Q2 19/20

Oct 18, 2019

Good morning, everyone. It's a pleasure to welcome you all on behalf of SCC Securities for the Q2 FY 'twenty Bajaj Consumer Care Earnings Conference Call. I would like to thank the management for giving us the opportunity to host the call. From the company's side, we have with us today Mr. Kushagra Bajaj, Chairman Mr. Sumit Malhotra, Managing Director Mr. D. K. Malu, CFO and Mr. Kushal Maheshwari, Head Treasury and IR. I now hand the call over to Mr. Bajaj for his opening remarks. Over to you, sir. Thank you, everyone, for joining the call. My name is Kushagra Bajaj. I'm the Chairman of Bajaj Group and Chairman of Non Executive Chairman of Bajaj Consumer Care. I would first like to apologize for canceling the call last minute for Tuesday. I had to travel on an urgent meeting. Therefore, I had to cancel the call. There was no other reason. So sorry about that last minute thing. I would just like to give you an overview of what's happening in the company. As you might have read and seen, the promoters have sold 22% stake couple of days ago in the secondary market. With that, the money has come yesterday. We have repaid our entire personal debt yesterday. And the pledge there's no more personal debt at the promoter level. And with that, the pledge or all pledges on the stock will go away. So that is one development. Second commitment is that no further debt will be taken at the promoter group level and no more pledges of Bajaj Consumer Care stock will be done going forward. Three, so that's one thing I would just like to put it on record. For us in the Vajraj family, reputation is much more important than money, because reputation is built over generations and once lost can never be regained. But shareholding, once fallen can also through creeping acquisition be regained over time. And I assure investors neither none of us in the promoters are interested in selling the company to any third party. On the contrary, as liquidity in the group improves over a period of time as per the loss of the land, we will increase our shareholding to at least 51% through the keeping acquisition group. Second, the question which everybody has is on the search for the CEO. We are almost on the verge of finalizing between two people. And hopefully, the new person should join by January 2020 in the role as CEO. That doesn't mean that Sumit Malhotra is going anywhere in the near term because then there will be a handholding period and which is required both from Sumit's end and from the new persons who's going to be joining as CEO from his end. The final modalities of compensation, etcetera, are being worked out. But by and large, there is a meeting of minds. We have met this gentleman for at least five, seven times between Sumit Malhotra and myself. And hopefully, the final compensation issue and the timing of joining should be finalized very, very soon. Even if 99.9% this will work out, but say one in a million this were not to work out, still Sumit is here until a replacement for Sumit, a new incumbent is found and there is no risk on continuation of business. Let me state that very, very clearly. Third, as you know, we had appointed Bain consultants to look at strategy and growth. We had taken one state, it's there in the presentation, which has been uploaded on the website. And that one state which we had taken was West Bengal. We started the whole execution strategy in the month of July, exactly on July 11. Just like to give you what has happened over there. The West Bengal market for the total Air Oil segment has de grown in terms of value has grown at 2% in the month of July, minus 3% in August and minus 6% in September. This is West Bengal urban and rural together. This is value growth. Volume growth in West Bengal was for the industry, for the total Heroin industry was minus 6% in July, in August minus nine and in September minus 11%. So this is data for the industry as per Nielsen. We, those three months, have grown our primary sales have grown at 19% in July vis a vis 2% for the industry. In August, we grew at 15%, again primary sales against minus 3% for the industry. And we grew at 10% in September against minus 6% for the industry. This is all like to like comparison. Compounded primary sales grew 14% against minus 2% for the industry in West Bengal. Our secondaries were much higher than our primaries in West Bengal with the new strategy in place. Secondaries against 14% compounded for three months was at 19%. So this has been done actually, we have reduced inventory in the pipeline even though our volumes have been disproportionately higher. So our secondaries in July in West Bengal were 20%, in August 22% growth and in September 17% growth. So this is not euphoric. We can't say that we have succeeded in our strategy, but the initial signs are very, very positive and inspiring because in a category in a state where the category is de growing in terms of volume, which is again very, very rare, we haven't ever seen that for the category at least in the last five, seven years. We have grown at double digits. So obviously, we have done some of the right things in terms of our strategy with the help of Bain. We would now continue to push in Bengal and we would be taking up from November 1, a very large state, for hair oils for total hair oils. And we'll be following the same vein strategy over there from November 1. If that state also performs outperforms significantly the industry growth, then we would implement this PAN India sometime in 2020. So that's the strategy going forward. I think our emphasis is very clear on growth and getting market share. Let me emphasize, this would mean that we would be significantly increasing our A and P spends as we go forward and go Pan India. Today, we spend between 16% to 18% on advertising and sales promotion. We could up it to as much as 23%, 24%, which could mean that once we go Pan India, which could mean that we would sacrifice on margins in the short term, maybe for a year or so. But we are okay with that as long as we get increased market share. We are assuming that over the next four to six quarters, industry growth will be flat, will be zero. And in spite of that, we want to grow in double digits to gain our market share. So that is where we are on our strategy. Let me reemphasize strategy is to grow double digits. We've done it in one state, West Bengal. Second, the results for last three months have been quite encouraging. We can't say it's a home run or we have completely succeeded, still too early. We would be implementing it in a very, very large hair oil state from November 1. And then we would wait for two, three months results over there also. Once we have that confirmation in terms of actual volume, then we would go pan India with the same strategy. Obviously, the strategy is to identify gaps and then form separate execution plans for each state, not even each state, even within the state, are making up states also into different geographies and for each geography, we are having different strategies. So the emphasis is to gain market share, as stated in the May presentation, from 10% to 20% as soon as possible. And for that, we would be significantly increasing advertising and sales promotion spends even though the economy is slowing down, even though the category is growing slowing down and should remain slow, at least in the short to medium term. But our emphasis on growth, capturing market share, so that even if it means reducing margins by a couple of percentage points over the next twelve to eighteen months. But the idea is that at some point, the economy will start growing again. And if on a larger base, we have a larger market share, then the delta to earnings will be significantly disproportionately higher. So that's the third thing that I would like to highlight. On the cost cutting front, we have been quite successful in implementing some of the cost cutting initiatives that we had taken. And hopefully, by June, the entire target that we had set out for cost cutting would be fully implemented. We have also initiated automation. The next step, AI automation in terms of we already have handheld devices, but now there is an AI tool, which is available it's only for salespeople, which makes which is available on handheld, which we are implementing. And that tool will basically make it easier for the sales officers, the ISRs and the lowest sales people in the organization, make it user friendly for them exactly what they need to do for the day or for the month and what they have done, where are the gaps in the market in terms of the people whom they're selling to or the SKUs, which are slow moving, fast moving, etcetera. So it basically makes it very user friendly. And it's an app. So we are in the process of implementing that. Two, we are in the process of implementing SAP across the organization. And hopefully, by March, SAP should get completely from production all the way to sales. It will be fully automated. So we are doing that exercise. And as I said, on the cost side, we had initiated a target of about INR16 crores of cost saving. I think we've achieved INR4 crores or INR5 crores as of now. And the rest will come by June year. So that's on track. This cost saving includes manpower reduction out of about 500 people. We have almost downsized 89 people already. Other than this includes sales as well as general support, which includes all other departments. So basically, now the whole strategy is growth even in a slowing category, slowing economy, and we will leave no stone unturned to achieve that to get that growth. With that, I would like to all wish everybody a Happy Diwali and a very prosperous New Year and hand over thing to Sumit Malhotra to take the matter and if he has anything further to add, and then we'll open up for questions. Good morning, all of you. After the initial comments by our Chairman, I'd just like to add one or two things that has been concerning most of you, which is the actual slowdown in the industry. And there are two or three points to be noted in the slowdown. At least ever since I've been in this industry, I've never seen hair oil growth so gloomy. In the second quarter of this year, the volumes are flat. That's a big cause of concern. But the bigger cause of concern is the growth engine, which used to be the rural growth is for the first time negative. So in the second quarter, total Air Oil has de grown by 2%. The third thing that really concerns all of us is that Urban is actually now outgrowing rural. And if this continues, you'll see a longer term period of zero to flat growth in the coming quarters. I think this is something that all of you have been quoting in your various reports and we see it in figures that we are getting from Nielsen and from other agencies like Cantor and MRB. That's the first point. The second point that people have been talking about is cost. Unfortunately, the cost has not gone up for us and this is a statement on our effectivity in site of maintaining costs. And like you have seen over the last three, four years, even in bad times, we have been able to maintain or better our margins. And this quarter also, we have been able to do it quite successfully, which is available in your the investor presentation that we have done is despite increase in my A and P by around 160 basis points, my EBITDA has not gone down. The third thing I'd like to talk about is that the Bain experiment as we call it has done quite well in the state that we piloted it and this has given us a lot of confidence and we are well into implementation implementing it in the second stage and we'll keep you all informed as we go along. With this small synopsis, I'd now like to hand over the mic to you all to ask your questions as you feel like. Thank you very much. We will now begin the question and answer session. The first question is from the line of Lashmin Narayan from Tian Capital. Please go ahead. Yes. I have two questions. The first question is with respect to your diet coverage, which you have actually increased substantially over the last three years. Now, what is the growth you are getting from the new direct coverage? What is the mix between the old and new? And what is the cost of increasing the distribution? That's my first question. My second question is related to the Uptown property, which we acquired in 2011. What is the plan for that? Do you intend to infuse more capital into that? And what is the end plan for that? So these are the two questions. I'm Kushagar Bajaj. I'll answer the second question on Uptown because I would like to just nip that question in the bud permanently. We are building our own office building on that premises. We are waiting for final approvals from BMC. It's a mess in BMC to get approvals. We are not asking for extra square feet. It's just but BMC being BMC. So we are waiting for final approvals and we will start construction on building our office building on the Uptown property. And obviously, that would require capital to be put in to build that property. So as and when we get approvals, we will then go about in building that building. Any plans what's the kind of outlay you're expecting for the next three years towards this? I think over the next eighteen months, it will be about INR $25.30 crores for basic civil works and then the interiors and things like that. But we have a projection of about eighteen months. After that, the interiors will cost us significantly more, but about INR25 crores, INR30 crores over the next eighteen months. Once we get permission, we still haven't got the final approvals. So hopefully, you should get this final approvals in the next two, three months and then we should start civil construction work. We should be digging and piling and things like that. And then we will start the civil work. And then once the civil work is complete, then the interiors can start. And it is just how the Bajaj consumer can or it's a larger premise? No, it will have all the group company offices. So from promoter offices to part of the energy business, part of the sugar business and the consumer business. And if there's any extra space, we haven't exactly planned the interiors as yet, but that's how we plan to do it. But it will only be for Vagad Group, not for outsiders. Okay. Answer to your question on distribution, currently our direct distribution has gone up to around 513,000 outlets. And you would remember that when you started tracking around three, four years ago, it was a little under 3 lakh, right. Now to your second question, which how much has it added to business? Actually, there's a little bit of background that I have to talk to you about because one is that these outlets are obviously the smaller outlets that you get to it. So actually addition in terms of turnover, Primer, Facie would be much less than the other outlets that we used to cover earlier on. But the second part is something that you need to understand is that we used to depend on wholesale to the extent of 55% that has come down to around 34%. If we hadn't increased our direct coverage, actually our overall REIT would have shrunk. So it's not only increase in outlets that you're looking at, but also the necessity of moving to direct from indirect because of the strain in the wholesale market. And if you look at wholesale, it is still under strain and largely because of the liquidity crunch, but also because of the demon and GST pressure that were applied on all kind of cash dealings that were being there in the informal circuit. Okay. And what is the cost of this distribution increase? Is it something which you have worked out? Like, I just want to understand that for every 10,000 outlets you increase, what is the cost? Calculation is very simple, Lakhny. Every person you add adds around 400 outlets, right? And a person normally costs at the lowest level between 10,000 to $12,000 a month, right. But the big question mark is what kind of outlets are you adding. For example, in the pilot state that we are doing the Bain study, have actually added 10,000 outlets. So from around 38,000 to 48,000 we have moved, right. But this has only given us one third of the growth that Mr. Bajaj was talking about, which is we grew our own 19%. One third of that got added because of the new outlets that we the remaining came from the existing outlets. And as we go along, you will see this mix existing and new outlets moving towards more delivery from existing outlets because of more pull and higher market shares. One of the things, Lashmi, that we have put ourselves at the target in the, say, in West Bengal, our target is that we should, over the next couple of quarters, hit 20% of the total retail outlets as direct coverage. And that is what we plan to do as we go to the second state also where the number is much lower and eventually do that pan India. So it may take two or three years to do hit 20% direct outreach, but that's what we plan to do. I think that's also necessary because the wholesale sector, because of liquidity crunch is just hand to mouth and there is in some places it's even de growing the wholesale. So it is better to have a direct reach with the customer. And as you get volumes, then it more than offsets the increase in cost of adding manpower and distribution cost. Got it. Got it. Thank you so much. Thank you very much. Next question is from the line of Amit Sena from Macquarie. Please go ahead. Yes, hi. Thanks for the opportunity. Firstly, question is on the new strategy. And is it possible to share more details on the new strategy apart from the things that you have already mentioned that you're spending higher A and P spend and more regional stuff and also the direct distribution is kind of taken up. Is it possible to share more details of things which are happening on ground? I think a lot of details have been shared in the investor presentation. If you go through it, it's been quite exhaustive and quite transparent. So I would request one to go through that. But answering your question, yes, the whole idea is to go more direct, to go for example, in Bengal, we've already made a special ad in Bengali with a Bengali actress in the Bengali language after doing after seeing what the requirement what they were looking at in hair oils and things like that. We've come out with a new price point, which is a fast moving price point. We've increased direct coverage substantially by through WAN operations. So these are multiple things that we've done. All of them most of them, if not all, are there in the presentation, which I've already repeated. And then we significantly our share of voice has significantly gone up in terms of spend vis a vis our market share in Bengal. So it's a combination of everything, not just one thing that we've done. So increasing in share of voice on advertising, increasing direct distribution, new price points, improving per man return, launching a new ad in the Bengali language with the famous Bengali actress and things like that without obviously giving any credit. The whole thing is on a cash and carry basis. And so I think those are the broadly the major things that we initiatives that we've taken. Amit, I think you should appreciate that we have been transparent in just about everything we do. So here also on the call, if you need any theoretical insight into this, you're free to contact me. I can help you with there's nothing to hide in all of this. And I don't think any company would be as transparent as we are. No, sure, sure. I'll take in detail later from you. Secondly, on the cost cutting plans and in initial statements, I mean, you mentioned that there has been a significant cut in terms of number of employees. Just wanted to understand what are the areas where you have cut employees? And when you say that this is further going to go up in terms of the cost savings, what are the other areas apart from the employee cost where you see a meaningful savings coming from? Amit, I'd first like to talk to you about the whole idea of cost cutting. It's not cost cutting, it's basically we call it cost optimization. And when the strategy moved from diversification, providing option value to focus on hair oil, you did not need such a widely distributed setup in each of the department. So what we have done is we have optimized each department and this is not only sales, not only some of the support, it's each and every department, keeping in mind the new strategy. And you've already seen that the employee cost to total cost has gone down by around 200 odd basis points. And you've just seen only a part of it because as you know, employee reduction doesn't happen overnight. You'll see more of it. And the other departments will also start pitching in towards reduction in cost and improving efficiencies in the delivery because now the target is very, very crisp, which means that focus on the hair oil industry, don't start focusing in on many other things like international business, merger acquisitions, other categories you would like to go in and so on and so forth. Okay. But you would still say that the larger part of the employee reduction happened in the sales force, right? Obviously. Out of 500 odd, 300 odd are salespeople, so which is the largest part of your organization. Okay, sure. Lastly, when you say that you have to take up the market share from 10% to 20%, what goes under that assumption? I mean, you have been launching a host of product in the last one to two years. So firstly, wanted to understand, is the main market share gain going to come from the ADHO? Or the plan is for having a bigger set of portfolio and the bigger market share will come through that route? And second is, in the last few presentations, there have been no mentions of some of the earlier product launches. So while you have given some details of the cooling oil, which you launched recently. Just wanted to understand what has happened I mean, the updates on some of the earlier product launches in the last four, five quarters? I think this is Kushagar, Bajaj here. I think it's very clear that we didn't have a really clear and focused strategy before we launched anything, and it was more trial by error kind of a thing. So the whole emphasis now is that to identify the gaps in a state and even within a state go micro management. So say West Bengal could have a different strategy, Central Calcutta could have a completely different strategy for the city, metro, northern the hills, the Gili and things could have a completely different strategy, southern part has a different strategy. So we're not looking at even one state as one state. And then within that also you could have rural separate, urban separate, things like that. So that's one. Second, the growth can come from almond, can come from cooling, can come from amla, it could come from coconut. For us, we are not a light hair oil company anymore. We are a hair oil company. Hair oil consists of everything and not just light hair oil. And therefore, we are not talking about market share gains in the light hair oil. We are talking about market share gains in total hair oil from 10% to 20%. So depending on what the gap is, what sells in a particular region in a state, we would then focus our strategy on that. For example, this is not the season to sell cooling right? Cooling oil is sold only four months of the year primarily in the summer. It doesn't sell in some parts of the country, even within the state. Some part of the state, it doesn't sell even in the summer. It's only in a particular region within the state that it sells. So we need to be very that's the focus that we have right now. That's the strategy because it's all data driven and it's not gut feel driven. So it's all data driven with actual numbers and seeing competitive analysis, why say a Himgange doesn't do any advertising, but does only a trade push, whereas the Navaratnam in cooling oil does lot of advertising. So what is the right strategy to do, when to do it, how to position your product? I'm just saying, for example, in cooling oil and when to do it because right now, there's no point doing anything. This is not the season for cooling oil at all. It's a very it's 100% of sales almost comes in four months for that product. So our whole thing is to have potentially have focused products across the value chain in the hair oil segment and then see as and when whatever the gap, whatever the requirement based on the particular region, we will then form a strategy for that region and push that product. Sumit? Amit, just to sum up what Mr. Bajaj has been talking about. One, answer to your question directly, it will not come only from Ammant because our ambition is not to move from 10% to 20% in Ammant. Because even today, 10% is not Ammant's market share in total Air Oil. It's 9.6%, percent comes from the other marginal brands. That's number one. The second thing is like we launched the products nationally, we will not be launching a product nationally. For example, what you have seen is cooling oil or brahmi, we launched nationally and it did well in some of the places. It didn't do well in the other places. And therefore, to support that kind of strategy, we never had a clear allocation of resources. Now we will do a micro segmentation within states, even within states in which we will identify products and therefore the kind of resources those products need in that particular state. The third thing is, yes, we have talked about some of the launches, but as we go along, we are focusing on trying to update you on the new strategy, which doesn't tie up with the strategy we had up till around two years ago, which was launching products nationally. I hope I've answered your question. Yes. Okay. Thanks a lot, sir. That's it from my side. Thank you. Thank you very much. The next question is from the line of Sameer Gupta from INFINITE. Please go ahead. Hi, sir. This is Persi here from INFINITE. Basically, I just wanted to understand some historic perspective to your pledges. I was just looking at data from the stock exchanges. As of June, the number of shares pledged were 53.8 and June end price was 3.25. So if you multiply these two, the value of the shares pledged was about crores. But as of September 2019, the number of shares pledged was INR55.6 million and the share price on that date was INR245 crores. So the value of the shares pledged came down to about INR $13.60 crores. So about a INR 400 crores reduction in the value of the shares pledged would mean that the security available with the lender has gone down to that extent. So in that period, did you repay some part of your debt through some other means? Or it's just that the lender was okay with a lower security? So yes, we did repay from other group companies in the promoter level. We repaid plus now we are fully repaid with the stake sale. So now there is no more pledge going on no more pledge as on today. Okay, okay. So as of June 30, sir, can you just tell me what was the promoter level debt as of June 30? I'm offhand, I don't remember now. It should be INR $6.40 crores, INR $6.50 crores it was there. Don't INR $6.43 crores. And as of Which September was there today, which was there as of today also. Yes, which was there as of September, but as of June, it would be higher, right, because you mentioned that between June and September, there has been repayment of debt. No. March, we sold shares. If you remember, we sold 6% in March. Yes. And INR $6.43 crores was in June and on September. Am I right, Mr. Maher? Yes. And now it is nil. Okay. So INR643 crores was the same between June and September, but the value of the shares pledged fell by about INR400 crores. So the lender was okay with a lower security by Okay, okay. Sir, secondly, just wanted to understand the Bajaj Energy, you have filed for an IPO. But in case because of bad market conditions or whatever the IPO does not go through and there is a substantial debt in that company, what is the plans to reduce debt in that company, Sorry, this is a conference call for Bajaj Consumer Care. I would not be answering calls answering anything on Bajaj Energy. No, no, just from the point of view that it might have sort of let me complete. If you asked a question, give me time to complete. Sure, sir. Second, that company is I can't talk much because heavy restrictions are there, legal lawyers are there because the DRHP has been approved. So I'm not allowed to speak much. But it's a profitable standalone company, extremely profitable. It has been in operations and profitable for the last eight years, which is mentioned in the DRHP. So there is no overhang of that on this business, whether the IPO happens or doesn't happen. That business by itself is profitable and the debt over there is much more than sustainable to form its own cash flows. Okay, okay. Understood, sir. That's all from me. Thanks and all the best. Thank you very much. Next question is from the line of Sireesh Pradeshi from Centon Broking. Please go ahead. Yes. Good afternoon, Kushagar and Mohit. I have few questions. First question is on the CSD. In the investor presentation, you have shared that after a long time, you have supplied to CSD. So I hope the name change issue has got sorted out. But if you actually look at last five quarters, CSD has been very, very volatile. So is that shipment which has happened will keep the benefit saying that another two quarters there will be further more shipments? Suresh, there are two parts of it. One part is obviously the zero sales in the first quarter of this year because of the issues, CST rates, because of our name change from Bajaj Corp. To Consumer. That has been sorted out. But the bigger problem, Suresh, is the way CST themselves and the government is looking at canteen stores. Don't want to make it a hotbed of stock flows into the local general trade market. And therefore, they've been constraining the amount of stock in the canteen stores as well as the kind of number of outlets, the products that are there in CHT. And that's not going to change. So third, if you're asking me, will this kind of invoicing continue over the next few quarters? Yes. But I don't think you'll see major growth in canteen stores from now on. No, my only question was you have reported 1.45% sale and sale which has come, approximately INR 6 crore stock which had got. So my only question is that, is that going to one shipment or it was multiple shipment which is It was multiple, it was two months. So fair to assume that As study said two two point five percent of our total business as we go along. Okay, all right. We have seen the substantial improvement in the international business. Is there any new markets we have gone? And what kind of number we should look at for full year? No, we have not gone to any new markets. If at all, we are actually constraining our expansion plans into new geographies. We are concentrating on basically five markets and that is what is giving us our growth and we are happy with that. We are not because we have to look at a new strategy in the international business itself because consequent to our change in strategy from diversified to hair oil or hair care directly, our strategy in the international business will also change, which will be formulated as we go along. Okay. Last question on the GT growth. This growth what we have seen is reflected into the volume growth also. So I assume that the volume growth on ADHO would be sub-1.5 percent, 1.6%? Yes, right. It's 1.3%. 1.3%. So if you can help us because if I look at we are very strong into the northern markets, I mean some specific markets. The whole question is that which part of GT, is it urban GT is slowing much slower or is the rural GT is growing much slower? If you remember, Suresh, Mr. Bajaj You're talking for our product or you're talking for the hair oil category? No, I'm talking about ADHO per se. Yes. Actually, if you look at the industry and also ADHO, our growth in the urban is higher than the growth in the rural areas. And this is this sort of mirrors what's happening in the total hair oil industry. Okay. All right. Thanks and all the best. Thank you very much. Next question is from the line of Sachin Shah from MK Investment Managers. Please go ahead. Yeah. Good afternoon, sir. Thank you so much for this opportunity. What I would like to know is that you know, this main experiment that we've done and with the success that we've tested over there, will it be fair to assume that for the next two, three, four years our focus to grow will be largely on the organic growth and not too much too inorganic? And where I'm coming from here this question is also is that in the last three, four years we've had a very, very high dividend payout ratio. Do we expect that to continue or we might have some other options of using the cash flow? Thank you for your question. I see it as two parts. One is whether we'll actively look for merger and acquisition in the next two to four years. And the second is the dividend payout. To your first question, I think four years is a long horizon that you're looking at. And I would like to tweak it out and say that I think we have enough on our place in the next two years that we may not need to do any acquisition of hair oil because we have enough scope, enough products, understanding of the hair oil to be able to do organic growth, whether it be through our current lead brand almond drops or new categories or new products in different categories that may need to be sort of worked on in particular geographies as per the micro segmentation plan that we are doing state by state. In terms of dividend, since like Mr. Bajaj said that we would be increasing our investments and you could probably see the profits come down over the next two years. You could possibly see a reduction in the kind of dividend that we have been giving because you would agree with me that we have been giving very high dividends in the past three, four years. You could possibly see a reduction because of the extra investment we are giving behind a brand building and getting organic growth. Right. But will the dividend so profits may come down and that's why the dividend may come down some bit, which is fine. But will the dividend payout be as high as 70%, 80%? May not be. May not be because we will keep cash one because we don't know how much more we are going to be spending on organic growth and how aggressive we will need to be on that because our whole strategy is to just gain market share. And if that market share if the gap identifies that we may need to acquire something, we would also like to keep cash for that. And second, obviously, as mentioned earlier, we are also going to be starting to spend on building our own office premises for which we will require money. Although for the next eighteen months, the amount is much less, but eventually, it will be a much higher number over a four year period. So the dividend payout will be as a percentage and an absolute value lower than what it was. Okay. But we already have a decent amount of cash on the balance sheet, isn't it, at this point in time? Yes. But if you look at an acquisition, for example, suppose the Bain strategy throws up that there's the requirement to do fill in a gap through an acquisition of a particular brand in a particular segment of the hair oil, then what do we do at that point, right? And as you know, the valuations are prohibitively expensive in India to acquire anything. At that time, then we would not like to further sell equity either through primary or secondary means to acquire something. It's better than to have cash on the table. Okay. And if I can just squeeze in one more. With this strategy of growing organically, I would say, that from the organic growth and I'm seeing a little bit longer time frame, say four to five years, can we have a goal or is there a goal of doubling our profits from INR250 to say INR450 crores, INR500 crores in the next four to five years? Will that be a fair thought? Yes, that's the target that if you increase market share as you then as mentioned in the presentation in May, but that had assumed that category will continue to grow at the historical growth rate. Now obviously, that was 12 or 14% in the presentation. Now category is flat growth. But the whole idea is that you should more than double your profits if it were to continue to grow at 1214%. And I don't believe that over the next five years, the category is not going to grow at all. Yes, there may be twelve months, eighteen months, twenty four months of very little growth. But if you say that the economy is just going to collapse, I don't think I don't see that happening. I see the no growth or very little growth being there for at least the medium term. But long term, I'm still very bullish on India and the Indian economy because it's very resilient. Perfect. Thank you so much and all the best. Thank you. Thank you very much. Next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi, thanks for the opportunity and thanks for very detailed opening remarks on lot of issues pertaining to the business. So one, a couple of questions. First on pertaining to the new CEO that you spoke about. Now in terms of our long term vision, we have just pivoted and committed to our new vision. And so how important is that the new CEO should be aligned to this vision and it is nonnegotiable? Or we are open to pivoting again if the new CEO has a new vision on the business? Kushagra Guraj here. He has to be completely aligned and that's non negotiable and that has been explicitly discussed in great detail for four or five sitting each of three, four, four hours, both with me separately and with him, with Sumit separately. So that is non negotiable. Strategy is this, in strategy, if there is 100% buy in of the new CEO, then he comes in. If he has a completely different strategy, then he's not the right fit for our organization. But the persons that we are the two people that we have shortlisted, both seem to have 100% buying on the strategy that we are implementing as we speak. Sure. This explains. So second this is for Sumit, sir. Sir, in your quarterly presentation organization charts, IB position is international business position is missing from this chart. So is there an attrition or there's a rethink on the international business as well under the new strategy? That was an attrition. But post the attrition, we are looking at how to handle it. But international business will be part of the strategy, right? Obviously. We don't have a strategy for the international business as yet, right. And therefore, under the new scheme of things, we are looking at Bain for India only, but we'll we are sitting and looking at our strategy for the international. I think first we need to get growth and market share gain in India and we're still far away from that. Once we have that in place strategy for all the states and then implement it, get the execution right, get the growth there over a couple of quarters, then we will look at how to do replicate look at it for the same thing how we can replicate it internationally. Sure. And lastly, this is for Mr. Bajaj. Sir, I agree that you did not want or you don't want to speak on Bajaj Power IPO on this call. But just from Bajaj Consumer Care's perspective, when you say that you will defend your holding at this level, are you building a contingency of, let's say, all the contingencies including that of Bajaj Par IPO because of market scenario getting delayed by two years or more, are you building that contingency in that guidance? Well, the only overhang was promoter debt, which has been completely taken care of and I have addressed it upfront. Other than that, there's no overhang. If the IPO doesn't happen, nothing changes. Consumer business continues to do the way it is. The power business will continue to behave the way it is, and the sugar business will continue to behave as it is. Any of them will not have an overhang on each other, even if the IPO doesn't happen. Thanks. This helps a lot and all the best. Thank you very much. Next question is from the line of Rohan Samand from Multiak. Please go ahead. Yes, hi. My question is with respect to the pilot project that we have done. So have we seen any sort of a reaction Or have they kind of increased their E and P in that state? So where I'm coming from is our competitors also have a lot of headroom in terms of increasing the E and P. So shouldn't kind of lead to a zero sum kind of a game? Are we going into that kind of a thing? So that is my question. Let's look at it very pragmatically. This is INR 13,500 crore category, hair oil industry. 62% or 63%, if I remember my data, market shares by three players, Maricopa, Bajaj and then Daban. That means there's 38% or 37% market share still to be gained from 1,300 other local mom and shop brands, okay? There is no international competition in this category because of the nature of the category, which is hair only. So you have three guys in the second in the INR1350000 category, INR1350000 category, which is the second largest personal care category. So even if all three were to spend money, they can they still have one third of the market share to gain from the other 1,300 brands, point number one. Point number two, if everybody starts spending disproportionately, they can grow they will definitely grow the category. Third, overall of this INR39.5000 crores, there is another INR3000 INR4000 of unorganized segment, which is not captured in this INR 13,500 crores and within this INR $131,300 brands. So there is ample scope for growth for all three of the top players to grow. And I in fact, rather than cannibalizing each other, I would wish that all of them actually disproportionately spend and grow the category. Okay. And so far, we haven't seen any reaction from the competitors in that particular state? No, we have. We have seen. It's not that we haven't obviously. Nobody is going to be sleeping. We have seen competition. But we are prepared for that, but that is the basic thing that we have to take before we even start executing our strategy that this is how competition is going to react. It is the big players, yes. The local players, obviously, they don't have the financial muscle to hit back dollar for dollar. Okay. And my second question is with respect to the royalty. So we shouldn't expect any change in the royalty structure, right? No. It's been locked in for only ninety nine. Ninety ninety nine years at 1% and that won't change. Okay, sure. Thanks. Thank you very much. Next question is from the line of Harsham Akhadam from Vibrant Securities. Please go ahead. Hi, good afternoon. My first question is I want to understand the volume growth in terms of cases for probably both ADHO and Total Products. Like I said initially, ADHO has grown at 1.3 and total volume is flat. Okay. My second question is in terms of the Bain agreement, the Bain partnership that we have. So where exactly does I think you said that the cost will incur on our income statement from this quarter onwards, which is quarter two. So are we seeing that impact currently? I don't know where you got this that it's coming. We are engaged with BEN from April. And therefore all our income statements from April includes the impact of Bain. Well, this is not something you can amortize, you have to take it as an expense. Agreed, agreed. Okay. And then this if I just look at the income statement also, I see that this sequential fall in other expenses in the IP. So is that something to do with the seasonality? Or is it just We said that we are looking at cost optimization. And one of the biggest cost is actually reduction is the cost of manpower. So other expenditure also you're looking at the LR. So LR also includes wage bills and other expenses. And same for distribution costs. Everything, but the biggest drop is wages. But wages would come under employee expenses, right? Or would it come under other expenses as well? No. In LR, it would be other expenses. Got it. Thank you. That's it from my If you look at the investor presentation, you will get a split there. Okay, got it. You. You're looking at two different things. Sorry. It has increased. You. Next question is from the line of Saptarashi Chatterjee from Centrum Broking. Please go ahead. Thank you for the opportunity. Sir, my question is again on the pilot. So basically, want to know the criteria for choosing this state for pilot. So how easy or how difficult it was to run the pilot and compared to other states through A and P spend and micromanagement? RAMAKANTH:] No, we haven't done it in any other state. So we don't know how it will be running out of state. We took Bengal simply because it's an isolated market. We could, from an advertising perspective isolate it and it's the third largest market for hair oils. So it's a fairly large market to do strategy over there. So you could see meaningful gains. So how it will pan out for other states at this point in time is very difficult to say. We are hoping for the best and we're giving it 100%. Understood. Okay. And secondly, when you say that this kind of micro entity you have done PT wise and you have used like languages, local languages and accesses, the similar kind of thing are you going to do for the other states for Pan India? And how do you think how feasible would it be like to expand it to Pan India? What kind of timelines you are looking at? Yes. Can I as we progress, we will answer this question? At this point, it's too premature to say whether we need to depends on the size of the market, whether there's a requirement or not and things like that. Obviously, there's a cow belt, which is a Hindi speaking belt, where only the Hindi language ad can do, and that will be in multiple states. It will benefit. But let us go state by state and see whether there's a requirement to do a specific ad in local language. It's too premature to say whether that will happen or not. We are completely open to it. If need be, we will do it. If need be, we will not do it. Understood. And any kind of timeline you are having for this, like two to three years or like any kind of already time mentioned at the beginning of the call that we will be taking up the second state, which is a fairly large state from November 1, waiting for the results to see over the next two, three months after November, and then go out with the Pan India strategy. Okay. And sir, thirdly, for as you have said, our strategy is not only light hair oil, but the entire hair oil market. So are you having for other segments, are you having any new product? Or are you thinking of inorganic expansion? I think we've already answered that question on the call already. So would suggest that you go through the transcript because it will be repetitive for everybody else. Okay. Thank you so much. Thank you very much. Next question is from the line of Srinivasya Chaudhry from Mirabilis. Please go ahead. Yes. Thank you for the opportunity. The first question is relating to the Snomax. So until last quarter, we were launching, say, the sun Screen, etcetera. So in the new strategy, like where does Nomarc fit in, if at all? And what are the plans with that sub brand? Yes. Nomarc was a part of our diversification strategy that we had. Under the new strategy, are focusing on Airoil, which basically means that we will not be over investing in Nomax as of now. At this point of time, we would like to continue selling Nomax and making money and not taking money from the Airoids to Nomads. And if the opportunity presents, we would look at some kind of a sale also or I can't answer ifs and what, but if it happens, we'll decide at the top between the board whether it makes sense to divest or not. Sure, sure. And Sumit, just regarding this entry of the other categories of hair oils, so one you already kind of doing and then there are potentially more on the way over the next few quarters. So we used to have a portfolio of products spanning several hair oil categories until a few years ago, where, of course, almond drops continue to be market leader widely. The other categories, we're not able to kind of challenge enough. So just what are the learnings from that? And how would we do things differently now compared to the past, which can lead to a better measure of success? Again, I thought I'd answered it, but let me repeat it while boring maybe the other people. The strategy earlier on used to be one strategy for the whole nation. And therefore, if you had a strategy on, let's say, AMLA brand for the whole of the country, you would have some parts that did well, some parts that didn't. But you would be spending all over the country and therefore you could never get the impetus that brand needed. Now the big difference is you will do micro segmentation and therefore you will push one brand in one part of the country or one state or within one state, one part of that state. And therefore, the strategy is one of focus and pushing a brand where it will it has a better chance of gaining market share Because now it's not just about getting volumes all over the country, it's about getting market share in each small segment of the country. That's one big difference that you have to realize. So you will maybe be ending up getting a bouquet of brands, but not all the brands will be sold all across the country. And we used to have like the presence in some five, six Heron categories. We still have on paper, we still have. You still have, but will that aspiration still remain that we want to be sizable in each of these or that we like more spaced and we will discover things as we We want to be where the hair oil sells. So if in a place like, let's say, Jharkhand cooling oil sells, we want to be there. But if in Jharkhand, Amla doesn't sell, you will not be there in Jharkhand. So it's not about having a big size all over India, it's having a market share in a particular subsection of India. Okay, okay. And sir, just a final question on the A and P, which earlier you referred to on the call. In what timeframe should we expect a substantial increase in the advertising program for the company as a whole? Are we looking at the six months or twelve months or Haven't you already seen it? I think I also said that our ASP to sales has already gone up as a percentage. And this is only one state that we are looking at. Once you get into other states, you will see this increase much more apparent. And that is why So the increase in spend has already started. You'll see the full impact once we roll out PAN India. Okay. That's the timeframe I'm asking about. Is it 12%? That's why I said first quarter of next year, plan to roll out PAN India, end of first quarter next year. Okay, fair enough. Thank you so much for answering the questions. Thank you very much. Ladies and gentlemen, due to time constraint, we will take the last question from the line of Sarvesh Gupta from Maximal Capital. Please go ahead. Thank you for taking my question, sir. Given that you are planning for a high growth strategy going forward, any guidance that you can give on your EBITDA margins going forward? Will revenue and expenses grow in tandem or you see that the growth? One, we don't give out guidance per se, but I've already stated that we will significantly be increasing our E and P spends. Second, over the next year or two, we don't mind taking dip in our EBITDA margin if it requires just so that we get growth and increase in market share. But what the exact quantum will be, it will be very difficult to say, and we don't give our guidance on that. Okay. And secondly, related to the pledging issue, so while the company which was the promoter holding company for Bajaj consumer would be de pledging all the shares, but is that valid for is the promoter level debt gone from the other non operating companies of the group as well? Yes, absolutely. There is no more promoter debt from all other group companies at the promoter level. Understood, And finally, if I may check There was only debt in this company. There was no other debt. So there's nothing else to go. Okay. So except for the operating companies, it will have some debt of its own. There is no debt now Yes. At the holding As well as at the personal level for the promoters. Yes. Sir, final question related to the pledging. Since the company had substantial cash on its balance sheet, so one way to manage this sale of promoter shares was you could have announced a high dividend, which could have given some liquidity to the promoters to avoid selling one thing. This question is irrelevant at this point in time. Share has been sold. The decision has been taken by the promoters to sell down the stake, not let anything affect the company and its growth and its future. And that's the decision we've taken. This whole discussion now is meaningless. So let's I'm not even further answering this question. Understood, sir. Thanks a lot and best of luck for the coming quarters. Thank you very much. I will now hand the conference to the management for closing comments. So as a sum up, repeating, for us in the Bajaj family, reputation is built over generations and once lost can never be rebuilt. So that is most important, much more than money or anything else. That's why the stake sale took place. The 22% that we sold with that promoter level debt is zero across promoters, their holding companies, non operating companies, etcetera. Two, and with the commitment that no further debt will be taken on the promoter level and no further pledges on Bajaj Consumer Care or any other group company will be done. Two, we are on very almost close to finalizing between two people for the search of the CEO. And hopefully, you should hear in the first quarter of next year, you should hear the formal announcement of that individual joining. So there will be clarity on continuation even from a long term perspective for the company. The strategy that we've adopted, the new CEO will be completely aligned to that. He will have 100% buying. There will be no change in strategy even when the new CEO coming in place. Third, our strategy is to grow double market share, as stated earlier in May. For that, if we will be increasing as we go along as we've already started, but as we go along further increasing our A and P spend significantly, both in terms of absolute value and as a percentage of sales, which would mean that over the next two years, there could be a reduction in EBITDA margin and profitability, but we are okay with that provided we get growth, And we will monitor that on a monthly basis as we go forward. And that is what we know that the industry is slowing has slowed down considerably, something we haven't seen in many, many years. But in spite of that, we are very bullish with our strategy. And we hope that when the industry growth comes back after maybe six quarters, eight quarters or more, if you have a higher market share on a higher base, that will disproportionately add to the bottom line in the future. But the medium term strategy is to get growth even at the expense of EBITDA margins. So with that, I would like to close today's session and wish everybody a very, very happy Diwali and a prosperous New Year. Thank you very much.