cross-category consumer promotion activations.
International business on a consolidated basis registered a growth of 23% in the quarter and 19% for nine months FY 2025 year-on-year. Bangladesh doubled its top line in Q3 year-on-year, registered 49% growth for nine months FY 2025, despite political challenges in the country. Digital engagement activities generated significant reach with seven million engagements and 13.7 million impressions in Q3 FY 2025.
Steady growth was witnessed in GCC and Africa. UAE and Lower Gulf saw a healthy growth of 31% for nine months. Opening of new markets in Iraq, Pakistan, and Angola aided this growth. We launched our first-ever ATL campaign in UAE to raise awareness about hair fall reduction, reaching about 2.3 million consumers with CTRs of 65% across YouTube and Meta platforms. The rest of the world registered a growth of 12% year-on-year and 26% on nine months. This was broad-based across countries with +5 countries: Australia, Canada, Malaysia, Tibet, and the U.S., constituting 73% of the business, growing at 35% year-on-year. Nepal grew by 5% in Q3 year-on-year and 28% for nine months, supported by launch of NPD's outdoor visibility and in-store promotions of CNO, Virgin CNO, and Kailash. The digital influencer engagement for Virgin CNO achieved a reach of 5 lakh with 7% engagement.
During the quarter, we launched our new ADHO campaign featuring Kailash Advani. The launch campaign delivered 840 GRPs with a 21% share of voice in the HSM market for Q3 FY 2025. This comes from the backdrop of overall lower TV spend by hair oil companies in the quarter. In digital, we reached a reach of about INR 2.5 crores on key OTT platforms. A&P was increased 190% sequentially on account of the new TV media ad.
ADHO witnessed a single-digit decline year-on-year, while on a sequential basis, it remained flat. Large and mid packs continued to perform better than the small packs. New consumer offers resulted in good traction in large packs in markets. This quarter, we also introduced a 24 ml pack of INR 10, which is with an improved value proposition and size perception for consumers. This will help in recruitment of new consumers for ADHO.
The AD hair and skin range is scaling up well, registered a strong growth of 50% in the quarter and 39% growth for nine months FY 2025, led by growth across major platforms. Regimen kits introduced for AD shampoo and conditioners saw positive momentum from activation in large e-commerce players during the festive season. AD body lotion sales on e-commerce were boosted by a new pack launch and influencer marketing campaign. AD soaps grew by 14% in [audio distortion], and on is performing well on Flipkart.
AD serum saw a high single-digit growth in Q3 and 16% overall. Bajaj 100% Pure Coconut Oil registered a growth of 8% in Q3, 19% for nine months FY 2025. The product has been scaling up well and has reached an all-India market share of 2%. The brand has attempted strong growth to double-digit market share in traditional Bajaj stronghold states of Punjab, Rajasthan, and MP.
Maharashtra has also been seeing growth in market share. We also launched, as we had mentioned, 525 ml in CNO, which has boosted offtake by about 25%. Moving on to input costs, LLP continued its downward trend in Q3 due to reduced demand and lower crude oil prices. However, it is getting offset by refined mustard oil, which has increased due to higher import duties on edible oils.
The global edible oil also saw price increases. Copra price has increased substantially over the past two quarters. The company is taking steps to improve gross margins and profitability structurally. While we have taken rounds of price increases in CNO, including in this quarter, we'll keep taking further price increases for the same product going forward. Also, we are planning to take graded price increases in ADHO in the coming quarters to further improve margins on the same.
Structurally, we are also rationalizing our trade inputs and incentive structure as well to make them optimal. These measures will improve our overall profitability going forward. Multiple initiatives have also been taken to reduce material costs and structurally, which will give us substantial benefit in the long term. The initiatives taken during the year have resulted in a saving of INR 3.3 crores in the first nine months of the financial year. Our focus on increasing productivity through smart manufacturing and use of technology has resulted in improvement in productivity by about 5% in Guwahati plant and about 13% in Paonta . Our activity also continues to do well with 12,000 families impacted over 600 villages. As part of our ESG commitment, we are on track to meet the short and long-term targets in all the key resources, both from the demand and supply side.
Rainwater harvesting has been done for the last few quarters, resulting in replenishment of groundwater to the extent of 500% of our water consumption. We are confident that our investment in expanding and rationalizing our distribution network through Project Aarohan, continued thrust and diversifying our portfolio and scaling up of organized trade and international business will be strong growth levers for the organization for sustainable growth for the near- to mid-term.
So while urban demand remains sluggish, rural demand has been showing some improvements. The recent union budget tax relief for middle class is expected to increase disposable income, leading to higher consumption, consumer spending on essentials and discretionary products. Focus on rural development for agriculture with enhanced agricultural productivity is also expected to improve rural income, which bodes well for the industry as well as for the large consumer group.
Now to share some exciting development, we have just signed the share purchase and shareholders agreement, which is SPSA SHA with a 100% stake in Vishal Personal Care Private Limited, a leading personal care company with presence in all southern states of India, having their flagship brand, Banjaras. The company was established in 1991, is a trusted brand with strong presence in natural space in the hair and skin care range in South India. The brand offers a wide range of high-quality products. It's built on strong business fundamentals and consumer liking. Banjaras has demonstrated strong performance with 14% revenue CAGR over the past four years, coupled with high gross margin, healthy EBITDA margins, and a debt-free balance sheet with positive cash flow. Now, let me take you through the rationale of this acquisition.
Firstly, the market of natural products in the BPC product space is significant and is expanding rapidly. Natural BPC products make up about 40% of the total BPC market and is growing 1.5 times faster than the overall market. This bodes well with BCCL's traditional and Indian heritage brand traditions. Secondly, Banjara's general trade distribution reach through cosmetic stores, pharmacies, and groceries all across five southern states substantially adds to BCCL current distribution in southern states, thereby increasing our distribution to near threefold for our existing brands as well.
Thirdly, with a wider portfolio offering from Banjaras, we'll be also able to exploit BCCL's wide distribution in HSM markets for the same. And finally, another potential revenue upside will be leveraging BCCL's expertise with Banjaras' products in the organized trade as well as in international markets. In both of them, Banjaras do not have any significant delivery for any brand.
So now let me move on to the deal structure. The purchase consideration for the deal is estimated at about INR 120 crores at a pre-money enterprise value of INR 108 crores, which is a multiple of 2x on a trailing 12-month revenue basis, on a yearly basis. So it's a multiple of 2x on the revenue. In the first tranche, we'll be acquiring 49% stake in the company. The balance, 51%, will be acquired in the coming three to four months subject to completion of the closing conditions. So we are delighted and very happy to welcome Banjaras within the BCCL family and are excited to unlock the next phase of growth with them. With this, I end the opening remarks and open the session for questions. Thank you.
Thank you, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. A request to participants, please restrict yourself to two questions so that the management can address as many participants as possible. If you have more questions, kindly rejoin the queue. The first question comes from the line of Rachna from Centrum. Please go ahead.
Okay. Am I audible?
Yes, you are.
Yes. Sir, in the previous calls of FY 2023 and FY 2024, we have mentioned to achieve high single-digit to double-digit growth in the near term, but that's not visible. So can you explain us in detail what challenges we have faced and what is stopping us to generate good sales growth? Second is, other expenses are increasing, even though the sales growth. What are those expenses? And you also mentioned we are being taken some cost reduction. So please explain that in detail, what measures are we taking? Third is with respect to the Banjaras acquisition.
Two questions, please. So just prioritize the two questions that you want, please.
Okay. Please tell us about the low sales growth and why the other expenses are high. And what cost reduction measures will we be taking?
Thank you. So as far as the sales growth is concerned, very clearly, as you have seen, the hair oil industry, especially the value-added hair oil segment, if you read the commentaries of other companies as well, while the only product that has been growing in the hair oil category is the coconut category.
All other hair oils, if you see commentaries from other companies, also have been under stress. Almond Drops is a premium hair oil in the value-added hair oil category, so obviously has a stagnant range. We have taken enough corrective measures. We are further taking corrective measures in terms of increasing our advertising spend from the brand, etc., while we'll also take some price increases and rationalize the cost to ensure that our EBITDA margins are protected.
So this is a step that we are taking. The other thing that we have already done, as you've been hearing, is in terms of Project Aarohan, we have been continuously working to ensure that our entire RTM for general trade, because all the pressure that is there is only on general trade. We have corrected the wholesale. The wholesale is slowly coming back. We had seen these are changes that take some time to adopt. It cannot happen overnight. So we wanted to ensure that the large wholesalers are controlled.
I think a lot of good hygiene work has happened. Now we are seeing both in terms of number of wholesalers as well as in terms of wholesale itself coming back. It does take time, but now it is already on track. Similarly, for in terms of retail presence, we had already had an aim that we wanted to take it. Now we have structurally partnered with a consultant, which we'll be doing for the next four quarters as well. And there are already some positive signs we are seeing in UP and NP, and now we are going to extend it to 30 more states. Coming to your cost structures, yes, you're absolutely right.
Certain costs have gone up, especially if you look at if you break it up in certain areas. The cost will look the same. One is in terms of employee cost, because there has been no increase in terms of employees, etc. It's just that there is a bit of higher percentage fill as far as employees are concerned, which is making a little bit of a difference. But the bigger difference is obviously a delivery thing, where the sales have not grown and the employee cost has had an annual increment. That is what has taken a blip at this current moment. This will get corrected as the sales normalize and come back in the next few quarters.
The other area you will see is in the other expenses, admin expenses especially. So as I had mentioned, two things are going on. One is a continuous thing where Project Aarohan is going on. So there are some additional investments as far as Project Aarohan is concerned. So this will continue for some more two to three quarters more. Specifically, one-time investment has been made in IT, certain things like e-invoicing and e-way bill, cloud application protection, geofencing, central managed and detection response, and higher DMS support. All of this we have done this way. We had to do these corrections. We have done it in this quarter. We could have split it across quarters, but we have taken this. This has also resulted in this. This will normalize in the next quarter and it will be coming back. Thank you.
Hello.
Yes, Rachna. Those were your two questions. If you have any further questions, please rejoin the queue.
Okay.
Thank you. The next question comes from the line of Vijay Bharadia from Honest & Integrity Investment. Please go ahead.
Yeah. Hi, sir. Thanks for providing the opportunity. And congratulations for the new acquisition. I hope it works out well. So I have a question on so if we look at FY 2020, you had EBITDA of around INR 200 crores, and now we are on run rate of around INR 140-INR 150 crores. So there is a delta of INR 50 crores. Now, if I want to look at it that way that between Almonds and the new and non-Almonds portfolio, do you think that it is majorly contributed by declining profitability of the Almonds portfolio? Or if you can just broadly give us the breakup, especially this INR 50 crore decline that has happened, is it because of the Almonds oil decline in profitability or due to other products?
Fair question. So, if you look at in terms of structurally, if you are investing in a consumer product, if you are looking at either a new product range or an acquisition or into your market or modern trade international wherever, where you are investing, you will typically go through a four- to five-year cycle before they start yielding results. So these are the investments that have been made.
So there are two parts of your two parts to answer two-part answer to your question. The first part is investments for growth that we have made. And if you would have seen, we have made significant progress in all the growth levers that we have pushed, whether be it in product diversification, within channel diversification, or whether be it in international markets. Wherever all of these places we have invested for growth, and now the growth has slowly come in.
Some of the products like coconut, etc., have been doing very well. I mean, now it's just a question of as the business bulks up, then we have a little better pricing power as well, which already we are seeing a bit of it. Only thing is we need to be a little smarter in taking the price increases on time as the commodity prices keep going. Because this is a commodity product, we need to just be a little more smarter. That's about it as far as the products are concerned. Some bit of investment has gone into that. There has been a dilution as far as this. But this was a planned thing. If you really want to make it a company from a single product to a multi-category, multi-channel, multi-country product, this is where it was.
So this acquisition is also fitted exactly in that sense where you wanted to get into a market which is underrepresented as far as we are concerned. Earlier, we never had a product range which could really cater to the South market. Now we have enough products, including other good brands that we have established, which will go through the Southern market. With our DCOs that we have in the market is about 27,000-28,000 in the entire five states of South. With this, it will straightaway go up to 80,000 odd . So straightaway we have an advantage of having a far larger district as well to sell our products. So those actions have happened. As far as ADHO is concerned, yes, you are absolutely right.
But if you look at the trends as far as the last five years is concerned, the value-added hair oil category has faced headwinds. So there has been a lot of bloodbath in the marketplace in terms of in this value-added hair oil category. And you would see that from commentary of most companies as well. So hence, we being a single product dominated in that hair oil category, obviously our margin looks directly flows into our P&L directly like that. If there were companies where there are multi-brands, multi-categories, this part of the portfolio gets a little hidden. But if you were to cut it out and look at this thing, none of them would be faring any better. So yes, we were in the downward cycle of demand as far as this product is concerned.
But now as we feel that the cycles are slowly starting to turn, maybe not yet, but with the government budget, etc., as we see turning, all these investments that we have made will now be able to see. And also we will be able to see the results slowly coming out. And also, I had also mentioned during my presentation that we are also looking at some structural corrections as far as Almond Drops is concerned in terms of price increase and investment back into the business. So that is also the other strategic direction we'll take.
Yeah. Yeah, yeah. So I understand that you have invested in a part of the decline in EBITDA in absolute terms would be because of that. But I was just trying to get a sense from the on the fact that how much is it majority because of the Almonds decline in gross margin of the Almonds portfolio or EBITDA?
Almonds portfolio would have declined a bit, not really much. It is more the investments for the future.
Thank you. Got it. Understood. That's it from my side. Thank you.
Thank you. The next question comes from the line of Kaushik Poddar from KB Capital Markets Private Limited. Please go ahead.
When can you get back to that 15%-17% margin that you have spoken about in the previous con calls?
So the 15%-17% margin was just an aberration in this quarter itself. The last quarter, you would have seen that consistently we have delivered 15%-16%. I don't think this was just an aberration. You should be, as I said, we had made it was in a downward cycle for both. Both in terms of the corrections that we have made, some of the results coming in have slowly started to trickle in, whether be it the wholesale corrections, whether the investments in terms of feet on ground that we have increased, whether the rationalization of vans, which are now being converted to sub-Ds.
So cost structurally, we have done all these corrections. So the results will obviously slowly flow in the next quarter or two. But these are the investments. Plus, we made those one-time investments as far as the IT requirement and development base that is concerned. So this is a blip that has happened. You'll see this coming back quickly. So that should not.
So we should be around 15% from this quarter onwards and progressing further. That's what you are suggesting.
I would not like to give any forward guidance on that, but you can assume from the structural direction that we have taken, that is where we should be looking at even more going forward. Yes.
Okay, and this value-added hair oil being a substantial part of your portfolio and that category having not done well for the last few quarters, do you see the challenge there? Is the market landscape changing for this value-added hair oil?
If you look at it in the last few quarters, I mean, slowly we are seeing the demand cycle slowly coming back. While it was quite under stress last year, slowly we are seeing the hair oil category itself coming back in terms of growth as far as the numbers are concerned. Obviously, it is still led very much by coconut, but we can also see value-added coconut slowly trudging back.
Given that this kind of announcement has happened from the budget where we feel that there will be more participation as far as discretionary spends are concerned, we feel we are quite buoyed that Almond Drops also should be able to see a benefit out of the demand cycle reversal.
What is the timeline for this new acquisition being consolidated in your accounts?
So this acquisition, as I said, 49% will go with the first tranche this quarter itself. By the next quarter, I mean, we have announced next financial, but we'll aim to finish it by three to four months, the entire acquisition.
Okay. Thank you. I'll ask my questions later. Okay.
Thank you. Thank you.
Thank you. The next question comes from the line of Gaurav Gandhi from Glorytail Capital Management. Please go ahead.
Yeah. Thanks for the opportunity. Just one question. Around this new acquisition of Banjaras, which is more into Southern market, what are your plans to take it pan India? How are you looking at it to grow?
So as I said, there'll be four prongs to the strategies. The first and foremost is where we see synergies coming in as far as our company is concerned. We feel that we ourselves can substantially add value to the Banjaras brand and make it much larger in terms of just in terms of sheer, let's say, all the other back-end benefits that we can provide as a much larger company to the company.
Banjaras itself, we feel that from the 50-55 crores of annual revenue that they do in the next two years, that can be scaled up substantially. Banjaras in the Southern market. The second benefit we see clearly is where the Bajaj brands that are today available can go into the five Southern states where our distribution scale-up can straightaway go to about 3x. I mean, that is the kind of numbers that are looking at. Clearly, there are some products which can go into that market. That clearly is the second growth lever that we see. The third growth lever, obviously, as we see, is that in terms of modern trade and e-commerce, I just told you that we have now a 30% share in modern trade, which was about 5%-6% about five years back.
This is exactly where Banjaras are or even lower, and that clearly, we have the expertise now in modern trade e-commerce with our full team. Banjaras are also they are also very excited that we can add value to their product range in that market. Because as you are aware, South is a large modern trade salient market, and e-commerce largely is set out of Bangalore. So a lot of benefit can come out of modern trade and e-commerce, as well as the international markets. We see there is some scope as far as the Banjaras product is.
The last one is where your question is specifically. We also see some of the products like Multani Mitti, etc. These are products which are face packs, etc. These are basically northern products more suited for the northern markets which are now going into the Banjaras. We are also looking at how that can be scaled up in the northern market. S o the four-strong strategy, we see there's a large opportunity for growth upside as far as all these are concerned.
Okay. Great efforts, sir. Hope to see the results in the revenue growth soon. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Rachna from Centrum . Please go ahead.
Okay, so sir, the acquisition that we have made, the Banjaras acquisition, what gross margin level is it operating at? And how are the ad spends compared to our ad spends? So the gross margin.
Yeah, yeah. Okay, so the gross margin that this company has consistently operated for the last four years is about 60%. So it has remained between 59.5 or 59-ish to about 60 and a half-ish, so they have consistently maintained that. They have a large range of product categories that they operate, and all of them operate at these kind of, so they have a face pack range, they have rose waters, they have other skincare products, they have black henna, natural henna, and other hair care products.
That is roughly where it is, and all of them are between 15%-25% kind of a margin, so very well distributed and very well controlled products.
Sir, please continue.
So coming to our ATL cost, so this company had made large ATL investments in FY 2022, and after that, they have scaled it down, so now they operate with a mix of ATL and BTL, where the ATL is substantially lower, but BTL is much more. They also have to remember they have beauty advisors at their places. So a lot of it is also sold at the beauty, the way the beauty advisors sell, at the shop, at the point of purchase conversion.
So they are extremely adept at that, and they are also very, very efficient in terms of churn of the new products. So with their beauty advisors, they are able to monitor what kind of trends are happening as far as the new products in the various categories, and they are able to churn out newer products and also scale up the older products. The other great advantage of this company is this is a completely secondary sales-focused company. So only when the distributor, so they only do replenishment of stocks of distributors.
So in that manner, they are actually even better than a company like Bajaj, where this is a very well-managed, efficient company in terms of stocks, etc. So they have a complete channel management in that sense to ensure that there is not too much of, let's say, bad stocks or obsolete stocks that happen. So great NPD work and as well as great inventory management.
Yeah. Okay. So how are these products positioned as compared to Bajaj?
So they are not comparable to Bajaj in the sense because that's not a category we are really into. But if you look at, they are more in the Himalaya range of kind of pricing, just a little lower, but considered to be, let's say, premium, not a super premium, but just a little higher than the local ranges, etc. So that's where they are. That's why they are on a 60% gross margin.
Does that answer your question, Rachna ?
Yes.
Thank you. A reminder to all participants, please press star and one to ask a question. The next question comes from the line of Karan Bhuwania from ICICI Securities. Please go ahead.
Hi. Good evening, sir. So firstly, I wanted to ask on Project Aarohan, right? So we have already implemented in a couple of states, UP and MP, right? So just wanted to understand what are the green shoots we're seeing in terms of, say, I understand we have expanded distribution into presence, etc. But what are the green shoots we're seeing in terms of sales as to how has it performed over the last couple of quarters? If you could share that, that would help me.
So good question, Karan. I mean, I think we started the Project Aarohan quite some time back, and we implemented in a phased manner in both UP and MP. We did not take full UP and MP in the beginning because we wanted to ensure that all of it is monitored. So we have a Project Aarohan team of our own, and there is a steering committee there as well as we have a project manager of Project Aarohan, while PwC's own people are also fully involved. So now the entire states of UP and MP are covered. The objective was to ensure that we ensure that everything that is required as far as improvement in the route to market is in place.
So in terms of rationalization of distributors, in terms of conversions of sub DBs to direct DBs, satellites to sub DBs, rationalizing of vans, which we knew that would result in reduction of sales, cost to sales will improve. Neither will happen immediately, but all of them will over time as you convert and rationalize the vans and add them into the sub DB network. As it stabilizes, it will give you advantages.
So all of these actions, as well as both UP and MP, is now about 90% completed. 90% as in what was identified as Project Aarohan and now agreed by Bajaj. Project Aarohan, say, you know, nickel cut out and which we had presented and he saw and then finally said, "Okay, these are something that we'll take up." 90% of those have been now already implemented.
So just to give you certain numbers, let's say the number of unrepresented towns, etc., 475 has gone into 658 towns that we have now taken into coverage. As far as UP is concerned, from 92, about 112 as far as Madhya Pradesh is concerned. I talked about coverage expansion of direct reach of UP and MP. UP went from 42.4 outlets to 58.6 outlets. That's about 1.4x .
And MP from 15,000 outlets to about 24,000 outlets. So we see great progress that is happening. Obviously, numbers will not immediately show up because these are all in the stabilization process. So now all the investments are happening. So we have put feet on the ground, foot on ground because to service this larger number of towns and this thing, etc., you'll require more people.
But as they stabilize and as they see, you'll start seeing the numbers slowly and strongly flowing in. And given this, as we see and as we are so confident that this has been a successful path going forward, we are now extending it to five more states now, eight more states now, and a few more we'll add at the end of the third quarter. So for the next four quarters, we will aggressively push this so that then this entire attempt where we were trying to ensure our retailing initiatives become stronger, whereby we are program outlets, etc., that programs, that retail loyalty programs, etc., now we are structuring within our own with a project managed by a consultant.
So we wanted more on-ground execution project rather than a strategy product because I think as a company, we required this intervention more than a strategy project. I think we have had fantastic results coming out of this. Going forward, we feel that as it scales up in the other states, we'll see very good results coming out.
Awesome. Thank you. That's very helpful. I'll come back in the queu . Thank you.
Thank you. The next question comes from the line of Raj from Arjav Partners. Please go ahead.
Hello. Am I audible?
Yes, you are.
Sir, how much growth are we expecting for the full year FY 2026 and FY 20 27 looking at the initiatives which we have done?
Two things. One is, first and foremost, I wouldn't be able to give you forward statements like this. But I can tell you all the growth that we have pushed and the kind of interventions further we are taking. See, if you look at the overall picture because of the market conditions, etc. The main area where, and obviously that is not only a main area, that's where the large fall has happened, is basically ADHO in general trade. Other than that, every other lever that we have pushed is working well, including ADHO in the modern trade, e-commerce as well as in international markets.
One of the biggest focuses now we have is to ensure that the core becomes far stronger. One exercise is ensuring that the wholesale destabilization that was there is slowly taken up. We knew three quarters back itself that it will have a little mid-term-ish pain area. Two, three quarters, we'll have to suffer before wholesale slowly starts coming back. It was not unknown to us. You have to make that intervention to ensure that in the long term, the company benefits.
So now that has happened, and that's why you have seen this Q2 to Q3 wholesalers already had a double-digit growth. On the other side, retail, which has been not a very strong area for the company, we have been taking initiatives at the company level itself, and a lot of work has happened, but we have really not ever done it to a structural manner. It was more internally done. So structurally, this was identified, and that is what has been going on. So we feel that is also going to a good level. So as far as GT is concerned, a lot of good work is happening. ADHO itself, we are looking at intervention in terms of increasing investments as well. ADHO is concerned how we will fund it.
Maybe we'll have to take pricing through ADHO a little more rapidly to ensure that we are able to fund it. That's the path we are planning to take going forward. So as a result, you will see ADHO and general trade, and obviously, you'll require some kind of a turn as far as the demand conditions are concerned. As long as that is concerned, that happens, and all the other growth levers are pushed, I think we are in for a good. I cannot obviously promise any number, or I can't even give any forward guidance. But clearly, 2026, 2027, we should be seeing some good numbers.
All right. I was just trying to understand all these initiatives which we are taking. So when all these initiatives will get converted into numbers? So you are saying FY 2027 will be the year when we can see some good growth in numbers, right? So, FY 2027.
Any commentary on that? Because all of these are initiatives which take time. These corrections, maybe you'll see results a little more earlier in terms of the initiatives as far as RTM is concerned and some of the others. But in terms of developing brands, etc., you have seen coconut already go beyond INR 100 crores, etc. So those kind of products will slowly take time, and we are in the right path. I mean, you will see in the last five years, there are no products which have been launched by companies which have scaled up to INR 100 crores plus in the personal care space. I mean, obviously, there'll be quite some misses, my thing, but I think some work has happened.
I think those will have to give it time now. Slowly, time is coming slowly to mature and fructify. If we keep investing in these, I think we should see results. I mean, international market has been doing very well. This can give us good growth. So in terms of the consolidated numbers, you should see good numbers coming up. It will require some investment, yes, but I think we should see growth. So I will not say go to FY 2027. Let's look at even FY 2026 positively.
Understood. Because overall, it is a concern for the investors because the sales have been flat for the last couple of years. And if you compare your peers, they have grown well. Only we haven't been able to scale up. That's why I've been asking about.
As I explained, you'll have to look at it a little more, cut it into categories and see how the growths are. With a multi-category company selling multi-segment in multi-category, multi-segment companies versus a single category, single segment, you will have to, if you want to do a like-to-like comparison, then you'll have to look at how this particular brand, which is in a single category, single segment, has operated against their peers.
And I would like to think overall in that sense, we have done pretty well. Yes, there'll be some misses here and there, which is so for the others as well. So that's where we are. It's a fine balance, and I think we are coming out of that balance and now looking at growth getting delivered in the future.
All right. Okay. All the best. Thank you.
Thank you.
Thank you. The next question comes from the line of Amit Hajeja from Haitong Securities . Please go ahead.
Good evening. Am I audible?
Yes.
Thank you for the opportunity. So my question was connected to international business. What are your top markets, and how do you plan to expand further?
International market has been, as we had said about five years back, that we wanted to take on the international market after we had got into modern trade, e-commerce, newer products, etc. We got into this journey about three, three and a half years back. And initially, we had a small operation in Dubai and in Nepal, and that's about it. In Bangladesh, we're doing some exports. We had closed down on operations. We started operations in Bangladesh. Bangladesh has been scaling up very well.
We feel there is a huge potential as far as Bangladesh is concerned because demographically as well as usage-wise, it's very similar to India. They have a higher preference for coconut, for sure. But there is a clear opportunity as far as ethnically, there is a clear opportunity as far as ethnicity. The Middle East market is another focus market for us, and Middle East is not only just UAE nor GCC. Middle East is Middle East, which would mean all the other surrounding markets, whether it be, I mean, extended Middle East of Afghanistan, Africa, and parts of, let's say, North Africa, etc. So I think that's the market which has great potential for us. The third market, which I am personally bullish on, and we had mentioned it last time, is the U.S. market itself. That's a large export market, huge diaspora.
Most of our competitors, huge amount of business. We have tied up with one of the largest FMCG distributors in the U.S. in the last quarter or last one and a half quarters or so. And I think that I personally think is a large opportunity as far as, in fact, it has come to a certain stage where now we are looking at using digital advertisement in the U.S. market to ensure that we can create further demand other than organic whatever demand is there. Another market which is of our interest to us is Malaysia. That's another market where there is an ethnic Indian population. So they are not Indian, Indian in a certain sense, but at least there is an Indian diaspora, not diaspora, ethnic Indians out there. So that is a market also of focus, which is what we are also focused.
Quite a few markets and levers we are pushing other than our standard Nepal and all over the world, which has fallen also. We clearly think that international, if we play out well for the next three, four years, can easily go to good low teens, high teens, even to the 20%s of our contribution. But we need to play it well. That is clearly an opportunity and easily doable, which we have also demonstrated in the last few weeks.
So what is the present contribution of the international business?
It is higher than it is close to 7%, and we are taking it up from about 2%-2.5% to about 7% in the listing. And we personally think that we can easily continue to scale up. The growth of international market is about 37% in the last three years with CAGR. Obviously, CAGRs are not that strongly relevant because the bases are low. But I think this is the direction that we have. But more interestingly, more comfort-wise, I think I would like to say two things.
One is sequentially, as well as in terms of CAGR, in terms of on a continuous basis, the growths have been very healthy. The other thing is geographically, the growths are healthy. It is not driven by one geography, but across all the geographies that you see. And it's part of the presentation as well. All of them have been doing well. We have been working on each of the geographies. We were penetrating in South Asian markets, and they have been doing well. So that gives us confidence that going forward, international market can deliver good results.
And so, my last question was connected to: Is the company coming up with any product innovations in the pipeline connected to other things other than personal care?
At this moment, we would like to consolidate our position in personal care. Personal care market itself is so large. We would like to focus on that. And plus, with this acquisition of Banjaras, we have a large number of newer products that come into our portfolio. That is something that we would also like to exploit and explore across the country as well. So there is enough in the pipeline. Yes, we'll continue to. Our R&D function is pretty robust. They'll continue to innovate, continue to look at newer ranges, whether it be in terms of Almond Drops itself, what can we do on Almond Drops itself, or some of the other ranges.
Yes, that work will happen, but we'll also look to consolidate the kind of products that we have already launched. Also look at the new member that we have gone into our fold now, look at how we can exploit that. So our focus will be more on this, and also looking at some opportunities. Innovation work will continue, but the focus will be to ensure the existing range is more put into place.
Thank you for the explanation, sir, and all the best for the future.
Thank you. The next question comes from the line of Kaushik Poddar from KB Capital Markets Private Limited. Please go ahead.
Yeah. See, you started this con call with the statement that your GT trade has gone down by high single digit. When do you think that it will come to the neutral level with all the initiatives you have initiated?
So Kaushik, as I said, I mean, I think you should see that. In fact, I mean, in January itself, we have seen good progress happening there. Two things, as I said, there are three parts of this business. One is obviously the wholesale, which we had said at the first quarter itself that we have taken this correction in wholesale. It's a pain area. It will take time to recover. And now we have already seen the recovery happening as well. Wholesale is concerned. So wholesalers, already, as I told you, quarter on quarter has already grown by about 14%. And the number of wholesalers has gone up, which is a good sign that that is slowly coming back to normalcy. And it will maybe take another quarter or so, and then we'd see that coming back.
As far as retail is concerned, which is one of the weak areas, urban retail is one of our weak areas. It's something that work has been going on for the last two, three years. Now, structural work is going on in terms of our entire coverage as far as the loyalty outlets are concerned, loyalty program outlets are concerned. How do we structure them? How do we make it more attractive to them? How do we ensure attractive viewers? A lot of work is happening on that. So that we feel is going well. And it's a rural market, which is part of that Project Aarohan as well, which is where all this work that we are talking about has been happening in terms of representation improvement, number of coverage, number of feet on the street, etc.
So I think you will see good numbers coming in the next quarter. I don't want to commit any number, but I think most of this work has already happened. Now we should see benefits flowing forward.
You said wholesale had grown 14% quarter on quarter. This quarter, it is growing?
That is correct. Quarter- on- quarter. So over Q2, wholesale has grown by 14% in Q3.
But why didn't it show up in numbers?
Because as I said, in Q1 and Q2, in numbers, it is showing up. Sequentially, you look at it, actually, by numbers, it has gone up. If you look at against last year, etc., still it is coming back because that's where the number, that's where in Q1, the drop had happened. So slowly, it is recovering. But clearly, between Q1, Q2, Q3, clearly, we are seeing the Q1 anywhere was a drop. So, because that was a correction that was made, Q2, it has still been coming back, not yet completely come back. Q3, we see substantial coming back has happened. Further, it will continue to continuously stabilize for sure.
Thank you. Ladies and gentlemen, that brings us to the end of the question and answer session. I would now like to hand the conference over to the management for the closing comments.
Thank you so much for attending this call. And once again, apologies for delaying this con call for about half an hour, as you are aware, because of this extraordinary item that we had to place. We are extremely happy that we are able to welcome Banjaras to our fold. This is a fantastic valuation that we have got from the business. And also, more than valuation itself, it is also in terms of fitment to our business.
This perfectly fits in because it opens up the southern market where our distribution has always been weak. It increases our distribution reach by about close to 3x, and all the benefits that we feel can accrue will come from that. So from that perspective, it's a great acquisition. We are very, very hopeful that this will give us great positive momentum going forward.
On the other side, as far as the business corrections that we have taken, we have taken a lot of these business corrections, and slowly, some of them are bearing fruit. So I think going forward, both through the Banjaras acquisition as well as our internal growth, we see good performances coming up in the coming quarters, both in terms of top line as well as bottom line. And we'll keep balancing both. So thank you once again for coming and joining on this call. Best of luck and good evening.
Thank you, sir. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. You may now disconnect your lines.