Q2 20/21

Nov 5, 2020

Quarterly report

Ladies and gentlemen, good day and welcome to the GCPL Limited Q2 FY 2021 Earnings Conference Call hosted by Kotak Securities Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Jay Kumar Doshi from Kotak Securities Limited. Thank you and over to you, sir. Thank you, Faiza. Good evening, everyone. On behalf of Kotak Institutional Equities, I welcome you all to Goodrich Consumer Products 2Q FY 2021 earnings call. We have with us Ms. Nussaba Godrej, Chairperson and Managing Director Mr. V. Srinivasan, CFO and Company Secretary Mr. Sameer Shah, Head, Investor Relations and Pratik Dantara, AVP, M and A and Investor Relations. Over to you, Pratik. Thanks, Jay. Good evening, everyone. We hope that you are staying safe and healthy. Given the exceptional circumstances created by COVID-nineteen outbreak, we are still presenting the results to you from our respective homes. So please bear with us if there is any technical glitch. We will start with Nisa sharing her perspective on the business performance. Over to you, Nisa. Thank you so much, Pratik. Good evening, everyone. I hope you and your loved ones are safe and healthy during these difficult times that continue. And thank you so much for being with us on this call today. GCPL delivered a strong performance in quarter 2 with all our clusters recording positive sales growth. Our overall sales grew by 11%, EBITDA and PAT excluding exceptional items grew by 19%. 83% of our global portfolio was household insecticides, hygiene and value for money products and they grew by 17%. Hygiene had an excellent growth of 27%, followed by value for money products, which grew by 22%. Growth in household insecticides was steady at 6%, partly impacted by supply chain issues due to regional lockdowns in India. From a geography perspective, we have seen positive sales growth across all our clusters. India recorded a strong sales growth of 11% led by hygiene including soap. Overall, rural grew much ahead of urban. Indonesia delivered a soft performance with a growth of 3%. This was impacted by large scale social restrictions in the last fortnight of September and down stocking by select modern trade retailers. Our Africa, USA and Middle East business showed robust recovery with a growth of 10%. We continue to lay the building blocks to sustainable and profitable sales growth in the subcontinent. Household insecticides has been one of our biggest growth pivots and grew steadily at 6%. This performance was partly impacted by supply chain issues due to regional lockdowns in India. We recorded much higher secondary sales growth in India. We continue to reap the benefits for very strong innovation pipeline and product portfolio, serving consumers at all price points. We are also investing more behind educated consumers and disease prevention. We have been laser focused on growth and innovation in our hygiene portfolio, including soaps, which grew at 27%. We also showed strong recovery in value for money products with 22% sales growth. We continue to have a strong balance sheet and remain more watchful than ever on receivables management. Working capital days have reduced by 12 days, primarily driven by the reduction in receivables across customers. Net debt to equity ratio also reduced to 0.17. I'm pleased to share with you that our teams have been on top of their execution game. I believe we were agile in resolving the continuing supply chain challenges in serving our consumers. We are using this crisis as an opportunity to digitize more rapidly and grow more strongly in channels like e commerce and chemist. As always, our values matter the most at this time. We're committed to enabling the safety and well-being of all good ageites and serving our consumers and communities with our full hearts and minds. Thank you. So should we start taking questions? Yes, please. Thank you very much. We will now begin the question and answer session. The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead. Yes, thanks for the opportunity. My first question is on the Africa, U. S. And Middle East business. So very good recovery of 10% sales growth. So wanted to understand how much sustainable is this? Could we expect a double digit growth going ahead in every quarter? And in spite of this, the margin dipped 100 and bps because of the higher variance of Braids. Could you explain why Braids has grown faster? Was it a conscious strategy? And when can we see margin expansion in this part of the business? Hi, Avnish. This is Sameer here. So I think to begin with, as we had shared last time around also that we are sort of laying down the building blocks, right, for a sustainable steady sales growth. I think 10% of sales growth in last quarter was led by West and Southern African markets. We will want to continue with those investments, which have sort of driven growth over there and also sort of feed in go to market initiatives as well as new product launches and hence drive innovation led growth also over a period of time. One of the reasons why I mean the margins have been relatively down on a YY basis has been higher saliency of rates and that's partly driven by consumer preference at least over the last 3, 4 months in terms of shift more towards kind of value formats within hair extensions. We are seeing that shift gradually changing as we, I mean, see the performance sequentially month over month. And hence, we don't expect, I mean, that at least to be the reason, if any, for any margin erosion at least going ahead. My second question is on HI in India. So sales growth of 4% was well below expectations. So I wanted to understand this because this partial lockdown or regional lockdown as an issue has not been pointed out by other FMCV companies and you must have seen the good growth, I think, delivered by most companies. And your own growth is decent in soap, for example. So why should the regional lockdown impact only this part of the business? It has not impacted, for example, the other listed company grew in this category 20% plus. So could you explain that bit? And did you lose out on opportunity because of this? Hi, this is Nisha here. Yes, so let me start off by disqualifying that in HII, we were not particularly happy with our own performance. We were really expecting to do better, especially because this trend on health stays safe is quite strong. That being said, and the stock issue is, I think, one issue. But what happens is that, in HI, quarter 2 and quarter 3 tend to be the more salient months in the year. So as you can imagine, say, meeting demand in quarter 1 is actually easier than in quarter 2 and quarter 3 because your factories had more capacity for a less salient quarter. And what actually happened is, and I don't know, I can't comment on other seasonal, but we had a regional lockdown in Guwahati for 21 days, where a lot of our HRI production happened. So that impacted us quite badly. That being said, we felt this pinch much more specifically in August. July was actually better than August. And then September October again have been strong like Sameer said, secondary growth was also quite good. Our new innovation, Flash is doing very well. So some of the longer term trends, this incense fix illegal ones are definitely on a back foot. We are doing more work there. And we're seeing things like cockroach and rat penetration, aerosol penetration also sort of drive. So I think the lockdown, that factory did sort of impact us and we are hoping to see a much better performance in quarter 3 on this category. So, Nisha, just two follow ups. So what percentage of our manufacturing takes place in Guartain et al? And would you have lost market share structurally because other players would have captured that? And any plans how you get that? I can't give you the specific numbers of what percentage of manufacturing from Goehati, we would have, I think overall, we actually probably gained in shares in electrics, but we might have lost, I think, share in coils and aerosol because of this impact. But I don't think it's structural. And those regrets that like our shares and say aerosols are extremely, extremely high. And even in coils, our relative market share is huge. So I think this will we'll focus on sort of our product innovation solving the consumer and I think quarter 3 should be better. But just last follow-up here and then I'll move on. So essentially Guwahati, is it substantial even if you don't get it through numbers And there is no price war in SI, right? Nothing to really get worried on the pricing price war front. So nothing to get there's no pricing or I don't look, I don't think I disagree that this is not the best performance actually after what we saw in consumer in quarter 1. Also what we're seeing in consumer sentiment, I don't think the lockdown is this factory lockdown in supply is the only issue we face. But like I said, September October have been much stronger and we're quite focused on growth. And I think the consumer sentiment is a tailwind, this illegal incense tick being on a back foot is a tailwind. We're seeing other non mosquito mosquito pets like cockroach and rat and those sort of products, very, very sort of high demand. So I don't think we'll have any supply chain issues in quarter 3. So let's see what we're telling you in January or February when we speak. Sure. And the last question, you have done well in overall sales from India, 11% growth. So wanted to understand all these new products on the health hygiene platform launched in the last 6, 7 months. I see very aggressive ad from the print media and other media. So could you give us a sense on the numbers, percentage of revenue or what's the contribution? And which of those are looking promising in these initial stage early, but still if you could give us some clarity which ones are looking more promising? Sorry, Avnish, again, I think we will not be able to share the numbers for competitive reasons. So what I may actually directionally share with you is HandWash is doing a much better. New products is a general overall basket, right, last 6 months or 1 year, whatever. So I will share, I mean, the mix of the product. Right, so mixture, things like disinfectants, sprays, we're also seeing things like the toilet cleaners, floor cleaners doing well. And don't forget, Avnish, some of these categories had quite low penetration even with pre COVID and were growing quite at a quite good clip. So I think some of those COVID has just sort of accelerated. So it's a good opportunity. We've obviously chosen particular categories and products that we want to add channels that we want to go after very, very aggressively. Obviously, we don't want to, like Sameer said, think about it because of competitive reasons. Sure, sir. That's very helpful. Thanks a lot to Nita and Sameer and the team, all the way. Thank you. Thanks so much. Thank you. The next question is from the line of Sameer Gupta from IIFL Securities. Please go ahead. Hi, Adim. Thanks for taking my question. Just wanted to a little more clarification on the HI performance in India. So if this is an issue with the manufacturing, then is it right to assume that there won't be there will not have been any sales loss at the consumer end because I guess the distributor plus retail channel itself would be around 20 days. And to that extent in the Q3, there will be some up stocking impact back in trade because of this issue in HI? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Sameer. So I think as we kind of shared earlier, we had much better secondary sales growth, right, I mean as compared to primary sales growth in HI and the reason for that was at least partly getting impacted by this lockdown related kind of challenges. It depends. I mean if we see that the stock levels with our channel partners are adequate, which I think is the case, then we should see a steady state growth. The point over here is to continue sort of building on some of the new launches like, say, GoldFlash or the good work on incenstix or a corporate solution kind of products to kind of drive steady and sustainable sales growth. So that's the way we are looking at it. The start has been good inside last couple of months as we also mentioned earlier has been good. So let's see how that kind of shapes up I mean, over the next kind of few months and perhaps for rest of the year also. Okay, great. So just to summarize, you are saying that secondary has been higher than primary this quarter and that gap will not be bridged. It might continue in the same way going forward also. Absolutely. Because sales have been much better and in growth have been much better than the primary sales growth in the last quarter. Yes. Okay. Just another question, if I may, on again on Africa, the margin. So while there is a mix impact, but when we had acquired this business some 5, 7 years back, this business was already at around a 20% margin. And on top of that, we had a wet hair care portfolio, which was even a higher margin. So even despite the mix, what kind of stable state margin should we look at in Africa now given the competitive intensity where it is and given the demand trends where they are? So I think we have shared this in the past that strategically, I mean, we would want to see anywhere between 300 to 400 basis points of margin expansion in Africa at least for the next 2 to 3 years, right? And then we need to baseline it with the FY 2020 margins. We do feel that we have the drivers, I mean, in terms of thought process as well as we will get executed, whether it be cost saving projects, whether it be favorable category mix, whether it be the scale itself. So we remain quite confident at least of that expansion of 300 basis points, 400 basis points over the next 2 to 3 years in the overall Africa, U. S, Middle East cluster. And this 300 basis points, 400 basis points will be a mix of your leverage, your growth and your margin mix. Is that understanding correct? Absolutely. Okay. Thanks team. Thanks for taking all the questions. I might come back in the Q5 anymore. Thanks. Thank you. Thank you. The next question is from the line of Nishat Gargare from Bay Capital. Please go ahead. Hi, team. Thanks for the opportunity. I just had one question on the investment side. So if we see the standalone cash flows, we see a INR 980 crores investment into into subsidiaries. And the consolidated cash flow shows a similar or larger rather slightly larger debt repayment of about INR 1200 crores. So firstly, I just wanted to understand which cluster or geography does that pertain to? And secondly, we've in the past never really used the domestic business cash flows on the international side. So I wanted to understand what led to the change in that? So Nishant, this is Unilever here. As we had mentioned earlier as well, we had prioritized repayment of loans as a good opportunity now to prove it. And what we have done is the surplus cash that we have in India, we have used it to capitalize these subsidiaries for return of the loan. That is what UTS investments come in the standalone cash flows. And the change is simple is that we have the surplus cash. And today, the surplus cash locally earns only about 2, 3 percentage points if you have to put it in a safe investment, whereas when you repay these loans, you are actually able to reduce your dollar cost by 2 to 3 percentage points. And in the long term also, we'll have a good balance between repayment of loans and keeping enough surplus to ensure that we have adequate cash flow or business growth. Okay, okay. So this is not driven by, let's say, lower than anticipated cash generation in one of the businesses and that required kind of some amount of urgency in debt repayment, nothing of that sort? No. In fact, we have actually prepaid some of our loans. I understand. This will be mainly related to the African debt. Is that correct? Yes. Largely, our debt right now is mostly for Africa. Understood. Thanks a lot. That's all from my side. Thank you. Thank you. The next question is from the line of Kiran Naik from Modi Finca. Please go ahead. Thank you for giving an opportunity. I would like to know what is our market share in our products for different products we sell? Hi, this is Samir Yash. Again, for competitive reasons, we don't share what is our market share. So what I can share with you is what's our market kind of leadership position. For example, in India, in housing insecticide category, we are market leaders in hair colors. We are the 2nd largest player in bar soaps and we are also market leaders in air fresheners. Similarly, in Indonesia, we will be market leaders both in household insecticides and air fresheners. So we are either number 1 or number 2, I mean, across categories in which we sort of play in. Okay. Thank you, sir. Thank you. Thank you. The next question is from the line of Janjal Khandelwal from Birlasan Life Insurance. Please go ahead. Hi, team. Congrats on good set of numbers. A couple of points. Firstly, the Indonesia growth. Indonesia constant currency growth is 3% is on the lower side. Is it because of the new social distancing norm in Indonesia? And you lost some days in Indonesia? And what's the growth one can expect in Indonesia going forward? Secondly, is on the household and safety side. You lost 21 days and refilling may happen in this quarter. But what's the category growth which happened in last quarter? And what is the growth you are looking forward in terms of the category growth going forward? Anshul, hi. This is Kirish Sameer here. So I think let's start with Indonesia first. I think if we just kind of look at the overall, say, FMCG performance category performance in Indonesia, I think over the last 6 months, we have seen close to sort of low double digit decline, right? So in that context, we do think that our kind of growth is sort of lower than our internal expectation, but sort of at par given the overall sort of context. Secondly, we also did see the impact of kind of extreme social distancing loans aversion to, if you may want to call it, which was sort of executed mid September and remained till sort of mid October. Lastly, we also did see kind of downstocking by some of the modern retailers and that's something which you'll see even in the past. I mean, they sort of downstock and then maybe at some point in time, they end up upstocking. So these are the three two reasons why the performance has been kind of soft. I think at this point in time, I would say we remain cautious in terms of how the overall Indonesia business performance will be at least in very short term. But structurally, I mean, medium term, we remain extremely optimistic of Indonesia's performance due to the multiple growth sectors, whether it be market share gains, penetration, new product launches or even scaling up new category like hygiene, and which has happened over the last sort of 6 months? Sure. On the household insecticide in India? Yes. So I think on the household insecticide side, as we shared earlier, Jamsil, our secondary growth rates were sort of better off than primary growth rates, right? And hence, to that extent, we do expect our overall performance to be relatively better. I mean it's difficult to sort of estimate a growth number at this point in time due to multiple Okay. How has the category grown in this quarter? I think, again, I mean the details which have been coming in from tracking agencies have been kind of for a very short period of time. I mean we had paused actually the overall category kind of data. But over the last few months, we have seen kind of category kind of growth somewhere in sort of low to mid single digit. But again, I think we need to take it with a pinch of salt in terms of how the overall category growth rates have been. Sure, sure. Just lastly on the Africa business, which is coming from a low base and you have multiple new product launches planned. Can Africa be the growth driver going forward with a new CEO in place and things panning out? Yes. I think the thought process is to definitely get kind of profitable, sustainable kind of growth, right? I mean, in Africa, it's not just about 1 or 2 quarters, right? I mean, as I was sharing earlier, the plan is to kind of see kind of steadiness in the overall sales growth. The pivots basically, which will be go to market and product launches sort of getting executed, the margins profile sort of moving up, the costing programs getting really ruled out. So it's something which will sort of pan out over a period of time. But yes, there is no kind of short term without long term. Mean, there is no long term without short term in a way, right? So to that extent, we will see sort of gradually improving performance in African business also here and now and going ahead. Sure. Thanks. That's from my side. Thank you. The next question is from the line of Jaykumar Doshi from Kotak Securities. Please go ahead. Yes. Hi, good evening. Thanks. My first question is you had a fantastic growth in soaps category in the current quarter. So how what is your assessment of market share in the current quarter? And how do you see the trajectory going into October November? And any trends that you may have seen in terms of down trading or any other trend in that category? Hi, Jay. So I think we think our kind of source of growth definitely has been market share gain. Typically what happens is when you get into high commodity inflation kind of environment as we are especially for palm oil, small local players, they sort of sit on the fence, right? And that gives opportunity to large players like us to gain market share. So definitely that has bodes well for us. And secondly, micro marketing initiatives very much continue something which has been a growth vector for us over the past 12, 18 months that has also sort of contributed. And last but not the least, the 3rd storm kind of help, I mean, kind of within the new product launches also, I mean, in SOAR portfolio has kind of contributed to this growth. So we do expect then in a good steady state kind of performance in SOARs also going ahead. Right. Any thoughts on price increases or how do you see overall inflationary given inflationary environment, how do you what are your plans to predict profitability for the portfolio? Yes, I mean that's honestly not too much of an issue. I mean because we leverage our portfolio, we will also kind of set more on cost saving kind of initiatives. We would also want to be gradual and calibrated, right? I mean we have taken, I mean, sometimes increase at the flag end of quarter. That sort of already is in market. And we would be kind of striking a balance between kind of price increase as well as kind of volumes growth in this category. Right. And is the growth trajectory sort of likely to continue this in October, November? How is it trending? Well, I would not do our part of guess on that side. But as I said earlier, the intent would be to continue a steady state sustainable growth momentum even going ahead. Right. And if I may ask one more question, haircolor's recovery has been fairly impressive from 1Q to 2Q. And how should we expect how is it trending, if you can give some color on what are the trends you're seeing and how should we expect it in 3rd quarter, 4th quarter? I think in Will that sequential improvement continue given No, I think the sequential improvement should continue. We also had an extremely strong October and I think Durga Puja, Diwali, so it's a sort of festive time even though people are not fully going out. But I think in Air Color, we should see sequential improvement. So we're quite confident about it. Thank you. That's it from my side. Thank you. The next question is from the line of Rohit Dukania from Dham Capital. Please go ahead. Yes. Hi, good evening. Thanks for the opportunity. Two quick ones from my side. Can you talk about what has been the secondary growth in HI in Q2? Is it possible to quantify that? And also if you can talk about what kind of sort of exit growth will be seen in HI, let's say, in the month of September? I think, again, for competitive reasons, we would not want to share a monthly sort of growth, but on secondary growth what we can share is it was I mean in double digits, low double digits kind of thereabouts. The momentum in September October was good. The task on hand is to continue that momentum for rest of the year as you mentioned earlier. That's fair enough. And the last question from my side is, so the difference between sort of value and volumes of 5% versus 9%. So is it a mixed layer improvement or which segments are contributing that? Could you please highlight that? Yes. I mean part of it is it's 1 broad based, I mean across most of the key sort of categories. And second is there is plain vanilla pricing impact. Also there is sort of mix impact whether it be category mix because every category will have a different realization compared to the other categories and within categories also kind of formats and brands which should have a different realization and hence its own impact on the overall kind of value volume equation. So, one category is basically limited. No, no, it's very broad based. So, it's quite broad based. Thanks a lot on all the questions. Thanks, Rohit. Thank you. You. The next question is from the line of Richard Liu from GM Financial. Please go ahead. Hi, thank you. Hi Sameer. Hi Nisa. One, I got three questions. The first one is slightly philosophical. I just heard your comment regarding Africa has now done well, but Indo, you are a little tentative in the near term, etcetera. And if I look at the last many years, I think this has been really the story, right? I mean, the good work in one country is offset by some or the other issues in some of the other countries. Neesa, this question is for you. I mean, so you like a lot of the other Indian born FMCG companies also have taken this call that you want some share of revenue coming from foreign geographies. Looking at and I guess the intent of that was for them to be growth accretive, right, to the Indian growth. But then if you look at all the companies that have this international exposure, it didn't really pan out that way. I would say that international operations have actually taken away from the Indian growth rate. Given a choice, I mean, would you still be as gung ho about these foreign operations as the group has been when it started out on this journey? I'm just asking in the context of the kind of volatility of growth that we've been seeing off late. Yes, sure. So then, Tycho, and I think it's nice sometimes even on these quarterly calls to be asked about something that we think about all the time. So actually, thank you for your question. I think, Richard, if you look at a country like Indonesia, I would say by any sort of parameter you look at it, it has been a very successful sort of M and A and I think it will give us growth for many years to come. I still very strongly actually believe in this Africa story because I do think there is value for money product, good distribution, low cost manufacturing is something that transfers to there. I think in the last few years, definitely, the performance has really not been up to the mark. There are macro challenges, but if we're honest, there are macro challenges all over the world all the time and COVID sort of adds to that. But I think we are committed to making this business work. We do feel that this has very, very strong long term potential for DCPL. We also understand that there's no long term without a short term. So we are working extremely hard to really acknowledge where we've misstepped and where we need to put the fixes. And in the last few months with investors and all talked about getting someone like Dinesh Gurdon, who's a very experienced, South African leader, who's very experienced in operating on the continent. So I'm feeling quite confident that we will turn this ship around. Look, and 1 quarter of 10% growth, it's not like we're having a party. So I can assure you of that, correct? But it does give us a bit of horsepower. Quarter 1, as you know, in the Africa business was not good. It does give us some horsepower to say, let's finish this year strong, let's put all the changes we need into place and tighten our belts and get this done. So I do think the potential is that I've spent time in these markets. There is a lot of opportunity similar to India, especially in the big markets like Nigeria and South Africa. So yes, I hope to be delivering consistent performance in Africa quarter over quarter going forward, while increasing profitability. All right. Thanks, Neha. Okay. My second question is that if I look at the LatAm margin, they seem to have structurally gone on the higher side. And sorry, my definition of structurally is actually just the last quarter and this one. But we've seen we've been seeing very good margin from Black Hand, something that we've not seen for a long, long time. I mean what are the reasons for this? I think there are a couple of things, Richard, which seems I've been working on one is structure sort of cost saving initiatives, something which you have seen in India over the last 5, 6 years is what got cost related to the Latin American kind of business and that is sort of resulting in significant margin expansion. The other is scale, right? I mean, if you look at the sales growth over last kind of many quarters, it has been quite steady. And that is also kind of driving, I mean, scale average, which in turn is resulting in meaningful kind of margins. And again, I think we remain very confident of continuation of the strong profitable kind of sales growth in Latin American business even going ahead because as you very rightly said and that's the reality that it's more structural in nature and hence sort of here to stay. And what has changed in terms of that's helping the growth profile in this country because I would think that of the 3 geographies, this was probably the most volatile and this seems to have really settled for the better. Yes. I mean directionally, I mean what has worked for us is a strong sort of volume growth and of course, the pricing growth. But pricing, you have to be kind of clear as whether it's plain currency depreciation led kind of pricing impact or it's kind of mix as well as kind of tactical pricing kind of growth. So that's I think one thing. But I mean again the route to market initiatives and new product launches have all sort of contributed to this growth both in Argentina as well as in Chile. Okay, Mitchell, I wish I could say there was a magic wand and we did something magical and it turned around. But it's just I think sometimes it's also from a management perspective getting your act together stronger, correct? So I think like Sameer mentioned managing GPM, expanding it. We've done a lot more work in general trade there, managing working capital and receivables much stronger. And actually the CEO of Argentina has also become the LatAm head and is fixing a lot of these things in Chile also. So I think it's just also stronger operational management. Okay. Last question, if I may. Samir, sorry, this is I'm sorry, this is a little, arithmetical. But the 83% of the portfolio that has grown 17%, does that necessarily mean that the balance 13% has like declined by 20% or the thing that I saw you write 9% on one of the slides, but I'm not sure if that mathematically added up. Yes, I mean the rest of the portfolio has declined, of course. I mean in terms of math, I mean we can pick it up offline, I mean if you want. Did we make a mistake in our slide? I hope not. I'm sure not. I mean, it's just a Thank you very much. Thank you. We'll get back to you with an exact number. Thanks, Nikhar. Thanks, Sameer. Thanks, Sameer. Thanks, Sameer. Thank you. The next question is from the line of Latika Chopra from JPMorgan. Please go ahead. Yes. Hi. I'm sorry, I joined a little late. Not sure if this got discussed already. But just a quick one on the India HHI portfolio. Now you reported a 4% growth. We understand there were some production related issues. If you could comment on how do you expect the category growth rates to really pan out going forward? And how confident you are that this growth rates for you in this category could sustainably run at double digit levels? And if so, what sub segments will really drive that? That's my first question. And secondly, on Indonesia, do we expect low single digit kind of a growth to continue in the short run? Thank you. Hi. So, yes, welcome. We did get asked a lot of questions on on HR, but very happy to answer yours again. I think from a scale degree perspective, like I mentioned earlier, we remain quite confident. I think a few things that are happening and we also mentioned earlier that our secondary sales were stronger, September October were also stronger. But I think slightly looking slightly forward, I think this focus on sort of health is very important now. I think people are more conscious and paying more attention, want to protect themselves. We're seeing a big uptick also in non mosquito formats like cockroach and rat. We're seeing format increase in penetration and in demand for formats like aerosol where we have very large market shares. And I think we talked about it previously, this illegal, the illegal incense take duties have changed from 10% to 25% on incense take. So I think that those players and we are also reacting strongly to them both from the supply chain side and the consumer side. Our new electrical liquid vaporizer, which is much more efficacious than the last generation one is doing well. The consumer feedback is extremely sort of positive. So we don't feel there are enough of these tailwinds to be confident about. In terms of Indonesia, I mean, I can't give you guidance on the growth, but I think from a macro perspective, from a lot of the geographies we operate in, we have seen some of this COVID impact and all playing out quite strongly there. The business has good plans, growing out a new hygiene brand, doubling down on insecticide. But I think it will be a tough year for the business overall. Sure. Thank you. Thank you. The next question is from the line of Rohit Chordia from Wito Capital. Please go ahead. Yes. Hi, good evening, Sivar, Sameer. A couple of questions. One, if I could get comments on the euro trends and some of your new categories there, Krishna and all. 2nd, you seem to be, let's also launching a few new variants in usually your liquidated portfolio. Now that market during the pandemic, I think the category has seen some uptick. So are you getting more serious about that portfolio as a all season portfolio instead of just being a winter one? And the second one is on the balance sheet side. You've seen receivable number come down for most FMCG companies this quarter. Is this to do with lower savings of modern trade and KMT right now? And does this normalize as these two channels recover? Those would be my 2 questions. First of all, congratulations to you on your new role. I think begin with, I mean, air freshener category per se has been sequentially improving as we can see, I mean, from the overall category kind of group numbers. Of course, I think the overall performance for us also has been largely impacted by the overall kind of slow category growth, but that's influenced sequentially. So we remain kind of hopeful that this gradual improvement sort of will continue even going ahead although at a slower pace and perhaps a recovery at least which we saw in hair colors for us. And liquid that's for us, I mean historically has been more of a winter cat portfolio. The attempt timing with this new launches is to make it more of a 365 day play And that's where this new product launches and the related inputs and investments are sort of going in the market at this point in time. On the balance sheet front, actually if you browse through the balance sheet metrics, which we have shared, we have seen close to 12 days of working capital reduction. And a big part of that reduction is coming driven by receivables. And again, for us, it's quite broad based. I mean, it's coming from most of our countries, whether it be Africa continent, whether it be Indonesia as well as sort of India, right? I don't think so. At least for us, it has been only driven by kind of slow modern retail channel kind of sales because part of that has actually got offset by online, which also is related to higher credit. Understood. Could you talk about your e commerce sales and how much of it growth? I'm sorry, I didn't get your question, Vivek. The e commerce salience in India and how has that channel grown on a y o y basis? So for us, I mean, our salience, I mean, in India for e commerce was around 4% to 4.5% and the business is more than sort of double for us. Excellent. Thank you very much and all the best. Thanks Rohit. Thank you. The next question is from the line of Pasi Bandhagib from IFL Securities. Please go ahead. Hi, Nisaba, Sameer and team. Good evening. Hi, Pasi. Hi. I joined a bit late, so I'm sorry if these questions have been asked earlier. And if they have, then I'm okay to look at the on call traffic. Can I ask your question, Poti? Yes. So my first question was on the Africa margins. I think they have compressed Y o Y this quarter. So just wanted to understand what is the reason for that compression and how do you see it going ahead? What's the outlook for margins going ahead? Hi, Satish. This is Sameer here. So, I think the major reason for compression in Africa's margin was higher growth in Braids. Braids has relatively lower gross margins as compared to the other formats. I think going ahead for rest of the year, we remain quite confident of margin expansion in Africa during the multiple pivots. One is we are seeing gradual shift in the format saliency and some of our cost saving projects are now little kind of reaping some of the new rich dividends and expect it to have a meaningful contribution in the rest of the year. So at least at this point in time, we remain quite confident of margin expansion for both the quarters in Africa. And just a sub question here. So if the increase in grade salience has got to do with the poor economic situation, then that is not going to reverse so soon, right? We are seeing the strength, Priti. It's not like it continues throughout the quarter. It started, I mean, that way. And it's not just kind of poor economic situation, but also salons kind of opening and where sort of closed in lockdown because sort of formats also have its own kind of inter linkages, right? And we have seen that shift, I mean, almost every month over last 3, 4 months and expect also, I mean, that shift, I mean, to continue. So at least that reason, which was one of the major reasons for kind of downtick in margins, we will no longer be as prevalent as it was at least over the last 5, 6 months. Understood. And on wet hair care, I just wanted to understand in Africa, firstly, whether it's a similar impact of COVID related economic disruption in wet and dry hair care or are they impacted slightly differently? And also the wet hair care portion in U. S, is that impacted or there you don't see any significant impact? No, it's a very complementary category, right? So the impact is there very much. It's difficult to decipher whether the impact on dry hair was different from sort of on wet hair because it's complementary category. I'm assuming both of it would have got impacted more of the same. In U. S, we have seen sort of much improved performance. I mean, the performance was extremely soft in the early part of the year. But over the last 2, 3 months, we have seen good steady to strong sort of performance, and we expect that also to kind of be for going. And we were also kind of constrained with some of the back end supply chain challenges in U. S. Market, and those are also largely sort of behind us. So we do expect the wet head performance generally and in U. S. Also to be better and then going ahead. Okay. And lastly, this household insecticide launch in Africa, can you give me any updates on that? I mean, which countries have you done it? What is the initial feed? What is the future rollout plan? So I think it's a big category, right? We have talked about it in the past. And we have started our journey with kind of a result launch in Nigeria. We would want to sort of continue to invest in the learnings. As you are aware, I mean, this is a category which also needs 2, 3 years of kind of background work in terms of registration and product launches, readiness, right? I mean, in the different markets you want to get in, which is sort of happening as we speak. I'm sure we will talk more about it in the coming quarters and year once it sort of reaches to scale. Okay. And this initial learning, etcetera, anything that you would be able to share at this juncture? Too early, Persil. Okay. That's all from me. Thanks and all the best. Thanks, Pershing. Thank you. The next question is from the line of Prasath Deshmukh from Bank of America. Please go ahead. Hi. So I have only one question actually. So there is a sharp rise in e commerce as you mentioned. And if I have to look at the advertising per se, advertising industry per se, print media also seems to be struggling because of lack of leadership. I was wondering how your advertising spends now are adjusted versus pre COVID versus post COVID in terms of mix, say TV, print and digital? And how do you think this will trend here on? Hi, Prasad. I think directionally, I mean, a sense on digital has been kind of moving up, right, not just, I mean, in current kind of environment even I mean one of last year, right. I mean it also is a dependent on the category. It's not like all the categories can be digitally sort of advertised because you have to also look at the target audience, right, which you want to sort of connect with. But yes, directionally for us, I can share that our digital spend have actually moved up, continue to move up over last kind of couple of years and that trend I think will continue on to going ahead. So if you were to quantify how much percentage would be digital, how much would be say TV now versus say a year back? Well, again, I think we would want to keep some of this kind of details. I mean, you know, I'll note Okay. No problem. Just one comment then. As far as the ROI is concerned, on the digital spends versus say print media spend, how much would be the difference? At the industry level also should we find? Well, I think again to be honest, Farfad, most of the market is to grapple with ROI investments, whether it be on traditional media or whether it be on digital. There different metrics in terms of kind of clicks and then keep conversions and so on and so forth. But to be very honest with you at even industry level, the ROIs on different marketing mediums are still not very good. Got it. Okay. Thanks a lot. Yes. Thanks, Prashant. Thank you. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead. Hi. Good evening, everyone. Just one question, if I just look at the performance in December, leaving aside the impact of pandemic, I mean the last 8th quarter, if I look at, let's say, HI, the lowest number is minus 6, the highest is plus 17, Soap is minus 4, plus 26 and in fact, there is minus 4, plus 33. In general, by design, FMCG businesses are more stable and more predictable. And so over the medium term, what will it take for growth in a tighter range because the last eight quarters were not really marked by any of those one offs. I mean, demand GST was hard before that and pandemic is only from March of this year. So what will it take to have more predictable and a tighter range from a growth perspective? Well, one, it would be good not to be dealing with COVID because you said GST and all are not part of this range that you've described, but COVID has definitely been there. So I think that has some impact. I think that being said, I would agree with you that FMCG needs to be a more steady business. So I think as we go ahead this year, we do feel that we will have more steady growth and focus on keeping growth in the double digit. But I do think in the past and we've talked about this that the sort of past couple of years have not been the strongest for GCPL. We have been putting fixes in place. We have seen sort of market share gains. And we are dealing with COVID right now, I think, pretty successfully. So hopefully, we will see more steady growth going on. Sure. Nishav, the context also is because the number that I just read out are actually till December of last year. So that's why I left March number because those are also impacted by COVID. But again, just a follow-up to that, let's say, if you look at the 1st and the second quarter, I don't know if you have covered this already on the call since I joined late. But let's say, Q1, I did not get an impression that HI will go down all the way from 27% to 4%. At that time, the feeling was that, that 27% is more like there is no one off, there is no channel restocking, etcetera, etcetera. Conversely, so you did indicate that there will be a pickup and things are getting better, but from minus 2% to plus 18%, again, those volatility actually is something which worries me the most. So any thoughts on that? I hope you're all complaining about the minus 2 to plus 18. Definitely, I think I don't know when you joined this call because it seems people are joining at different times. But we did sort of talk over the HII piece that we were also expecting to be in double digits in this quarter on HII. And there were some supply chain issues, there were some other issues that sort of impacted us. Our secondary growth were better September October were better, and we're looking towards sort of better growth in HRI going forward. Got it. Got it. Wishing you all the way back, Nisawa and team. Thank you. The next question is from the line of Amit Sinha from HDFC AMC. Please go ahead. Yes. Hi, team. Thanks for the opportunity. I have just one question on the Indonesia business. And if I heard you correctly, you have basically what you pointed out is that this year is going to be a tough year for the business overall. While I understand and I have been listening to the commentary and clearly there has been extreme social distancing norms which have been implemented in the country, Until last quarter, your commentary on the country's business overall, given that you have been doing extremely well on the HII portfolio there, was sort of kind of positive, if not very positive. So wanted to understand, is there anything more from a business fundamental perspective, which is changing from the portfolio point of view and from the country overall macro point of view because I don't think anything is changing. Our growth in quarter 1 in Indonesia was 105. In this quarter, it's 103. We were obviously very pleased in quarter 1 with both India and Indonesia being at this 105 growth considering most companies were in the growth in quarter one. If you look at Indonesian companies, even in FMCG, they are in degrowth in quarter 2 also. So relatively 103 is good. You all are asking how the market conditions are. It looks quite tough is what I said. So I'm still given what's happening in Indonesia, still pleased. There is some we have a big air care business there. We are seeing the pressure on air care both in India and in Indonesia. It is not one of those categories that has tail wins in these emerging markets. So they are pieces that we're working through, correct, by making it fresh and sanitized and things like that together. So I don't think my optimism on Indonesia changes has changed at all, but it's not it's a tough year, meaning I don't necessarily see us jumping to double digit growth next quarter is what I meant. Understood, understood. Okay. It was more of a general commentary on the macro, not exactly for your Yes. I think the business there is very strong. It is a resilient business, but I do think it's a tough year for all businesses, but the macro has been quite and I think if you look at other Indonesian companies, you'll see that also. So India has actually the surprise has been that India has in consumer products has actually recovered quicker and faster than expected, then I would have expected Indonesia also as the economy would have recovered in a stronger way in quarter 2, but that hasn't happened. Yes. Thanks and all the best. Thank you. Thank you. Thanks, Amit. The next question is from the line of Avi Mehta from Macquarie. Please go ahead. Avi Mehta, your line is in talk mode. Please go ahead with your question. Hi, sorry. I was on mute. I had just a question on the margin front. Do you have any target or any target that you can share on cost savings that you have planned and any plans around that? How are you kind of going about it given the current macro environment? And not just on cost but also on the SKUs, any rationalization, any thoughts on that front would be useful. Hi, Avi. This is Sameer here. No, I think the cost saving programs, I mean, as I was sharing earlier, have also been cross formulated to African markets as well as Latin American markets. On an average, we do see savings anywhere between 4% to 5% of sales coming in. Of course, part of it gets really nurtured back for growth and part perhaps sooner kind of goes to the bottom line. So that's the way we are looking at it. And in India, we are perhaps in the 6th or 7th year of this program, whereas in Africa, we have just started this journey just 6th year. So that's I mean, the way we want it to be more of sort of continuous excellence program, right, which carries on for many, many years to sort of come in. SKU rationalization is important. I mean, we have sort of done that, I mean, in couple of African kind of businesses at this point in time, not just from cost savings perspective or simplifying your back end, but trust me, it also has kind of immediate impact on the kind of driving sales from your other SKUs. I mean, because you free up lot of kind of time and bandwidth of your frontline team members. So we've done that. In India also, we do that, I mean, at regular intervals. And we keep on sort of revisiting this kind of SKUs including the rationalization part of it. Okay. And Sameer, just on given the current palm oil prices, any how is that kind of trending? And is there any pressure that you're witnessing over there? Or how are you looking at that? Yes. So, I mean, again, honestly, I'm no expert on the palm oil pricing trends, but the POC prices say for at this point in time around 7.50 ish level is 30% to 40% up. I mean, we have taken some pricing action at the flag end of the quarter. We are not too worried about its impact on gross margins. We think that it's a good balance between driving volumes growth, having competitive advantage as well as ensuring that there is not much innovation on gross margins front. So that's the way we are looking at it. So I think we are comfortably placed in terms of our covers as well as the pricing cost which we will take up. Us. Okay, perfect. That's all from my side. Thank you very much. Thanks, Salim. Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead. Yes, hi, good evening. I just had one question on the new product launches. So if you could just help me understand in India, what would be the proportion of growth coming from NPD? And the follow-up on that is, now you're about 3, 4 months from the state of launches that you had done. In your early opinion, which ones do you think are more here to stay and which do you think are more tactical just from the just to take advantage of the macro? Yes, that's it. So our innovation rate this year is very high in the very high double digits, but that's also because we have this new flash, the new liquid vaporizer machine in India. So this is probably our highest innovation ratio and I don't think we've ever been this high. So that would be on the innovation rate. Again, for I think competitive reasons, I don't think we can share which other sort of new products that are going to be I don't think too many of them are tactical. I think some of them you might we're seeing like hand sanitizer if you play it just without a differentiation is becoming a very commoditized and very local driven market. But I think this and it's not just new hygiene products, it's already products that were there, but if you can bring differentiation there, good pricing and good distribution, lot of opportunities, but unfortunately can't share exactly which ones. Got it. If I can just ask one more. For the India business again, if you could just give me a sense of what the kind of recovery trend for the hair color business as you've already seen, you did see a negative 5% for the quarter, but through the quarter as exit rates go, how are you kind of seeing that Yes. I think we're seeing sort of a positive and October was very positive in hair color. So we are seeing that category come back into growth. Good job. Thanks and all the best. Thanks, sir. Thanks, sir. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead. Hi, team. Like what Prasid mentioned a little earlier, sorry, I mean, I also joined a little late on the call. I'm actually recording it, so I want to listen to this after I'm so I have 2, 3 questions actually. The first is, if you covered it earlier, I'm sorry for that. Could you just comment about the primary and the secondary sales on insecticides and soaps? So that's the first question. Hi, Manoj. The secondary sales growth in housing insecticides, as we shared earlier, has been much higher than the primary sales growth. And in soaps, it has been marginally higher than the primary sales growth. Okay. That's great actually from a soaps point of view. HNA, is it double digit? Sorry, I'm sorry. I'm again, apologies if I missed that number. Is it better? Is it significantly better? Or is it closer to the reported 4%? It is no, it is low double digits. Low double digit. Okay, understood. That's very, very clear. Point number 2, some qualitative commentary on the new category entries, whether it is the home care, whether it is ready care on will be helpful. What's the consumer feedback and kind of where are you at this point in time? Again, I think it's too early to call out. You had kind of fewer launches, right, whether it'd be in hygiene and again, we did hygiene into disinfectants and veggie wash and even into bathrooms, cleaner and floor cleaners and toilet cleaners. But honestly, too early to call out at this point in time. The start has been good is what I can share over the last kind of 3 to 6 months. We continue to kind of invest because the point is not just we have a tactical view, but make it more structured and a key growth vector for us over a period of time. So maybe at the right point in time, once we get sufficient scale, we'll be very happy to share more details from the same Manoj. Understood. That's point number 3 and that's the last question. Any material changes in the market on the trade margins, consumer discounts, essentially more on the BTL side not really the ATL part of it? Yes. It continues to remain on the lower end, though I think it has gradually moved up compared to the Q1 year level, but still significantly lower on a year over year basis. I mean, you can see that from our disclosures also, right, I in terms of it has added sort of 2 percentage to our overall pricing, I mean, for the last quarter. So, yes, I mean, that's where we are. I mean, it's still higher than Q1, but yes, still lower on a y o y basis. And maybe the trend also continues at least for rest of the year is my view. Got it. Thanks guys. All the best. I'll catch up greatly. Thank you. Good day. Thanks, Manoj. Take care. Thank you, sir. Thank you. The next question is from the line of Asmuthi Wala from Nivalis Partners. Please go ahead. Yes, hi. Good evening. Thank you for taking my question. Before the question on hair color on Raf, I was almost wondering if you're in the business because no one for the last 45 minutes asked this question on it. So thank you for clarifying that. The related question on hair color is, do you take some of the Indian businesses like you're taking HI to Africa into other parts where you operate principally being in Indonesia, focus on sort of hair color or related such businesses of India into that geography? That's my first question, please. Yes. We have a brand called New, which is a sashay hair color similar to Expert Creme in Indonesia. We also have quite a significant hair color business in Africa, focused it's mostly in South Africa, but has been sort of expanding. So hair color is definitely a global category for us. And obviously, the Latin American businesses is heavily skewed towards hair color. Sure. And just as a learning on the Indian context, I mean, we've been in this business for a while. So do you see this business evolving into a much larger sort of business from a category point of view and you being the big leader in the business? I think, so there's been a launch that I've been very excited about this quarter, which is not in hygiene or in household insecticides actually, but in fashion hair color. So globally, the market there's a big there's obviously a gray coverage market and then there's a fashion hair color market. While in India, it's mostly been a gray coverage market. We think the time is extremely ripe for fashion hair color. And I think COVID actually sort of that trend COVID will push it forward because with people wearing masks, they're not doing lipstick and some of the expression from the lower half of the face. So the upper half becomes very important and fashion hair color can play a strong part in it. We have an extremely good no ammonia innovation in fashion colors. It's quite hard to get that sort of bright vibrancy without ammonia. So the formulation is fantastic. And again, it's set of value for money. It's at INR 40. So above the main SKU, significantly above, but still early value for money for that category. So we are quite in spite of early results and we think this could be something very interesting for the market. One of the things obviously other business, but definitely building fashion and not just gray coverage is an interesting opportunity in India. That's very helpful. And as you brought it out, sort of fashion element to color. And just is there a natural sort of overlap on that? Is there a trend there? And is that going to work in favor or against you on the color hair color side of the business? On the what? Sorry? On the hair color side of the business, is there also a natural sort of tailwind building up and is that going to affect your business positively or negatively? I don't think it's so I think the way is that we have a lot of natural ingredients in the hair colors and also we have the biggest natural hair color brand, which is our Nupur Mehendi brand. So you'll see more things from that brand being launched. But I don't see any negative impact on hair color. Fashion is equally important trend as naturals, let me put it that way. Sure. And just a small quick question to the point that Sameer you answered to an earlier question. You said BTL has actually added 2 percentage points to your top line. Is that what I heard correct? That's right. Okay. That's great. I appreciate your time and thank you very much. Have a good evening. Thank you so much. Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Pratik Dantara for closing comments. Thank you, everyone. With that, we would like to draw this call to a close. Thank you, everyone, for your participation, and have a great evening. Stay safe and stay well. Thank you so much. Thank you. Bye. Thank you. Thank you. Ladies and gentlemen, on behalf of Kotak Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.