Ladies and gentlemen, good day, and welcome to the Godrej Consumer Products Limited Q3 FY 2024 earnings conference call. 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 this conference, 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 the senior management of Godrej Consumer Products Limited. Thank you, and over to you.
Good evening. This is Sudhir Sitapati here. A very good evening to all of you. Our performance in Q3 FY 2024 was in line with our expectations in terms of volume and ahead in terms of profit, especially in the context of the current market conditions. Our consolidated reported volume grew by 8%, sales grew by 2%, EBITDA, including forex, by 16%, PBT by 18%, and PAT by 6%. Organic underlying volumes were up by 5%, sales declined by 2%, and at constant currency grew at 15%. Overall, organic underlying volume growth of 5% has been on expectation, though the quality of volume growth has been better than expectation. High margin, which are greater than 20% EBITDA categories and countries, have grown volume at almost double that of low-margin sales, which are less than 10% EBITDA.
This, along with savings in a benign cost environment, have been the reason that our EBITDA and PBT growth have been so much ahead of sales. This is in sync with our strategy, and we have been able to deliver this improvement over the past few quarters. PAT lagged PBT due to the higher tax rate, although our cash tax is lower due to MAT credit and deferred tax charge on brands acquired. India volumes grew by 12%, revenue by 9%, and EBITDA, including Forex, by 18%. Organic UVG was 5% and sales growth was 2%. India domestic sales and volume were up by 4% and 6%, respectively, with our low-margin export business showing some volatility in performance. India volume growth was in line with our expectations. HI continued a steady performance.
Hair color, air freshener, and fabric care are all seeing strong double-digit growth, and we continue to gain share in these categories. The revenue growth continued to lag the volume growth, driven by price declines in personal wash. The integration of Raymond Consumer is now complete, and the cost synergies have started to flow. We are now operating with approximately 30% of the erstwhile overheads and remain confident of achieving the business case. Indonesia continues to deliver consistent performance with 9% volume growth, 8% revenue growth, and 12% EBITDA, including Forex growth. Apart from macro tailwinds, the household insecticide business seems to have responded very well to a significant improvement in the efficacy of our products a few quarters ago. Our hair color business has started delivering over the last few quarters on account of an impressive performance in shampoo hair colors.
The GAUM and LATAM business saw volatility in INR sales due to currency devaluation. The Argentine peso from 361 to 808 devaluation, which, due to hyperinflation accounting, has impacted nine months of revenue. This is having a negative impact of mid-single digits on consolidated sales. However, the impact on operating profits and cash flows is minimal. We are conscious of the fact that some portions of our business would experience volatility on currency or other geopolitical factors. Despite this volatility, we are committed to deliver on an annualized basis, underlying volume growth and improvement in profits and cash generation in GAUM and LATAM in the years ahead. To further elaborate on this volatility in the sales of GAUM and LATAM business, we understand that this can sometimes be confusing.
A simple way to look at our business is to look at underlying volume growth in India and Indonesia and overall consolidated EBITDA margins, post-Forex and operating cash flows. On all these three fronts, we are likely to meet the expectations we set for ourselves at the beginning of the year. Operating cash flow will probably see the second consecutive year of 20% growth. We continue to make substantial progress on key strategic pillars of category development and simplification, and strive to improve the organic underlying volume growth to levels closer to our aspirations while sustaining the EBITDA and cash flow deliveries. On category development, we have consistently been investing in our brands, with our media investments increasing by roughly 200 BPS year-on-year. We have two new launches last quarter, which we think will give us an improvement in our volume trajectory going ahead.
We launched Fab liquid detergent at a category-defining price of INR 99 per liter. This has been currently launched in select markets and will be scaled up gradually into other markets. We have entered the INR 1,200 crore market of anti-mosquito incense sticks that is dominated by illegal players as of yesterday. Goodknight Agarbatti is India's only government-registered active-based anti-mosquito agarbatti. Goodknight Agarbatti uses a new molecule, Renofluthrin, RNF, which is 2x more effective than other molecules that are used in India.... Renofluthrin is a novel molecule indigenously developed in India by our strategic partner. GCPL has a long strategic partnership with the manufacturer, who has been in business of household insecticides for 25+ years, and we have an exclusivity on this molecule for India for the medium term.
It is indeed a proud moment when an India-developed molecule outperforms global molecules, many of which are illegally imported into India. Our simplification journey is a holistic one to release fuel for growth. Our EBITDA margin is now greater than 20%, and we anticipate steady improvement through various structural cost reduction actions. We are on track on our reorganization journey in East Africa, and will complete the same by Q4 FY 2024 to Q1 FY 2025. We will assess any one-time impact on accounts of this as we get more clarity in Q4. 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 touchtone telephone. If you wish to withdraw 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 now wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks, and, congrats on, good margins and decent volume growth. My first question is on, liquid detergent. So here are three sub-questions to your overall fabric care and liquid detergent portfolio. I understand that you have been coming out with this, disruptive pricing in terms of, the powder to liquid, but, the issue there is, if it is successful, it gets copied by the other, larger players very quickly. Second is, liquid detergent is a premium product in India. So for that kind of a premium customer, is INR 99 pricing relevant? Because he may think that the quality may not meet the standards, plus, generally, premium customer is a bit more, brand, loyal. Third, of course, is what is your market share in fabric care? Because here two large MNCs completely dominate.
When you joined, you had said that you had redid the strategy. You focused on core and where right to win is there. So fabric care, is there a right to win for you? What is the market share, and how would you compete with the two large MNCs?
So Abneesh, there are three questions here, so let me answer it one by one. I think the first question is, this is not a powder to liquid. This is a regular liquid. It's not a reconstituted product. Today, in our portfolio, see, laundry liquid, not long ago, we were the main player in this market. I think today our market share is 15%-20%, is what our market share is. So we are a close number three, actually. In many quarters, we are number two in the laundry liquid category. So this is very much a category where it's a core category, it's not a new category, and a category where we do have a right to win.
We have two strong equities: Ezee, which is a very strong equity, Genteel, which has been doing very well for us, which is also a reasonably strong equity in some parts of the country. Genteel. Ezee is positioned on woolens, Genteel is positioned on care, and Fab is positioned on clean. Now, on your question on laundry, a premium category, we, you know, that's not how it develops in many countries. In many countries, laundry liquid very quickly becomes a mainstay. That's what we're seeing in many parts of India, where it is not only premium consumers who buy into laundry liquids. A whole lot of mid-priced and mass consumers move. That's what we've seen in China. That's what we've seen in Indonesia.
So in fact, our anticipation is that as this market moves from being a premium to a more mainstay category, I think we see a need for a brand like Fab.
Sure. My second question is on the disruptive Agarbatti, which you have launched. So a few sub-questions there. One is, in the past, GCPL has not paid same level of focus on coils versus, say, the higher-end products there. So in Agarbatti also, it's a lower-end product. I understand it's a INR 1,200 crore market. So I wanted to understand, can you extend this product to coils? Second is, in terms of pricing, how does this compare to the illegal players, and in terms of efficacy, how does this compare to the illegal players?
See, I think the larger point on household insecticides and Agarbatti is the first entry there is, you know, one is of course the format of Agarbatti, two is the active Renofluthrin, which is exclusive to GCPL for the medium term. I think, you know, our Agarbatti is a format that consumers want. Today, they're using illegal incense sticks, you know, with varied amounts of dosage. We don't exactly know what goes into each incense stick, so this guarantees a safe experience for consumers. On average, we have noticed that our Agarbatti is 2x as effective as regular incense sticks. There's a wide variation in illegal incense sticks, but we have noticed that it is twice as effective as the illegal incense sticks.
It is priced at the same price as illegal incense sticks. It's a price, MRP of it is INR 12 in the South of India and INR 10 in the North of India. That is roughly the price of illegal incense sticks in South and North.
Could you extend that to coil if it is successful?
The active will work everywhere, Abneesh, so it's a matter of time, and, you know, we'll figure that out. But the fundamental principle is Renofluthrin, which is the active... It obviously has implications in many parts of our portfolio.
Last question, essentially on HI again. You have mentioned more such products will continue. So my specific question is, in Bangladesh, I think you have come out with a disruptive HI launch. So if you could mention, how is the pricing of that product versus your earlier product? And, in terms of, market share and growth, how the numbers have been. I understand, your presence is small there, but, could you, take us through... Could you become a very relevant player post this disruptive launch, long term?
Yeah. No, I think both in Bangladesh and Indonesia, we changed the active molecule from TFT, which is the global molecule that is used in many parts of the world in household insecticide, to more efficacious formulations. They may or may not be exactly the same molecule as India, but more efficacious formulations. In both Indonesia, which we declare the results, but Bangladesh, the results on household insecticide, if anything, have been even better. So we are very, very—and it has all been on our liquid electrics. Electric penetration in Bangladesh is sub-3%, unlike, which is about 20% in India. So even compared to neighboring Bangladesh, it is, it is very small, and it is growing exponentially this year in Bangladesh. So we are very, very bullish on improving efficacy of household insecticide being a route to better performance in household.
It's something that, you know, you've been asking us for a long time. I think with the launch of... We've done it already in Indonesia and Bangladesh. With the launch of incense sticks in India, I think this is our first step in improving the efficacy of household insecticide products in India.
How is pricing different in Bangladesh versus existing products, similar existing products?
The liquid vapor, the price is roughly the same as India. There they have illegal- Yes, yes.
Oh. Okay, that's all from my side. Thank you.
Thanks, Abneesh.
Thank you. The next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Yeah, hi, Sudhir. Congratulations on a good quarter. My first question was again on HI. So, from what you said, the efficacy is stronger than even illegal incense sticks, where, at lEast our understanding initially was that dosage is so high that that's almost like a killing product. But in your assessment, your product is actually more effective than the average of the illegal incense stick market?
Yes. When you guys, I think in May we will do an analyst conference, and maybe at that time we can show you guys how the various products, including illegal incense sticks, work. But we think that our incense stick is 2x as efficacious as the illegal incense sticks.
Got it. And, if you could just help us understand this INR 1,200 crore category, what is it as a percent of overall HI? And, in terms of margin profile, does it have acceptable margins, given whatever would be your, like, minimum margin thresholds?
It is between 15% and 20%. See, the numbers on illegal incense sticks are not absolutely clear. 1,200 is what Nielsen reports. It may be higher than this, is what we informally think. So anywhere between 15% and 20% of the market is what illegal incense sticks is. It's growing at 15%, so it's growing very fast as well. Over the last five years, bulk—actually, the volume growth in HI has been pretty good. Volume growth of actives in HI has been pretty good, but all this growth has been taken by incense sticks. So that is the incense stick story. The margins on our incense sticks are, acceptable, but probably not great. But we will see with time how we play this market. It certainly meets the minimum threshold, but we will play it with time.
We'll figure out how we can get there. I think our first step is to grow the household insecticide category rapidly. I think that's our first job. You'll see, Arnav, that this quarter, for example, we've declared 29% EBITDA in India, so we've got a solid P&L in India to fund this kind of fast-growing category.
Got it. Just one last follow-on to this. Do you need any additional approvals to use this molecule in LV and other formats, or once the registration is done, it's up to you in terms of how you execute it?
See, the way it works is that, A, what takes a lot of time is for the molecule to get registered. Once the molecule is registered, it takes a certain amount of time for a format to get registered. So molecule got registered some time ago. We have now got approval for the incense stick format. It won't be proper for me to say what we're doing on the others, but, you know, natural thing is, you know, it becomes easier with time, so one, one would expect, approvals to come one by one, across formats.
Sure. And just one last question from me. The price mix this quarter was still negative by about 3% for India business. Is this largely to do with the soaps pricing amortization? And do you see pricing coming back in FY 2025?
Yeah
based on the current outlook that you have?
Yeah. So, Arnav, you know, on our domestic sales, it wasn't that high as 300 basis points. It was close to 200 basis points. It is largely due to soaps, and that will come back from Q4 onwards.
Understood. Thanks. That's it from my side. All the best.
Thanks, Arnab.
Thank you. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Hi, good evening, Sudhir.
Hi, Vivek.
A few questions. First is on, again, on Goodknight incense stick. So again, I know too early, and you have just literally rolled out now, but if the product is 2x more, you know, in terms of efficacy, and assuming that, you know, the distribution might is there with you, you will also support it with the advertising bit. How do you define success over here in terms of what would be the, let's, let's say, aspirational market share for you in the next three to four years?
... See, I mean, look, this is an INR 1,200 crore entirely illegal category. So if you logically think about it, there's no reason why we shouldn't pretty much be the only player or have a dominant market share here. I think while we go on this journey to answer Arnav's question, we have to be a little careful on how fast we grow versus the right margin. So we will have to calibrate a little bit here. But I would certainly say in destination, there is no reason for illegal incense sticks to exist in India. When they are less efficacious, they are less safe, they're not allowed, they're not advertised, and it's basically a proxy product, why should they exist?
In terms of what would be your distribution strategy over here, would it, you know, I mean, again, we definitely, you know, like the growth mindset, but, you know, in the past, you have had mentioned or have had some concerns around the incense stick. The fact that you have launched it shows the growth mindset, but would there be a total overlap in terms of your LV and incense stick, or incense stick will be more in markets where you think that the existing illegal sticks are floating around much more than, you know? Basically, the idea is to displace illegal or to grow, you know, to grow this category.
No. I, I mean, look, we, some of these answers, Vivek, will get clearer to us with time, I think. You know, some of these things we just wait for what the market wants to do, and our job is to distribute and communicate that it's available. What has happened so far in incense stick is that it has upgraded from coils in India and prevented the fast growth of electrics. I don't think it has really taken from electric so far. So while we will get into incense sticks, hopefully replace illegal incense sticks, the underlying reason why incense sticks, one, is because the molecule is very efficacious. I mean, while it was illegal, it was efficacious.
So we hope to have a strategy on liquid vaporizers, on aerosols, on coils, as well, which will, you know, let them have their own place in the sun, and providing margins of everything is acceptable. So ideally, for us, we must get to good margins on everything we sell and then let consumers choose.
Got it. Got it. On Indonesia bit, you know, we have seen again, smart, you know, margin expansions over there. How do you think about, you know, the margin trajectory from where we are? I think in the past, you have mentioned that, it may be difficult to get back to the same or you wouldn't necessarily want 28% kind of margins. But in the next couple of years, where do you think Indonesia settles at?
Indonesia margins today are around about 20%. At its peak, it was 28%, so I think it can go somewhere in between the two.
Somewhere in between the two. Okay. And, again, you have not explicitly given, but could you highlight where would be Raymond margins right now in third quarter?
As you know, I think, we'll probably give that to you guys at the end of one year. But suffice it to say that the gross margins we are happy with. We are very happy with the reduction in overheads, and we have significantly increased the ATL beyond what we wanted to, because, you know, we feel like, let's, let's do that. So one has to look at the structure of the margins. It's also a little difficult for us to compute right now because it's all been merged. But I think once we finish a year, we will probably show you guys what the shape of margins are. But I, I would say that I'm, we're quite happy with the shape of margins. The thesis on margin extraction seems to be bearing out.
Got it. And last question, you know, your P&L margins, everything looks, you know, looks quite good. You have been, let's say, launching or you have acquired this RCCL portfolio. Do you think for now... And of course, HI, you know, more products will come out. But let's say from a next two, three-year perspective, do you think whatever launches, acquisition you have, you had to make, you have already done that, and it will be, you know, building around, you know, the existing platform? Or do you still think there are white spaces like, you know, deos, for example, some liquids, for example, you have entered, RCCL, you have done. So the blocks are in place, or you think there may be a couple of more categories that you may look into?
I mean, Vivek, look, our number one priority is market development of existing categories. As and when we find genuine ways to solve problems in health and beauty, our vision is to, you know, bring the goodness of health and beauty to consumers in emerging markets. So in particular, in India, as and when we find opportunities in health and beauty, we'll evaluate it. But our thesis is based very much on developing the categories we are present in, including liquid detergents. I must say that we've always been in liquid detergents, not a new category.
I mean, just a follow-up, you know, on that point, because I also have had this question, what Abneesh asked, you know, about right to win in this space, given that, you know, there are two large multinationals. So I'm not sure if the existing category and what you, where you have entered are really, you know, really in the same domain, because one is the existing two brands are really, really specialized, right? In a, as a matter of speaking, as against this liquid detergent. But, you know, we would still like to give you benefit of doubt and see the progress over the next few quarters.
Yeah, we can have a look at this, Vivek, but, you know, soaps and detergents is very much part of our making. I mean, we, you know, 20 years ago, we launched Godrej No. 1 pretty much, and, and we've done really well over the last two decades. We have—we feel we have a very good understanding of, surfactant technology. We have the right distribution. Two brands we've already got, which are strong, Ezee and Genteel. The third one, we're launching at a disruptive price. So, we feel we understand the technology well. We feel we are—it, it's got an overlap with technology, overlap with our selling systems, overlap with our marketing systems.
We may or may not operate at the, you know, super premium of the market, but there's a huge market in India that will develop for liquid, and someone's going to get the mass of the market as well.
Okay, the last follow-up to this, it's not a precursor to you entering into powder space, right?
... Yeah, I, I mean, look, we will not tend to, we don't tend to enter into markets where the problems are solved, where penetration is high. You see, our thesis on liquid detergents is it's a low penetrated category with rapid growth. We have studied it across many countries. We know what kind of price points. So we will not enter categories, which are highly penetrated, certainly neither organically nor inorganically, actually. So we certainly have a filter of when we want to do something new on what is the penetration of the category, what is the growth potential of the category?
Got it. Got it. Thank you, and wishing you all the best.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may please press star and one. The next question is from the line of Percy Panthaki from IIFL. Please go ahead.
Hi, Sudhir It's a very basic question here on the incense stick. Is it a product which kills or is it a product which repels?
It's a product that kills.
Okay. So, and this doesn't last the entire night. It will burn out in an hour or so, and then will give protection maybe for a couple of hours more, right?
Yes. It's a 45-minute burn product.
Okay. Understood. Understood. So, tell me one thing. Now, you are giving the most efficacious molecule in the most mass market product. So will users of liquid vaporizers not sort of feel short-changed? I mean, they are paying a premium, they are buying a premium product, and they are not getting the most efficacious solution for the price.
Liquid vaporizer won't stand still. Our game is to improve the efficacy of every single product in this category. We have launched with incense sticks. It's the largest market. We've moved with speed there, but in every single category, liquid, coils, aerosols, we will seek to significantly improve the efficacy of the product so that the relative efficacy of products don't change.
Okay. And what is the moat in this molecule that you have? I mean, you said that in the medium term, nobody else can use it. Why is that the case?
It's a patented molecule of which we have exclusive usage for a reasonably long period of time.
Approximately how long? Any idea?
If I could tell you that, then I wouldn't say for a, for a reasonable time, right? But for a reasonable time, Percy, I mean, not, nothing in the, not, nothing, nothing that is in the very short term. So,
If that is the case, then can a case not be built that you are not just targeting the INR 1,200 crore incense stick market, which of course, you are doing through the incense stick format, but if the larger plan is to use the molecule across all formats, then you are looking at, sort of, I mean, logically, given that you are a market leader, you have a better distribution, you have a better efficacious product in LV as well as coils or other formats, what is the rationale for existence of even the other organized players in the HI market?
No, I mean, certainly that's what we've been doing in Indonesia, and, that's the game here, for us to improve the efficacy. I don't know about rationale of other competitors and all, but to improve the delivery of, mosquito kill, we feel like... See, molecules take some time, you know, they're a little bit, you know, they have a life cycle. The current molecule has been around for a long time, and it's time for a new one. And, so we've taken a little bit of time because we also want to structure this right. So to get a more efficacious molecule, to get enough, exclusivity on it so that we can shape the market. So, I mean, I don't know how exactly the market will shape out, but certainly that's our intention.
Across the world, are there other molecules which are more efficacious than the molecule you are using, which maybe some of the other competitors can just sort of try and get those molecules registered in India?
See, there may or may not be. I don't know for a fact, but it is not an Ezee process to register a new molecule de novo in India. It takes many, many years. So it's not... Because, you see, a formulation can be registered reasonably fast. A molecule takes many years. So even if there was something, which I don't think there is, but I mean, there could be, but it'll take a long time because it has to go through a lot of safety, because, you know, some of this is a combination of efficacy and safety, which is why I can't give you a direct answer. So there might be a more efficacious molecule, but it may not clear safety tests in India. So the short point is, there's nothing that is registered in India, which is better than this. It will take, it takes several years, I mean, six to seven years for a molecule to get registered.
Understood. See, when you started off this business, in 2010, the market share was somewhere in the early 30s. I remember last time, some market share data was shared. Was that in 2016 or 2017, it moved up to the early 50s. So basically, in a six to seven years or 20 basis points, sorry, 20 percentage points, market share gain is really huge, for any company in any category, which is what GCPL achieved at that point of time. And then I think the market share is more or less flattened out. Do you think now we are at the cusp of another huge, market share sort of gain over the next few years, given this new molecule? Or are we just maybe becoming too bullish on the back of a new molecule? What is your take on this?
I think, Percy, actually, if you look at GCPL's market shares in household insecticides, we've always roughly had more, about half the market. So even if you look at a decade. We've certainly not played in the incense stick in that burning part of the market, although we started that market with our Fast Card. So but, you know, that's not a place where we've won. But actually, in the other formats, in household insecticides, we've been gaining share consistently and constantly over the last 10 years. So our overall share in HI has stayed consistent over the last decade. We do feel that we should gain. I mean, you know, what our job is to serve the consumer to the best we can. The last time we had a new molecule and an upgrade like this, the business really gained, so we're hoping that happens.
I think the consumer will answer that question as we roll out these new products.
Understood. Last follow-up on this: How confident are you with this new product now that HI will very soon go and stay into a double-digit growth kind of a trajectory?
I mean, how to say, answer that question per se, except that this is certainly the most decisive move, both the... More importantly, actually, than the launch of incense stick is the launch of RNF. But the launch of RNF in the format of incense stick is certainly a decisive move that will change our growth trajectory in household insecticide. The rightful growth trajectory, if one compares our per capita consumption to Indonesia, at the kind of growth levels we are in, is about 1.2x GDP. So you should get volume growth of 8%-9% in household insecticide, is the right volume growth. And, of all the moves that we have done, this is the most, I would say, fundamental.
Got it. Thank you. That's all from me. Thanks, and all the best.
Thank you. The next question is from the line of Jay Doshi from Kotak. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Continuing on the previous question, so how much time did it take you to register this product in India, and when did this journey start, in RNF molecule?
The RNF molecule, Nisaba, correct me if I'm wrong, started almost a decade ago?
Yeah.
So the molecule has been in the works for a decade. The formulation has been-
Including development.
Including development, registration, that's the kind... But it takes, I think it's taken five to six years for the registration of the molecule, and then there's a formulation registration, which can take anywhere between a year and two years.
Understood. So then, is there any possibility that any other competitors of yours can sort of launch something similar anytime in the next two, three, four years?
Like I said, in RNF, you know, we have exclusivity for the medium brand.
But comparable molecule, something comparable.
If you get a comparable molecule, A, you have to develop it, B, the molecule form, registration time is a long process because there are a lot of stringent safety rules and molecules, and then formulation is another two years. So you are many years away from getting a, a new molecule into India.
Understood. That's helpful. And Indonesia and Bangladesh have a different molecule, right? It's not RNF.
Indonesia is another molecule, but again, we. It's, yeah, it's another molecule, but procured locally. By the way, on the RNF, I want to say it's an Indian-developed molecule, huh? So it's an Indian patent. It's a proudly made in India molecule. It's quite rare actually, to have a patented molecule created fully in India. In Bangladesh and Indonesia, it isn't RNF, it's another molecule, but equally there, we have got some supply chain advantages and structural advantages there as well.
Understood. But the efficacy of that molecule is comparable to RNF?
See, the thing is that. Yeah, I mean, yes, short point is yes, that molecule is not, yeah, yes.
Understood. In a short period, what is the extent of market share gains you've seen in those markets?
We have seen very significant... I don't want to give exact numbers, in Indonesia, but we have seen very significant gains of share in Indonesia. Bangladesh, we don't measure it, but if one looks at our volume growth, you'll have seen significant market share as well.
Finally, last one. Is this molecule, RNF, something that you can take elsewhere in the world, as well, in Africa and in your other markets? I mean, Indonesia, Bangladesh, you already have something.
Yeah, we can. We can. There are alternate routes there as well, but we can.
Understood. I'll go back in the queue. Thank you so much.
Thank you. To ask a question, ladies and gentlemen, you may please press star and one. The next question is from the line of Avi Mehta from Macquarie. Please go ahead.
Hi, Sudhir. Thanks a lot for this opportunity. I just wanted to clarify a bit on RNF. Would it be fair to say that if we were to extend this formulation to other formats, the pricing of the format would remain the same or would not have to be tempered with, with the addition, despite the additional efficacy? So on a per ML basis, the pricing still comes out to be favorable. Is that the right way to look at this?
I mean, we obviously don't give out specifics on pricing and so on, but, approximately and roughly speaking, yes.
Perfect. That's all I wanted to kind of clarify. Thank you very much.
Thank you. The next question is from the line of Aditya Gupta from Tara Capital Partners. Please go ahead.
Hi, good evening. A quick clarification. This, in the new stick that you launched, to the customer, what will be the cost on a per night basis when I compare it to the liquid format?
See, the formats are different. This is INR 10 a stick. It is used for instant kill. And therefore, you know, it's INR 10 a pack, so INR 1 a stick. Now, if you take the liquid vaporizer, which costs roughly. But you know, it works for 45 minutes. The liquid vaporizer, the refill pack, costs about INR 75, and it's for 30 nights. It's about INR 2-INR 2.5, but it lasts through the night. This one gives a lot, a big dosage of. So therefore, the use case is different. It gives a high dosage of molecules, but gives it in 45 minutes. The liquid vaporizer gives lower dosage over a longer period.
Got it. Thanks for that. Now, in that case, as a customer, if I've used it, and it solves my problems in 45 minutes, and obviously the doors and the windows are shut, then... And if the product is efficacious, then what does it do? What does it mean for the liquid format? I mean, does the efficacy of this new product not solve the problem for the whole night?
No, I mean, it won't solve the problem for the whole night, unless you, like, completely shut all your windows and all your doors and don't let any mosquito come in. It is a immediate instant kill. You know, liquid vaporizer has not grown as fast as we want it to, but despite, like, five to six years of incense sticks at the efficacy and at using TFT, which is the current molecule, has still kind of grown over the last five years. So if the liquid vaporizer also improves in efficacy, there is no reason for that also not to go, because the use case is different. See, there are two things: one is it lasts through the night, two, is there are many consumers who don't like to burn things in the house. So both those are distinct, benefits for LV.
Our suspicion is that as we increase the efficacy of all formats, all of them are slightly different use cases, and all of them will do well.
Got it. Got it. And just to clarify, there's one more incense stick product on the market, which I've seen, I've used it before. How is this one different from that one? And, I mean, is that a big product? I mean, in terms of any contribution, is the existing product big in size and what-
Existing product was a natural product. It wasn't a. It didn't have an active insecticide in it, so the efficacy level, that was a repellent to answer, I think, Percy's question. That was serving a repellent purpose. That cannot be comparing efficacy with this.
Got it. Perfect. Thank you so much.
Thank you. Ladies and gentlemen, you may press star and one if you wish to ask a question. We have the next question from the line of Jitendra Arora from ICICI Prudential Life Insurance. Please go ahead.
Yeah. Am I audible?
Yes.
Yes.
Yes. Yeah, so I was just checking. So this molecule was registered sometime in 2015, 2016, and taking into account 17 years of patent applicable, so this molecule will go out of patent by 2032. Is my understanding correct?
I mean, I don't know the exact numbers, but yes, it'll go out of patent sooner than 17 years.
No, I don't think it was 15, 16. Just check. I thought it was later than that. I see papers online which are referring to this molecule in 2015, 16, so I'm assuming it would have been patented by then.
No. We can get the exact-
I'll get you the exact dates. But it, anyway, even if what you're saying is right, it's a pretty long period for us to shape this.
Sure. No, just wanted to get the understanding. That's about it.
We'll revert to you. Vishal, will you just revert on when the patent was filed for RNF?
Yeah. Thank you.
Patent, my patent.
Thank you. The next question is from the line of Kunal Vora from BNP. Please go ahead.
Yeah, thanks for the opportunity. Again, continuing on the same line. In LV, between your existing molecule, which you're using in India, and this new molecule, what is the difference in efficacy? And when do you expect an LV launch with this new molecule, and why are you starting with incense stick and not with LV?
See, the efficacy of RNF in our view is 2x of TFT, whichever format it's used in. There might be some slight differences in the format, but that is roughly what we think is the efficacy of RNF to TFT. Why are we starting an incense stick? Look, I mean, this is a large untapped market, large opportunity, and more importantly, you know, this is a, this is not determined by us. You get permissions, you launch it.
Were you targeting both-
When do we expect LV? Pretty soon.
Okay. But from your side, you're targeting both together, and you got permission for incense stick earlier. Is that the case?
Yeah. I mean, yes, we have, we have applied for many things, and they're all public, actually, in the public domain. So if you guys want to do the research, you'll find out what all we've applied for at RNF. So what I... This has come first, but we're also quite happy this has come first, because this is low-hanging fruit. This will immediately, I hope, come pretty fast. We'll get delta volumes. On LV, we will have to communicate, habit will have to be built, and consumers will have to see the product, et cetera. So yeah, I mean, this is what came first, but we're actually quite happy this came first.
Okay. But in LV, how will the strength, I mean, the consumer experience change? Like, with the higher efficacy, will the customer need to use it for a shorter period of time or-
Yeah, I mean, we measure, we measure in household insecticide efficacy by a, a measure called KT50, which is 50% of the mosquitoes, how much time they take to die. And, with RNF, under various conditions, is roughly half the time of TFT. When you guys come here in May, we'll show you. We'll take you all, to our mosquito breeding center and show you the difference in, efficacy between RNF and TFT.
Okay. But will you have to adjust it in terms of pricing? Because if the customer is able to get the same,
... I will answer that question, which is, we don't think, I mean, I don't want to give specifics on pricing, but we don't think there's a material difference that consumers are going to see, neither is there a material difference for us in terms of cost.
Understood. That's it from my side. Thank you.
Thank you. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead.
Hi, Latika.
Latika, the line for you has been unmuted. You may proceed with your question.
Hi. Can you hear me now?
Yeah, I can hear you, Latika.
Okay. Hi, Sudhir. So just stepping away from HI for a minute, just trying to understand the underlying, you know, growth rates better in some of the other categories in India. On hair colors, you know, you've got double-digit volume growth. If I recollect correctly, the previous quarter was a little soft, and we were betting on our festive quarter, you know, to drive this growth. I just wanted to understand, you know, what's the confidence in sustaining this kind of volume growth in coming quarters? And if you could also share some color on, you know, salience of shampoo hair color in the overall hair color mix.
And similarly, you know, if you could also give some flavor on, you know, the Raymond portfolio, why, why growth rates, you know, that you saw in Q3?
Yeah, no, I think here in hair color, it's true that Q2 was a muted quarter because of the extra Shravan month, and also because of the delayed festivals, and therefore, we've had a very good Q3. Will this sustain? And we've had... We've mentioned here that we've had strong double-digit volume growth in hair colors. I mean, look, you see there's one part of the hair color market, which is hair cream and shampoo hair color, which will sustain and will grow in double-digit volumes. We still have a large salience of hair powders and mehendi, which is henna, which don't grow that fast. So I don't know what the weighted average will come to, maybe a little less than what it's been in Q3.
But what we really look at is the rapidity of growth of our crème plus shampoo business. There, we've been seeing rapid share gain and penetration gain and volume growth. So that is the future of this category, and that's where it is. See, shampoo hair color is increasingly becoming a Southern phenomenon, where it's becoming the dominant format of upgradation in the South, but the dominant format of upgradation with North tends to be crème, or North, West, East. So this is the lay of the land between shampoo hair color and crème. It is not. It is growing slower than crème, actually, in North South, and growing very fast in the South, Latika. So that's the story of shampoo hair color. You know, in a way, they're both similar.
They're slightly different formats, but they're both modern formats. They have a lot of similarity in, rather than differences, and we see these as the format of the future. I mean, a point, by the way, I didn't ask the question, but since we mentioned it, you know, we've grown double-digit volume growth in Fab care, despite it being a large, Ezee quarter and Ezee sell for silks and woolens, and it doesn't grow very fast. So you can imagine how much Genteel and Fab have grown in a quarter in which Ezee is very big for us to have strong double-digit growth in laundry, but, yeah.
No, that's good to know. And Sudhir, if I could, you know, also check on Indonesia. You know, clearly, Household Insecticides have grown faster. We've talked about, you know, market share gains. I was curious to understand, you know, where we stand on hair colors. You know, it's been a good quarter. Again, strong double-digit volume growth is what you mentioned. What is the salience of this particular, you know, segment in the Indonesia revenue mix currently? And do you see this becoming a substantial piece of the business there? How are market shares, or if any other benchmarks, you know, that you track, for this particular category in Indonesia?
See, we have a relatively small business in Indonesia, in hair color, but rapidly growing through shampoo hair color. And one of the things we did a few months ago was to domestically manufacture shampoo hair color, because demand was so high and, you know, we were supplying from India, we have now unbottlenecked our production of shampoo hair color in Indonesia. So we are very. And we seem to be the pioneers in the building of shampoo hair color in Indonesia, and we are very bullish on winning substantial share in Indonesia through shampoo hair color.
Sure. Lastly, on Africa, are there any other incremental areas or markets that you're considering to move to a royalty model, or what you mentioned in the deck is what continues from the previous quarter?
I mean, what continues, I think in Africa, we're seeing a strong performance continued in South Africa, which is a high-margin business. We're also seeing a strong growth in what we call our international GAUM international markets in Africa, which are countries like Congo, Saudi, et cetera, et cetera, where we are doing a purely export-led operation. That is also, I suppose, in some sense, a royalty-type model. So, we're seeing growth there. So, of course, in Nigeria, we are moved to a distribution model, which is also showing good growth. So in a sense, the only country where we have a complete operation today is South Africa, which is a high-profit business. Every other operation, we have varying degrees of partners operating with us.
All right. Thank you, Sudhir.
Thanks.
Thank you. The next question is from the line of Nitin Gupta from Emkay. Please go ahead.
... Yeah, hi. Thanks for the opportunity. Just wanted to check, how is the capacity for liquid detergent? I mean, like, the thought is like, why not taking it national?
See, back to the liquid detergent market today, main wash liquid detergent market is in the South, and, I mean, it's something we'd like to try here first. It's majority of the market today is there. And to answer somebody's question, in the North, when you sit in Bombay, you think it's a premium category, but if you went to Tamil Nadu, you'll find rural outlets selling liquid detergents. So the market has really developed fast in Tamil Nadu, and Andhra. So we'd like to focus there, and then we'll see what to do with it.
Okay, thank you. Second question is with respect to your thoughts on male grooming category, where sort of we had attempted through Cinthol in the past, now have the Raymond's portfolio. Any thoughts here?
I mean, no, no specific thoughts. I mean, in Raymond's portfolio, I didn't answer Latika. We did, you know, INR 140 crore in this quarter. You know, despite continuing down stocking and so on and so forth, we are seeing green shoots in many parts of this portfolio, including in perfumes and male grooming parts of it. So I, I would say that, Park Avenue certainly gives us a platform to launch male grooming beyond deo. It already consists of it. It already has a soap, a shampoo, travel kit, et cetera. So Park Avenue gives us some kind of play there, in male grooming, but I don't have anything specific to add on male grooming.
Okay, thank you. Lastly, a bookkeeping question on employee cost.
Sorry to interrupt, but the line for you is not very clear.
Yeah.
You're not audible completely, sir.
Is it better now?
Yes, this is better. Please go ahead.
Yeah, last question is on employee cost for this quarter. Is it one-off there?
So there are two things which have happened. One is, as Sudhir mentioned, we've completed, the savings in terms of our RCCL cost base, so that's been one of the drivers to the cost reduction. Secondly, this whole thing of Argentina has meant that the entire P&L of nine months of Argentina has actually kind of been reset downwards. So while the turnover went down, the entire cost base has also gone down. So that is the second factor which has resulted in the absolute number kind of going down. It's not that the percentage has gone down, but the entire P&L gets reset. Yeah, but no, no specific one-off.
Okay, thanks a lot.
Thank you. The next question is from the line of Jay Doshi from Kotak. Please go ahead.
Yeah, hi. Thanks for the opportunity again. You know, on your earlier answer to the question, that this molecule kills mosquitoes instead of, you know, the repel. So even in other formats, if you were to apply the same molecule with different formulas, it will kill, be the default sort of outcome or. And if so, does it mean that, you know, there will be a lot of effort required in terms of educating customers? How do usually consumers respond to this kind of change, right? From a safety perspective, if I see something that is killing mosquito instantly, as a consumer, I would naturally sort of think twice about, you know, what would be the impact of it on, you know, our own health.
See, the number one preference driver of a household insecticide is drop down, mosquitoes in the first 10 minutes. So when consumers use a high efficacy format, they expect to see mosquitoes drop down. You know, in terms of safety, certainly, you know, these molecules are tested, and the reason that this registration takes so much time is to make sure that they're 100% safe. And we also position Goodknight, you know, nowadays on, you know, protects children from babies' sleep, which gives you both the importance of efficacy and the importance of safety. So from a positioning point of view, that's what we're doing in Goodknight.
From a product point of view, the reason that, you know, it's taken us so much time to respond in household insecticides, is it's a long process testing safety of molecules.
I understand, but the default will be kill, right, for all formats?
I mean, the only-
Sorry, go on.
Yeah, I think it's the way the formats work is the consumer's expectation is both kill and repel. So even with an LV, if you put it on, even with the new Renofluthrin, it's not that you'll necessarily find hundreds of dead mosquitoes right around it, correct? But it will work. You'll be much better protected than you were with the earlier molecule. And in our testing, it shows that it works much faster and more effectively. And we have obviously done extensive consumer testing with products like this, and they are very happy with the efficacy and the safety. So I don't think we'll see any issue from that point of view.
That's very helpful. Second is, in case of Fab liquid detergent, where does it sort of fall in terms of gross margin in your overall portfolio? Assuming you, you know, if you were to sort of do that business at scale, at INR 100 price point, how would gross margin compare versus the current portfolio you have?
I mean, lower than the current portfolio, but nowhere near unacceptable.
Sure. Finally, one last question. I know this is December quarter, but how has your operating cash flow trended, and, you know, is it tracking ahead of, your EBITDA growth, like, you know?
Yes. You know, it's not tracking ahead of EBITDA growth. See, last year we grew operating cash flow by 20-odd%. This year we expect the second year off. So last year we didn't grow EBITDA by much.... We didn't grow PAT by much, but we grew operating cash flow. This year, we expect operating cash flow and EBITDA to be greater than 20%, but PAT, because of MAT tax credit and variety of reasons, may not grow by that much. I hope next year all the three will grow at the same rate.
Sure. Thank you so much.
Thank you. The next question is from the line of Vishal Gutka from Phillip Capital. Please go ahead.
Yeah. Hi, Sudhir. Congrats on excellent set of numbers. I have one question on trade margins on illegal incense sticks. So trade margins given by illegal players are pretty high, so how do you plan to address that challenge? And second question is on air freshener. In the press, we have quoted that Aer has doubled over the past two years. So if you can give me quality comments, what have been the growth rates over the past, and how do you look going forward?
So, a good question. The first one is that illegal incense sticks do give higher trade margins than what we intend to give. We intend to give the same end consumer price, but lower trade margins. I think we've got to use that direct distribution to some advantage, because illegal incense sticks are, they just sell to large wholesalers. They don't have a distribution system. So that is certainly, you know, one of the things we'll have to figure out how to combat. We also have to get the right balance between margins and growth, and so on and so forth, on incense sticks. So remember what I told you, which is that incense sticks are significantly lower on efficacy, and therefore, their product cost is much lower than what we are. So we will figure this out.
I think the important thing is give the end consumer price the same as illegal incense sticks. B, make, give enough margin for there to be a good return on investment to the retailer. And then let kind of product and marketing do the, the trick. So that, that's really the question on incense sticks. Sorry, what was your second question? I think I've forgotten.
Yeah. On the air freshener, please. What is the growth outlook out there? Because the press has-
Yeah.
-quoted that-
Air freshener-
Yeah. Yeah.
Air freshener is one of those categories which has got a very long runway of growth in India, and we have been gaining not just marginal, but pretty significant market share in this category. We are now by quite a distance, the leader here. This has been growing in the 20s for the last two years. It'll grow fast. I don't exactly know how much it will grow, but it will certainly grow in the teens, high teens. Or if it doesn't grow in the high teens, then we're not doing something right. But that's the kind of growth that between high teens and early 20s, is what this category should have for some years to come.
Okay, great. Great. Thank you, and all the best for future quarters. Thank you.
Thank you.
Thank you. Participants, if you wish to ask questions, you may please press star and one at this time. The next question is from the line of Aishwarya Dave from Haitong . Please go ahead.
Hello. May I begin?
Yes, we are on.
Yes, yes.
Okay. Hello, Sudhir. Hi, Nisaba. My question is regarding the recent acquisition of the brands Park Avenue and Kamasutra. So I want to understand where these two brands are in terms of percentage and the market share, right? And second question would be, what would be as a company the near-term to midterm growth strategy for these two brands? And are there any upcoming products or are you planning to increase the product portfolio for these two brands?
Yeah, I didn't hear your first question, but let me answer question two and three, and then you can ask me first question again. I think it was a bit muffled. The a share of this category was in the high teens when we acquired it. That's what the share of these two brands in male deodorants is. We hope to grow this category consistently at double digits, along with a very significant improvement in operating margins of these two brands. What was your first question again?
Yeah. My first question was, what is the current market share of these two brands in terms of-
I told you that.
Percentage.
It's in the high teens, in men's deodorants.
Thank you.
Thank you. Ladies and gentlemen, we have no further questions.