Ladies and gentlemen, good day, and welcome to the Q2 Results Investors Conference Call of Dabur India Limited. As a reminder, all participant lines will be in the listen-only mode. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Gagan Ahluwalia. Thank you, and over to you, Ms. Ahluwalia.
Thank you. Good afternoon, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to this conference call pertaining to results for the quarter ended 30 September 2023. Present here with me are Mr. Mohit Malhotra, Chief Executive Officer, Dabur India Limited; Mr. Ankush Jain, Chief Financial Officer; Mr. Ashok Jain, EVP Finance and Company Secretary; and Mr. N. Krishnan, DGM Finance. At the outset, we will have an overview of the company's performance by Mr. Mohit Malhotra, and this will be followed by the Q&A session. I now hand over to Mr. Mohit Malhotra.
Thank you very much, madam. Good afternoon, ladies and gentlemen. Thank you for joining us today for the results call of Q2 financial year 2024. While the macroeconomic indicators were showing an improving trend during the quarter, uneven distribution of rainfall and a deficient monsoon impacted rural consumption in quarter two. However, we expect the uptrend in FMCG consumption to continue, driven by new age channels, MSP increases, sustained infrastructure investments, robust crop sowing, and onset of the festive season. Dabur's consolidated revenue grew by 10.4% in constant currency terms and 7.3% in INR terms to reach INR 3,204 crores. Our international business grew by 23.6% in constant currency terms and 10.4% in INR terms.
The beverage portfolio in the India business was impacted by uneven distribution of rainfall, especially in North India, which was significant sales in our business. Ex-beverages, India business saw a growth of 6%, backed by volume growth of 5%. Talking about the categories, HPC portfolio recorded a growth of 5.8% during the quarter. Our home care portfolio grew by 15%, led by a strong double-digit growth in our Odonil and Odomos brands. In the mosquito repellent category, we saw a strong uptick of 556 basis points in market share, taking our share of Odomos to 65%, and our air freshener portfolio also saw a gain of 164 basis points. Dabur Red franchise grew at a high single digits, and the recent introduction of Dabur Red Bae Fresh Gel is showing good traction in the marketplace.
Our market share in the toothpaste category saw a gain of 20 basis points. Hair care recorded a high single-digit growth in secondary terms, and our share in hair oils improved by 143 basis points to reach a level of 17%. The healthcare portfolio recorded a growth of 5.4%. We gained market shares across the health supplements portfolio, with Chyawanprash seeing a 45 basis points gain and Dabur Honey gaining 64 basis points improvement during the quarter. The digestive category saw a growth of 18.1% on back of robust performance of Hajmola franchise. OTC portfolio witnessed 8.4% growth during the quarter, driven by Lal Tail, Honitus, and Dabur Health Juices. Ethical portfolio recorded an 8% growth in the quarter.
Our recent initiative of setting up a therapeutic division is doing well, and we saw baby care sales double, and the therapeutics division recording a double-digit growth. While beverage business saw a 10% decline during the quarter, food business under the Hommade brand performed very well with a growth of 40%. This was further bolstered by Badshah acquisition, which saw a high teens growth during the quarter. Despite the high inflation in spices, we remain committed to exiting the year with a run rate of INR 500 crore coming from our foods portfolio. We continue to drive our distribution initiatives. Our direct reach stands at 1.4 million outlets and should increase to 1.5 million by the end of the fiscal year. Village coverage is at strong 1.07 lakh villages, being ably supported by more than 13,000 Yodhas.
The edge score, which is a marker of the efficiency of the distribution, continues to see improvement and has seen further improvement by 12% in the quarter. Now, coming to our international business. With moderation in inflation and distribution changes in the international business, the business has seen a strong recovery and registered a 23.6% constant currency growth. This was driven by a notable increase across regions, with MENA region growing at 18.4%, Egypt business growing at 35%, Turkey at 78%, and Bangladesh recording an 11% growth. Our focus on innovation and customer-centric strategies has enabled us to gain market shares across categories and countries. Recently, we made a disclosure regarding litigation against our U.S.-based step-down subsidiary, Namaste LLC. Let me assure you that this does not concern any of our Dabur brands or products.
This litigation is against the entire hair relaxer industry players, including L'Oréal, Godrej, Softsheen-Carson, Namaste Labs, Avlon, Revlon, and so many more, where it has been alleged that the use of these products leads to harmful effects to health. Namaste disputes the same and stands by the safety of its products. The case has been filed based on an incomplete and an inconclusive study and has absolutely no legal merit. The portfolio in question is less than 1% of our consolidated revenue, and we have a product liability insurance in place. The matter is sub- judis. Coming to the consolidated profitability during the quarter, our gross margin saw a healthy expansion of around 300 basis points, as we saw material deflation during the quarter. In line with our stated strategy, we have increased our A&P investments by around 43%.
We believe that media investments are essential to drive long-term sustainable growth and maintain our market leadership. The consolidated operating profit recorded a growth of 10%. Excluding the one-off exceptional legal costs, our operating profit grew by 16% and consolidated PAT increased by 14.1%. Overall, the demand scenario is improving. The onset of festive season augurs well for our business, and we will continue to drive profitable growth across our business verticals, backed by investments in our distribution network, brands, manufacturing, digital, organizational capabilities. With that, I conclude my address and open the floor for more Q&A. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead.
Yeah, thanks. My first question is on home care. So clearly a star, this quarter with double-digit YOY growth and four-year CAGR. My question here is not on Odomos, Odonil, my question is on Odomos. So other HPC players have pointed towards the in-home consumption being weak, which I think in your case is more of out-of-home. But still wanted to understand, are there any learnings from this part of the business, which is growing double digit YOY and on four years, to some of the laggards of your business? And second, this 560 basis points gain in market share for Odomos, on what number is such a sharp gain? What is driving this? And your recent foray in terms of the in-home mosquito, essentially LVs, any initial success, if you can share?
Right. Hi, Abneesh. So firstly, I think home care is a category is under-penetrated in the country. And I think because the category which are under-penetrated, there is a tailwind of growth, which is happening as the country is urbanizing and from metros to mini metros to Class One, Class Two towns, the penetration is moving up, and post-COVID is opening up of the market. That's why rightly pointed, like you did, that Odomos is more out-of-home consumption as kids move out and, there is a learning. So is the category learning across the category in our juice business. Juice business, so as Real was in-house consumption, as we got into pet bottles, which is out-of-home consumption, is catching up. So cross-category learning is there, but that's not a laggard.
Out-of-home consumption is really actually catching up, and is there a learning maybe in skincare also, which is a laggard at the moment. As far as our extension of Odomos into LVP is concerned, early days yet. Most of our distributors have already taken insecticide licenses, and we are rolling out LVPs across the board, all India. As of now, we've garnered a turnover... It's just been two months since we've actually rolled it out, and a turnover of roughly around INR 4-5 crore is that we've got. The category size of around INR 2,500 crore, as compared to a very small size in which personal application creams operate, we expect a good acceptance of this brand extension into LVP because awareness of the brand is very high.
So that's where we are on Odomos and the insecticide category.
Right. My second question is on the beverage business. So in Q1, the performance of the cola companies and your performance was in a very tight band. Both were weak, but this time I see a very big disparity where both the pan-India national cola companies are double-digit kind of growth, and you are at a double-digit decline. I understand it is not like-for-like portfolio, but for the customer, it is broader form of a bit similar consumption. So here, is it a one-off? Is it because of festival impact? I know you alluded towards the North India on an overall company basis, but is North India impacting this part of the business more?
Can any proactive steps be taken so that you can close the gap in terms of performance, with the overall beverage, in terms of the cola companies, what they are seeing from a medium long term, can you close the gap in terms of performance?
...So I think, Abneesh, I think festive season impacted us. The festive season was shifted by around 20 days, so a lot of loading, which happens during the festive season, did not happen as far as the beverage business is concerned. And North India got impacted by incessant rainfall, which happened in the month of July. So the business got impacted in the month of July, and we could not cover that up in the month of August, where rainfall was lower. But in September, again, the rains kind of caught up, and therefore the loading and the supply chain got impacted. And not so much because North contribution to the business is more than around 50%, for us. That was one factor, festive season, north rainfall.
The third factor was that there is a new player called Storia, which has entered the market, which is in coconut water. Our coconut water business got impacted because of that one player that impacted our market shares in the modern trade as far as the coconut water is concerned. So we are ramping it up. We are putting in a CapEx worth around INR 30-40 crores, so that the next season we are able to catch up with the PET bottles in the Real, wherein coconut water can be served. While we launched a Tetra Pak, but Tetra Pak in coconut water has not shown us as great a response as maybe a transparent aseptic PET bottle.
We are putting up a CapEx for aseptic PET bottle to try to cover up the lacuna that we faced in the first and the second quarter.
Sure. And last question will be on the legal thing, which you mentioned on Namaste. You mentioned product liability insurance is there. So two sub-questions there. In terms of the legal cost, I think, which is fairly large, fairly substantial, any part of the insurance claims can cover that also? And second is, I understand it's a industry-wide impact. So is a collective action also being thought about? Because a lot of these are company specific, but then it's a larger industry-wide also. So any industry-wide action which can lower the legal costs, which can lead to faster solution, anything on that sort can happen?
Yeah, so you know, you're right. We have a product liability insurance in place. That insurance actually covers any claims or damages arising out of the legal suit, the estimate of which is not known as yet, because we are still in the discovery phase. And the final scientific phase and the legal proceedings, court proceedings, will determine all that, which is still a little time away. It may take another four-six months for that to happen, but we've started incurring the legal costs, while the insurance is covering a part of the legal cost and some part we will have to bear. There is a ceiling and a cap on the legal costs there. That's why you see an expense which we have incurred.
We've incurred an expense of around INR 36 crores in the quarter, but initially in the discovery phase, the expense was higher. Going forward, we expect the expense to be lower in the range of around INR 20-odd crores per quarter, is the expense that we estimate going forward. But this is our estimation of the expense. As far as the joint legal pursuit is concerned, against the legal case, we have our lawyers and other company lawyers in the industry have got together and created a forum called a Joint Defense Group has been created, and they are all working together towards fighting this case. There doesn't seem to be any legal merit to the case because it's based on an incomplete and an inconclusive study, which has got published in a journal, and that is becoming the basis of the legal suit.
In the past also, a couple of cases like this have happened, and we have a precedent which works in the favor of the defense, which is us, and we are very confident of winning this case. As far as Namaste is concerned, we have safety studies in place which are material in this case, and our products are safe. We and Namaste LLC maintain that our products are absolutely safe and do not harm the consumer health. And this kind of a product has been sold for people of African origin for generations together. And we don't see any legal merit, but the cost will have to be incurred for a time. That's how the legal landscape is actually set up in America.
We have to defend it, and that's why we are trying to defend it with capping of the costs, as I just alluded to. If I've missed a point, Mr. Jain, you can add on. Yeah, so that's pretty much from our side. Yeah.
Sure, thanks. One last question on the India business. So essentially, India's largest biscuit company today said that, given demand situation is challenging, so in that context, spending too much on advertising or, say, promotion, doesn't make sense. In your case, 40% plus advertising spends are happening. I understand, many other HPC companies are also sharply ramping up, and foods is different. But what would be your thought process, given your volume growth 3% or ex beverage, say, around 5-6%, is not something very high. So, are we now at the peak of the advertising spend? So if you could comment on that. And which categories are seeing more in terms of the ramp-up on a YOY basis?
Yeah, so I think overall situation, you're absolutely right. As far as food is concerned, it's more impulse purchase, so therefore, too much of advertising and building a consideration for your brand and saliency for the brand doesn't make much of sense, because more impulse purchase decision is taken on point of sale. Therefore, food company don't spend, and we also don't spend as much of money in our beverage and our food portfolio. It's more point of sale investment. As far as considered purchases of HPC and HC are concerned, I think their advertising becomes very, very important to build the equity and build the brands into the consideration set, and, moreover, bring the main brands to the fore for the decision making, there we feel it's very important.
In last one or two years when the inflation was very high, we cut back expenditures, so we are still at around 7.5-8%. We think the band of advertising to sales ratio in this category should be around 8%-10%. We will continue to ramp up advertising investment in that category. In specific, we are talking about more of oral care, where we will ramp up, home care, where we'll ramp up. HPC categories is where we will look at more growth, and also in category like Chyawanprash, for which we are having a season. Because what happens in healthcare is that attrition happens once the season is out, and you have to enroll consumers. For enrolling consumers, some top of mind advertising has to be there.
So our power brands will see a ramp-up of advertising, and not so much in the beverage and the food portfolio. To your point.
So thanks, Mohit. That's all from me. Thank you.
Yeah. Thanks, Abneesh. Thank you.
Thank you. The next question is from the line of Aditya Soman from CLSA. Please go ahead.
Hi, good evening. So first question on the season. I think you indicated that the season was weaker for juices and Chyawanprash. Are we seeing any sort of pickup in October as we enter the festive season? And secondly, I think you just mentioned on advertising support for Chyawanprash, so I'm assuming that this will be largely in 3Q, and then in 4Q the support goes back to normal levels. Would that be right?
Yeah, Aditya, good evening. So absolutely right. So I think season for beverages was impacted in the second quarter, wherein invariably we do loading for beverages for the season to come in the quarter three. This time, because the Diwali has got shifted by 20 days, the loading, you know, shifted to quarter three, and whatever we lost in quarter two should ideally get compensated in quarter three. I think it's just a shift of season. It is not that season was damp or something. It was just shifting of festivity which has happened, and therefore loading, suffered in Chyawanprash and some amount of Amla and some amount of beverages, which, should get, compensated in quarter three. I am pretty positive that.
If you look at the quarter three number, October has just gone past, and we've seen our beverage growth at around 10% odd levels in the quarter already started, in which it declined at around 9%-10% in our quarter two also. As far as advertising is concerned, yeah, Chyawanprash advertising is already, as the winter has started in the north, so we started our advertising in Chyawanprash and honey, and it will continue through the quarter three. In quarter four, it will again abate a little bit.
Thank you. Very clear. And, and in terms of home care, we've seen very strong numbers. In particular, Odonil. Anything to call out what's really driven this, driven the market share gains?
So Odonil is in the Home Care category. The penetration of home care category is low in the country, as I alluded to before also. There's a tailwind of a category growth of around 20%, so it's a great category to be in. We feel, as per Nielsen's indicated data also, the category is growing by 20%. Our entry sale is in the range of around 23%, and it's a margin accretive category to us, with low competitive intensity. We have a high capability and a good brand in Odonil, so we are extending the Odonil brand. So we were present in the PDCB blocks. From PDCB blocks, we've extended ourselves into gels.
So we launched a gel pocket, and the initial, you know, feelers from the market, the gel pocket has been received very well. It's a modern, upmarket format, uplifting from, PDCB blocks to the gel pockets. That is doing considerable well in the marketplace, so it's on back of that. In addition, our aerosol format is also doing well. We've introduced a signature variant of, aerosols also in the marketplace. So room freshener as a category is also, picking up, there. So that's, where we are as far as Odonil is concerned.
Thank you. That's very heartening to hear, and, and all the best.
Thank you.
Thank you. The next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Yeah, hi, Mohit. My first question was on margins. So in most of the commodity, benefit of lower commodity costs already in the quarter, this quarter, and, in the context of you having already done a 20.5% margin this quarter, you are obviously seasonally strong in the 3Q. Would you now be a lot more confident of doing, holding, you know, above a 20% margin for the rest of the year?
Yeah, as far as margin is concerned, we've seen a bit of deflation, Arnab, in most of our categories. But that said, we have not seen too much of deflation in petroleum-linked products. While there is a deflation in packaging, there is a deflation happening in edible oil. But, as you know, the petroleum prices haven't softened to what they were, you know, when the inflation cycle had not begun. So LLP prices are still not where they were earlier during the COVID or pre-COVID time. So we are waiting for that to actually soften, and we expect the margin upside continue to happen for us going forward in the quarter. I did not understand your question very correctly, Ankush.
Yeah, yeah, but Arnab-
... so you are saying that 20% will hold on to the rest of the year, is it?
Operating margin.
Ah, operating margin. Operating margin, 20%, you mean? But our business is seasonal. Yeah, no, understood. So now our, you know, operating margin is based on seasonality also. So Q3 it peaks, but Q4 it doesn't really touch 20% or thereabout. So H2, we'll have to see a blend of both the seasons put together. Yeah.
Yeah, but that said, you know, we have-
Yearly guidance, yeah.
We have already given a yearly guidance, and we'll maintain by around 19.5% annual operating margin, and we are committed to this. Despite the legal cost, which is actually a hit of around INR 63 crore in the first half, we had a legal cost. Despite the recurring legal cost that we will have in the subsequent quarters also, we are pretty confident to what guidance we had given to the market of 19.5%. We'll be either at that or even better that also. We will try, as the commodity cycle is on a deflation sort of end. Yeah.
Got it. Secondly, one on health supplements. That was the one kind of soft aspect in this quarter, where you had a flat versus last quarter being like a 5% growth. So anything to call out for why this quarter was softer than last quarter, given that the base would be now correcting, you know, post-COVID, the impact had started going away? So anything to call out why it was weaker and any specific, you know, factors which you think would drive the growth in the second half?
Yeah. So I think on health supplements, very clearly, I think the default came in from Chyawanprash. Because of the season shifting by 20 days, Chyawanprash loading could not happen as it happens in the previous years also. So that has got shifted. So as that gets shifted and the winters have also got shifted, I think it should get covered up. As far as Honey is concerned, the second big brand in our supplement portfolio, that continues to gain share and do well. We grew by around 6-7% in our honey brand, whereas Chyawanprash actually declined at around -7%, only because of the season issue. So which I think in the second half should get covered up.
Got it. And just one follow-up question on the legal issue in the U.S. So this 1% of the sales that you have, does that sale get impacted in any way because of the legal challenge or because consumers may be concerned on this product, given the case? And secondly, this INR 20 crore cost that you said, how many quarters do you think this continues... I'm just trying to understand the period of time in which the legal expenses have to be borne.
Yeah. So there is a little bit shadow cast on the business. If you look at the overall Namaste business, which is roughly around $45-$50 million business, out of that, around 25% of the business is relaxer business. Only the relaxer business is impacted by this, and that is continuously getting impacted. And there is a delisting which is happening of relaxers because of the sentiment being negative in the U.S. market. So that business is impacted. But over a period of past four-five years, we have created a non-relaxer portfolio, which is now almost 75%-80% of the portfolio and growing at a faster clip as compared to the relaxer portfolio. So we will expedite to build and bolster that non-relaxer portfolio. That said, U.S. contributes around 60% of the business.
Forty percent comes from outside of the U.S. That relaxer is not impacted. Even in the U.K., it is not impacted. There we'll continue to compensate the same. As far as legal cost is concerned, we had incurred a cost of around INR 30-35 crore per quarter in the first half, but going forward, we are capping it. We are trying to cap it at the range of around INR 20-22 crore per quarter. That is what we've done. We've done some changes as far as our legal attorneys are concerned, and also taking up with the insurance companies, et cetera. All that is happening and also working in joint defense group to cap the legal costs. That said, invariably such, you know, multi-district litigations in the U.S. take invariably two years, if not more.
Two years is what we are trying to see that it should take, and this kind of a cost should continue till the time.
Okay, thanks. Thanks so much, Mohit. All the best.
Yeah, thank you. Yeah.
Thank you. We have the next question from the line of Shirish Pardeshi from Centrum. Please go ahead.
Yeah. Hi, good evening, Mohit. Thanks for the opportunity. Two questions in the beginning. You mentioned during the CNBC interview that there is a rural uptick you have seen. So specifically, there are two parts of question. One, you alluded saying that the winter has started setting in. So is the north winter or north rural has seen these green shoots? And the second part is that where the rural problems is still not recovered or below expectation?
Right. So, Shirish, overall, I was commenting upon the overall rural sentiment. If you look at the syndicated data also, and the same thing, we are seeing in our business, rural, if you look at the past three quarters, we saw rural at, You know, rural was in the negative territory. From negative, it moved to positive at around 0.4 in last to last quarter, then it moved to 4%. From 4%, it's moved to 6.7% in terms of volume. So the trajectory of rural is only getting positive as you are lapping over the lower bases, and those lower bases will continue for some time. And I think rural will continue to gain traction, albeit it's happening slowly, but it will happen surely.
With the MSP increases that the government is announcing, with the election season coming up, some swaps will happen, infrastructure investment is sustaining by the government, direct benefit transfers are in place. So I think on back of all this, and rainfall and the crop proceeding has also been good for the winter crop. So on back of all this, I think rural will grow, and we have seen our trajectory also in rural kind of sustaining. But that said, rural is lagging urban, and we have seen in our business also, the new age channels like modern trade, e-commerce, are growing at a much faster clip, and GT business is not doing so well. If you look at the distribution of how rural is faring, I think rural, the worst is in South India.
In South, rural is getting impacted the most because that is where the monsoon also got impacted, if you look at distribution. So South is lagging in rural, followed by south, it is, I think, West, and, then it is North and East. So that is where we are seeing a little shoe pinching in, south for us, at least for Dabur. I can't comment upon the other companies, but, South India for us is lagging, quite a bit. But I think North, with winter coming in, North should, pick up, and, UP, Bihar and, central region, Madhya Pradesh, they should tend doing better as compared to the South India.
Okay.
Because in South India, we are also impacted by a little bit of credit in the market, because the money is not there in the hands of the consumer. And because the money is not there, the credit extensions are also picking up, the payment is not coming back. So, a little bit inventory issues are also happening in our South India.
Okay. One, one follow-up here, in the rural part. But what you mentioned that then when the winter is setting in, you mean to say that the winter loading for our products, our kind of businesses now started, with the ease in the north?
Yeah, absolutely. Chyawanprash, where North is very salient, I think which got impacted in the last quarter, should pick up now.
Okay. So now the question on healthcare is that, though second half last year was weaker and base is now becoming normalized, so can we expect against 5% growth, what we have seen in quarter two in healthcare? Should we double or high double digit?
I can't say high double digits, but maybe high single definitely, as the season is approaching. So high single is what we expect, because it all depends upon the power brands. Because while rest of the portfolio is there, that is trending up at around, high double digit, whether it's Ethical Portfolio or it's a branded Ethical Portfolio or OTC portfolio, that will continue to grow. But till the time the power brands like Chyawanprash and Honey, I think it's hard to get to a high double-digit growth in healthcare. So Chyawanprash is where, I think the bus, actually stops for us. So we just hope that, Chyawanprash business trends up well in the quarter three.
Okay. My last question on the international business. You fantastically delivered a very strong growth, despite there are challenges in the Middle East. I mean, most of the companies are highlighting there is a crisis. But just if I extend your thought, how we should look at second half, if the momentum remains there, the inflation is subsiding, the margin trajectory is also there. So maybe quick comment on how we should look at the overall revenue growth and margin trajectory in the second half for the international business.
Yeah, so I think in the top line, we will expect a double-digit growth and a high double-digit growth in constant currency. Currencies, we don't know what kind of a depreciation that they will go through, but high double-digit growth is what we are expecting in international business going forward in the second half also. But I will give a caveat here. With the situation developing in Middle East, which is although Palestine is immaterial for us, we don't have too much of business coming from Palestine. It's a INR 3 crore per quarter. That's very small, negligible business. That doesn't impact our business. But as the situation develops, it's a wait-and-watch situation for us. As of now, we are not impacted.
But if the war spreads to the whole region, then the business can come into a little bit of, you know, frenzy, and we will have to wait and watch. But at the moment, I think the way things are, I think we are very comfortable to say that double-digit constant currency growth will continue, and what we've delivered in the first half, we will deliver in the second half also, despite the legal cost, which is hitting international business only. So this entire INR 63 crore hit international business, and yet it has delivered the business despite a little bit of cloud on the Namaste business also because of relaxers.
Any word on margin?
So margins, there's a deflation context there in international business. We have seen our gross margins improve by around 600 basis points. There was a 300 basis point in control that you've seen in GP going up. But in international, it's gone up by 600 basis points because it's entirely HPC business, and the entire basket of commodities of HPC business are kind of deflationary, whether it's petroleum links, specialty chemicals, or it is a little bit of edible oils that Vatika is used, so that entire thing is deflationary. This deflation trend will continue, and margin upside on gross margin will again keep trending up in the second half also.
Thank you, Mohit, and all the best.
Thank you so much. Yeah.
Thank you. Ladies and gentlemen, to ask a question, you may please press star and one. The next question is from the line of Amit Rustagi from UBS. Please go ahead.
Yeah. Hi, hi, Mohit. Just on the legal, legal cost, when you mentioned that the legal costs are insured or the outcome, which is impact of outcome is insured, can you elaborate on that? That if whatever cost you increase, will there be any recovery in some of these costs, or these are like, the legal expenses and that cannot be recovered from the anyway?
So there are two elements of legal cost, Amit. One is the legal cost which will happen, which are the damages, which the plaintiffs will kind of put onto the company. The estimation for that is not known, and that will happen at a later stage of the case when there will be court proceedings. As of now, the cost that we've incurred is the cost of hiring a defense counsel, and this is a legal cost, and that a part is recoverable and part is not recoverable out of this. But the majority part of what we've already incurred is something which is really not recoverable.
Okay. And when you mentioned, like, from the next quarters, it will come down in 2023, 2024. So will that have some component of recoverable part, or it is still non-recoverable part going forward as well?
Just to clarify what happens, the insurance company, it takes up the defense on your behalf, but then they engage the lawyer, kind of, as a lawyer, or they have a capping of fee. If company wants to defend its position in a big way, they want to engage the best of the lawyer in the class. So then there is a certain higher cost than what insurance company reimburses. So this is that cost which we are going to incur. Why the cost will be lower going forward is that in the initial phase, there's a discovery phase, where a lot of documents of the company are studied and the lawyers gain the information, then they submit in the court. So that phase, the costs are high. Now, that first phase is almost going to be over.
Slowly, this cost will come down over the subsequent quarter. It will be more of a litigation cost.
Okay, okay. Got it. Very, very clear. And-
Yeah, but, but yeah. Amit, just to tell you, for example, an insurance company will cover a cost of around $300 per hour for a legal counsel. If we incur a cost of more than that, that balance has to be borne by the company themselves, and this is that kind of a cost. To Mr. Jain's point, I think the discovery phase, the expense is more, and post-discovery phase expense will be limited. That's why from INR 36-odd crores, it will go down to around INR 20 crores.
Okay. Okay, got it. And, like, among the new and, like, new product launches, NPDs, you think any material NPD where you think that, brand extension is working quite well and can be a sizable opportunity, for us in the near term? Like on medium term, I, we know that we, we want to give all the NPDs, but any new, any new product where you think that, we should be very, very, you know, there is a lot of possibility around, that new launch.
Yeah. So I think, in HPC, we rolled out Cool King as a brand. I think, first year itself, we should be doing around exits of around INR 20 crore. We launched a Bae Fresh gel as an extension of Dabur Red. That's got great reception in the marketplace, around INR 25 crore turnover that we will do there. LVP extension of Odomos is the early days yet, but we've launched it around INR 10 crore. In healthcare, we've done Baby Care. Baby Care on back of setting up an advocacy team, we have already done a turnover of about INR 20-INR 25 crore. We'll exit the year at around INR 50 crore turnover. So I think that's a big call-out and is doing exceedingly well. Tea is getting good traction. Of around INR 15 crore, we've already done.
Hajmola variants that we rolled out, Chatcola, LimCola, et cetera, have done INR 50 crore sale. INR 50 crores of sales has done. In food business, our coconut water introduction in the Tetra Pak has already garnered INR 20 crore in the season. I think full year, we've also had ordered a CapEx for the pet bottles that I alluded to earlier, wherein a new private equity player has done well. So I think that as and when we catch the next season, hopefully in the coming summer, if we are able to catch it, then we should be able to ramp that up. Fizz is doing well for us. We've got a turnover of around INR 20 crore in Fizz and pet bottles around INR 25 crore. These are the call-outs for the NPDs doing well for us.
Okay, great. Great to know this. Thanks, Mohit, and wish you and entire team a Happy Diwali. Thanks for answering my questions.
Thank you, Amit. Happy Diwali to you, too. Thank you.
Thank you.
Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to Ms. Gagan Ahluwalia for closing comments. Over to you, ma'am.
Thank you for your participation in this conference call. The webcast, audio recording and transcript of this call will be available on our website. Thank you and have a great evening ahead, and wish you a very happy... Thank you.
Thank you. On behalf of Dabur India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.