Q1 20/21

Aug 4, 2020

Quarterly report

Good evening, everyone. We would like to welcome the senior management team of Budhrish Consumer Products and thank them for giving us this opportunity. I would now hand over the call to Puneet for initial introductions. Over to you, Puneet. Thank you, Ashish. Thanks, everyone, for joining us today to discuss the quarterly performance and the current business environment. The call is represented by Ms. Mrs. Bogutridge, Chairperson and Managing Director Mr. Vishwanivasan, CFO and Company Secretary and Mr. Sumeet Shah, Head of Investor Relations. To now have Niswita share our thoughts on our performance, and we can open up for Q and A. Over to you, Niswita. Thank you, Satish. Good evening, everyone. I hope you and your loved ones are safe and healthy during these difficult times. And thank you for being with us on this call today. In quarter 1, GCPL's performance was resilient. Our overall sales growth was nearly SaaS and EBITDA grew at 3%. Profit to SaaS also grew at 3% excluding exceptional. As you know, 85% of our global portfolio is household insecticides, hygiene and value for money products. These grew at 9%. Household insecticides and hygiene combined had excellent growth at 20%. As value for money products declined, we have seen sequential improvement from April to June and remain confident of stronger performance going ahead. I had previously pointed out that our Indonesia business is very similar to India in product category and strength of its G and L. As an economy, actually Indonesia seems to be stronger than India at the moment. I'm happy to report that both India and Indonesia, which is down to 70% to 75% of our overall sales, grew at 5% each. In India, our primary sales mirrored secondary sales in absolute term and rural grew much ahead of all. Our performance in Africa, the USA and the Middle East was weak, but we haven't seen sequential improvement from April to June. And Harnesh Gordon, who is our new CEO of the region, has already got his hands around the business and we had a strong July and we remain committed to a turnaround in performance going forward. 1 of the biggest growth pivots for us has been the resurgence in household insecticides, which grew at 27%. We are reaching the benefits of a very strong innovation product line and product portfolio serving consumers at all price points. Consumers are also, at a time like this, extremely concerned about their health and insect borne diseases like malaria and pangi. So we are also investing more behind consumer education on disease prevention. We have been laser focused on growth and innovation in our hygiene portfolio, which grew at 15%. I'm extremely proud of our team that we were able to push down new product development cycle times from month to week, and we will continue the agility we saw in launching the ePlex product. I'm also happy to share that our teams have been on top of their execution game and I believe we were advised in responding to the supply chain shocks that we faced. We are using this crisis as an opportunity to digitize more rapidly and grow more strongly in channels like e commerce and chemists. Working capital days came down by 6 days, and debt to equity ratio also came down to 0.17. As always, our values matter the most at this time and we are committed to the safety and well-being of all digitized and serving our consumers and communities with our full hearts and minds. Thank you. Any questions now? Thank you very much. We will now begin the question and answer session. Your question is from the line of Praveen Roy from Middle East. Please go ahead. Yes, congrats on good comments on the HI. Some questions I have on the practice. 1, how are the illegal interest rates in Africa now? Do you have some head people there? And second, any impact on out of home consumption in SI because people are not being outside? So these 2 are the main ones. You can also highlight how much is the contribution of the new products launched in the last 1 year in April? Thanks, Amish. Thank you for your question. So I'll take a question on illegal incense stakes. So I do definitely believe that illegal incense stakes are impacted for a couple of reasons during this time. I think one is, as we've seen that all of us have had supply chain issues and keeping our factories running and getting the right logistics, both and so. So I think and costs have gone up. So I think they have virtually been impacted by that. The second piece, which you might know that's happened is that the duty on raw bamboo sticks which come in from China or Vietnam, the duty has been increased from 10% to 25%. So this makes their business sort of much less profitable or more unviable. I think the other pieces, which I will be mentioning about, we have also got a lot more aggressive in terms of pushing them back, whether it's educating consumers, PR media we're doing or through the government and legal means. So I think some of that's been playing out and we will make sure that we use this time to just fully push them back. Yes. So one follow-up here is, so bamboo, can they ship to our domestic bamboo sourcing Is this in the fee also in terms of that Duke sales? You can. Yes, it would improve cost also, but intensity is a very small part of our business, our IHI business. We have other other products like Fast Card also, and we have some new launches that are going to happen in this area. So I think my understanding is that, yes, you can use with their bamboo as much as same quality, which makes it challenging and the cost would be higher. And my other question is on new products for the last 1 year and out of home consumption, how that has been impacted? Yes. I think to begin with, Adnish, we have had a meaningful contribution from Ignite Gold Liquid Authorizer, something which got launched regionally to begin with last year and then we scaled it up. So it has had a big contribution to overall HI sales as well as growth. I think out of home, category per se, I mean, has been a relatively small play. And over last few months, the consumption has been relatively lower as compared to the recent past year in terms of growth rates. The second question is on Soapko. That's all in the presentation, playing the global presentation that will become number 1 in India. So how do you explain that because that all is almost generic to that segment? Of course, the product also can play that sort of in SMCG new brand takes a lot of time. So if you could tell what is the right to win from product here? And have you lost any shares because at all has come upon or is it a loss to the rest of the year? So, Avnish, I think to begin with our scale up in kind of project kind of helps you and it's very intriguing. That's something which got launched during the quarter. And did you expect even a meaningful scale up profit over coming months and quarters and expect it to become very integral part of our sort of portfolio to begin with. We don't share market share details at the end. So to that extent, it will be very difficult for us to at this point in time call out. I don't know how the share trends are in. Also the details coming in directionally on market share are still not marrying in with lot of internal data points. So to that extent, we do feel that our market share is quite stable. But I think the last for us will be to ensure scale up of OXXO as well as continue with our micro marketing initiatives, which over last few years have been definitely very meaningful share gains for us. My last question is on hair color. So can you see growth improving because of the work from home entering? And second is how much is the percentage coming from Helen and barbershop because again, if they're using the trimmer, etcetera, they are not going to barbershop for most of the consumers. So, let's take the impact from Beeblant because I think that will be much more challenging. So, could you discuss on this? I think both of VBLANT and Professional Business, Amisha, very small and sort of very insignificant. Professional business has definitely been impacted. From a Beebelunk point of view, that is not actually sold in salons, but sold in retail from beauty shops or online. So that will have a different sort of trajectory. I think what we're seeing with hair colors is obviously we have seen some amount of sequential improvement. But also what we realized is that from ALCIM's humor research, men seem to be a little bit more shabby at this time or willing to be shabby. No offense to any of the men on the call. But women feel want to follow and they say we don't want to sit around at home not looking sort of good. So we do and then we have these value for money products that are well distributed and stuff. So we'll see what happens, but this is not a category where the bottom is just totally falling out. Thank you very much. Thank you very much. Thank you very much. Thank you very much. I'll request to come back in the question queue for a follow-up question. Next question is from Arunang Mitra from Credit Suisse. Please go ahead. Yes, hi. Good evening and congratulations on a good result in the context. So on the HI business, the 27% growth is clearly a very exceptional number. So as people go back to work and spend their time at home, which would be happening in June July, what are the kind of growth rates you've seen sequentially in these months? Are you seeing it settling down at at a lesser rate or do you see the trends continuing to hold up at a very high growth rate in the immediate term? Well, I think it's too early to call out, Arnab, at this point in time whether the trends are continuing or we are kind of settling down because it's very, very kind of dynamic as we speak. I think what we have to understand to begin with is there has been a strong reason to buy from an consumer perspective, which has been received prevention. And we expect that we will tend to sort of continue and we will be investing in fact on that platform aggressively to ensure that I mean that reason to buy very much intact and growth rates are kind of steady, I mean in house to look at that category, not just here and now but for many more years to sort of come. We will also top it up with some of the innovations which we have launched for last 6 to 12 months and also see more innovations which will come in the rest of the year. So, those specific numbers in terms of other 10, But definitely, I think we should continue to see sustainable kind of stable performance in housing incentive category, both in India as well as Indonesia for its 1st year. And I would break it up into 2 pieces actually. I think some of the growth issues that we work facing, correct? Some amount due to the illegal expense taken. I'm sorry to what you will see us is also taking market share. We've also been very aggressive in say this gold flash liquid vaporizer. We're not just saying, oh, India's most powerful visible wafers. We've really worked very hard from a technology front to get this product to be much superior, correct? And we saw some years ago when we launched a much superior LV, part of how our market shares sort of really grew strongly. So I think one will be a market share both from illegal intensive penetration with more some of these underperforming formats. So I think and we've mentioned this that we have this full place, portfolio play. So that I think is work we've already been doing and pushing forward. I think we're also for a category like this is an opportune, it sounds horrible thing, an opportune time, but people are very concerned about their health, correct? Just the way that they're washing their hands or using sanitizers, we do not want to take a chance of getting any sort of sickness and having to go to a doctor or a hospital. So I think that vigilance, which we're seeing across the categories, improve my immunity, keep me safe. And I don't think that is just going to drop off overnight. So I think our job as the category leader is to make sure that we're driving distribution. We are giving customers, consumers the products that they really want and are also educating them on how to keep themselves safe. Sure. Thanks. My second question was particular to the launches you've made in or the foray you've made into dishwash and toilet and flow cleaners. Now these are obviously large categories. They have strong incumbents. So how should we see this? Is this an extension of what you have in terms of some brands in a time when these categories are seeing a pickup? Or is it something where DCP now wants to be a broad based home care play and therefore has gone through the process of development thinking through how what role you will play in these categories? How should we think about these 2 specifically large categories in home care? Yes. I guess we are in the workplace, home care, and obviously, HI sort of dominates the story. But don't forget, we've also become, over the last 3 years, the leaders in air care, very low penetration category with a good sort of headroom to growth. We want to play strongly, obviously, in liquids, detergents. And actually, these floors, as an operator, seem quite opportunistic at this time. So these were categories that we had been sort of looking at. And the way we look at it in a country like India is what is the penetration story. Sure, you have very strong competitors in this in these categories. But we feel that the penetration story here is it is quite opportunistic. And it's a good time both from a penetration viewpoint and what consumers want again, this I want to keep the house as clean as possible, which I'm trying to get into these categories. Okay. So you would say that this is not just an opportunistic foray, but you would think of developing this as a long term growth vector for the India business? I think any of these categories we're getting into, it's not just opportunistic. Obviously, look, if you even in a brand like Cet, we know where what are the products that are really differentiated, where are the products where we have cost advantage or other advantages and we would probably over invest in those. Essentially not just let's do it for 6 months. I don't think that makes sense for a company to our scale. Okay. Thanks so much. Thank you. Thank you very much. Next question is from Pasi Bhasin from Indranco line. Please go ahead. Hi, good evening team. A couple of questions from me. The first is on the soaps business. Despite a significant decline in Q4, the Q1 numbers in soaps are just about flat. And this is very different from what the market leader has reported. They have reported double digit growth in skin cleansing for Q1. So just wanted to understand what are the moving parts behind this? Why are sort of Q4 plus Q1 average decline is in double digits? If you look to any light, any sort of particular geography or any particular brand? And also if you can sort of share if there's any initial signs of this normalizing and we going into a sort of strong growth in Q2 or not? Sure. Okay, this is Sameer here. So I think if you look at our performance over this last 3, 6 months, but again over the last couple of years, we feel we are very much kind of heading in the right direction in terms of share gains as well as kind of our initiatives, which has been largely micro marketing efforts in some of the events. I think going ahead, the strategy remains more of the same in terms of continuing to pick up kind of 1 state, multiple districts, doubling down 360 effort to get kind of full eventually market share gains, second to market and then sort of move on. Also in parallel, as I was mentioning earlier, we have launched Direct Edge Soap, which we think that should be a meaningful day for us sort of going ahead. Not speaking too much into the recent performance as well as behavior demand as well as kind of our structural and tactical initiatives. So we remain quite confident in continuing, I mean, the share gain momentum in soup and also we should see kind of much improved performance in soaps sort of going ahead. And foresee in skin cleansing, we will also be in growth. So I think it's also how you bucket what products we've not moved away from sharing categories that we have shared in the past, but if you look at if you plug in some of the other products like hand wash and all in there, we would be in growth. Understood. Secondly, just wanted to sort of dig a little deeper on your gross margins, especially in the India business. It's generally 300 basis points of traction in gross margin. And of course, there is a mix effect because hair colors decline would have contributed some part to that. So if you could just call out what is the extent of mix impact driving this? And then apart from that, the remaining part, what is the reason behind that? So I think there are a couple of reasons, Kartik, and you kind of called it out. One is obviously adverse kind of category mix. The other is also kind of input cost. While food has been benign, palm oil prices have been kind of higher on year over year sort of basis. And we are in process of taking calibrated pricing changes to mitigate that impact. So I think combination of both input cost increase or a lag between actually end consumer price related cost and also adverse category mix. So my sense is in coming quarter, we should see a much improved gross margin as compared to Q1, driven by the gap between input cost and consumer price getting partially good as well as much improved Right. So I was just looking at the palm oil prices, actually sequentially, it has not moved much. And on a Y o Y basis, I see the inflation is actually higher in March quarter versus the June quarter. So what am I missing here? No, I think the changes, I mean, especially in terms of input cost, even on a Y o Y basis, I mean, I think in case of common derivatives is still higher by 20% to 25%. And also there is kind of mix change. So, also you need to look at the weightiness, right? I mean, we will have orders and different kind of saliency coming in from each of the categories. So I mean there are too many moving parts to sort of look into it and just plain vanilla comparison of Q4 to sort of Q1 may not give you all chances. So how long will this margin remain under pressure? As I shared with you, I think in quarter 2, we will see kind of much improved gross margins, baseline with quarter 1 gross margins. Okay. That's all from me. Thanks and all the best. Thanks, Persu. Thanks, Persu. Thank you very much. Next participant is Rakesh Maheshwari from Jefferies India. Please go ahead. Hi, good evening everyone. My first question is to Nisaba. So Nisaba, since I was speaking to you for the first time, of course, you're taking charge at I mean just to give an example if you drop a parallel, when you started the journey of NDA, Mr. Ali Goodrich gave 10 points revenue over a 10 year period. I know the time you tried to give those kind of guidance, but how you would be approaching things differently given that now you are at the helm as in the next half? Yes. So like I said before, I was already at the helm. The problem with us has been growth. So my job is to make sure we grow. I'm not going to give you any guidance on that, but hopefully you'll see what we do this year and 3 years ahead. I think that is very critical that we get get back to best in class growth. And I think in our and I've said definitely India, Indonesia, very strong businesses, good category portfolios, deep P and Ls. And in Africa, I think along with Dhanesh Gordon, we've already seen your second should be one of the most in sort of getting back, I think just having a lot of execution strength and making sure that business both in this needs to turn around in the short term so that we can sort of realize our long term gains for it. So I think growth and just execution will be the focus. Thank you. That is very good to know. But this is again on the HI, which is the 27% growth that you have reported. If I go back, this is probably the best product that we have seen in several, several years. What is again, I know we don't want to give necessarily guidance, but what is the sustainable growth rate? Because like in the Percea, if I combine Q4 and Q1 together, I expect some percent growth in the business, and this is a bit of a base issue. So could you just highlight what will be the medium term growth time slots expectation from this business? Hi, this is Sameer here. So again, no specific guidance, kind of chaser sort of growth between, right? I mean, the housing industry side is still around 40% because of our India as well as Indonesia business. So we definitely need to have the category firing on all kind of cylinders. I know I could just use either a whole category to fill in. So the thinking is to kind of double down on this disease prevention platform, new product launches, continue to gain market share from income fixed here and carry on with this kind of sustainable growth kind of corporate as of the year. That's the thought process. And just a follow-up to that, Suneet. So what you have mentioned essentially is the supply side factor. So on the demand side, we have seen healthy food companies, for example, having natural dentistry of this food prices. Do you also think that retail is structurally not structurally, but medium term, it alters the profile of the category itself therefore? Yes, I think like I told you, when I think this a little bit earlier in the call, I think there are 2 things, right? I think our innovation machine, what we've been doing, pushing back in people's incentives. So I think some of that sort of kicking in. But I think consumer demand also to stay safe, manage your health and stuff has been a big shift. Now I would love to give you a guarantee of how much that shift we will it's like sanitized into hand wash, right? The base has definitely shifted much higher than it was before. Where will it level off? I don't think any of us can get. I think what we will do is to make sure that all the input metrics, right, education on disease, education products at a price point, increasing distribution, low cost manufacturing, all the inputs that we can control, we will definitely control. And like I said, say that this is giving us a moment in time on this high demand and say this instance fixing impacted. So from an execution perspective, we will do everything that we can not do at this moment in time go, which will sort of benefit the business in the long term. And I think when you think of Hichai, we keep focusing Hichai, Justin, sort of all these questions will be very sort of India purpose. I think one of the things is that we have a lot of category know how and knowledge in this. So how do we grow exports? How do we use this time to expand in Africa? So I think we're looking at HI a lot more. Obviously, we have a big HI household insecticide business in Indonesia. So I think you see more holistic thinking also on the growth of the overall category for the company from us. Great. Thank you and wish you all the best. Thank you so much. Thank you very much. Next participant is Manoj Menon from ICICI Securities. Please go ahead. Tim, some of your questions, I reckon, is partially answered, but I'll let you just still ask for some clarifications, if I may. First, actually, just a medium to long term thought process on likely consumer behavior changes that you're finding in the market currently in HII industry, which would allow you to diversify DC non mosquito businesses? Sure. Yes. So, Manoj, building the non mosquito and hi and how are you and good to be on the call with you. I think building the non mosquito business has always sort of been a focus of ours. And we're seeing like you know see something like roaches actually and when I talk about sort of disease prevention and educating consumers, roaches are actually something that I know to increase health problems for people to have asthma to sort of pause it again sort of lung related and stuff. So I think at this time, there's or it's bed bugs or the other insects, I think it's making sure that again you have the right product at the right price point and then educating the consumer on it. I think the number thing that we are seeing is that pest control is quite likely that people will want less people coming into their house to do this sort of work with at least do this sort of social distancing remains. So some of our we have this what I call HIT Roche gel, which is a very effective product and actually completely in pest control. So I think we will see non mosquito opportunities also to grow out of this. Okay. Now the only follow-up on this particular aspect here is, is it something from the consumer, I'm not sure whether I've actually been exposed to any of these activities, maybe it's my ignorance. But is it something which you're expecting currently? Again, your question is actually saying that you're probably as an outsider Yes. We already have a relatively large cockroach business. We have our rats and these sort of rat products and all have been doing quite well. So we continue to invest in these products. So we launched a full natural range of A type products with like amazing fly production, put it on the table, totally natural, so it can be around food, like flies won't come anywhere near the table for like 3 for us. So I think we have a full sort of portfolio and we are investing behind it. Okay. Just 2 more slots to HCI part of the systems. 1, when I look at the Indonesia overall growth, given the higher salience of HCI impact market, as we speak in the short term, is there a different consumer behavior of the Indonesian business as CEO? And could you talk in his little comments on how Gomesh being on Sure. So I think the consumer behavior that we're seeing is quite similar across across countries actually. So I want to avoid dengue, malaria is sort of very similar across countries. Obviously, people have different sorts of habits of product category like aerosol, this is another, Indonesia, it's in salience categories and it's in India. But the heightened awareness has helped and more keeping my house clean, keeping my environment safe goes across. I think Parnish coming on board and I have been telling people it might be selection bias since I did select him, but he's been he's just it's awesome to have someone who's so experienced on the continent, is already sort of driving sales and stuff in the short term. So I think for our HII, Dean, definitely from an execution perspective, he will drive that. Obviously, the know how and stuff comes from BTPL. We have actually had a pretty successful launch in Africa. I actually took out the details of it from the presentation because more headroom time from whoever our competition is looking at what we're doing. But I'm very confident. We obviously you all shouldn't believe us till we do it because we've been talking about it for a while. I do think we have the innovation capabilities and I think Dinesh will come and really help us drive execution, obviously not in HR and all of our categories. Got it. Actually, on the 3rd Africa piece, that's an extremely honest statement and really appreciate it. And lastly, on the Protected brand, which has been around for a while, which you are filing out for this week, just some more qualitative commentaries on the 2nd can on the consumer matrices and the access and distribution. Just on the product brand, I'm just trying to understand, keep your head around, on one end, there is a market opportunity. On the other end, some seasonality there is a market. You had had some very innovative products in Yes. So I think, Seth, obviously, a lot of we have products like hand washes, we have the luxury hand wash, which is very innovative and so this is again like a time where the demand is very high for these products. We're going where the demand is. I think we also feel obviously there are lots of very strong competitors in this category, correct, which is a game, say, like a death wallet, which literally stands for hygiene and the category. But we do feel that the Gojid volume itself is very strong and stands for trust. We do feel the tech, the kind of formulation, perfumes, innovative products has a lot of resonance with consumers. We feel that we have cost advantages in some of the product categories because this is consumer like aerosol cans and stuff both in Indonesia and India where because of all the portfolios, the largest producers of those types of products. And then we will use our sort of distribution, marketing spend specifically. Did we win? So we've launched a lot of products, but I think our focus will be where are we differentiated, where do we have a good margin profile there. So we will sort of rely on our strength in these areas. And the other thing we're doing, which you might have seen, is also that, say, in hair care and stuff, we are making category service to solve this need to humor, okay, I want to perfume my bathroom, but I also want to get a disinfection. So even in our other categories, we're heightening the hygiene elements. This all is doing very well. It's always actually been a germ protection. So although we have not sort of marketed it on that basis, we've gotten that on the packaging and stuff. So I think one is protect and A Good Night and A Hit, which is directly into the categories, but also in the other brands, what are consumers looking for at this time. Understood. Thanks and all of this. And can I ask one for Tecniskars? I was going through the presentation and I saw a snap of phone calls, thermal communication. Essentially, what I understood, I can relinked off that. So it's just how we repositioned family has a this is a Tamil ad because the original, Cintol is a very strong brand in just in Tamil Nadu and in little parts of the Pradesh also. And the positioning of the brand there is different than different. It's focused in a different way to the consumer than the brand is in other parts of the country. Very clear. So I think I remember maybe listening to this 10 years or 12 years back, Mr. Gautam talked about, I think the old sub launch that we're seeing has remained for some 30, 40 years, if I'm not wrong, right? Yes. Actually, when we relaunched, then now someone in my team is going to tell me to shut down. So that's like When we relaunched Cetal, actually to look at the packaging and what we did is that we took the whole brand to the original in terms of the clean lines and the strength of the brand. So yes, sorry. No, no, no. Thank you. No, no. I think I'll take it. Okay. I know we can connect offline on this, Anita. Sure. Thank you. Thank you so much and all the best to you and team. Thank you. Stay safe. Thank you very much. Next question is from Hamed Kapoor from Investec. Please go ahead. Yes. Hi, good evening. So my first question was on the advertising spend. So obviously, if you look at the 45 new launches, it's probably the maximum you've done in a quarter in a very long time. Just wanted to get a sense from you is that do you see a material step up now in your advertising intensity? Or do you believe that this is more availability focused in terms of the way to sell the new portfolio in the current projects because ad spend have come up quite sharply. Hi, Aurya, it's Samir here. I think we will see generally our ad spend sort of moving up if you are be selling it with Q1, right? In fact, we did keep sequentially also had spend moving up, but we also saw substantial reduction in CPRPs, right? It is actually going to be a good mix of higher GRPs and lower CPRPs. And we will continue to invest not just on kind of protect and the new launches, but even on other categories, whether it be kind of select parts of hair colors or household insecticides as well as you saw. So we will continue to be, I mean, in investment. Mobile will also be in value judicious, right? Categories where, I mean, we see, I mean, back end, I mean, off end, I mean, being a hurdle in terms of kind of getting it to consumer, our assets will be relatively on the lower side. Where the demand is kind of normal, we will sort of continue to invest. I mean, and hence to that extent, we will see step up in our advertisement spend, I mean, in coming months So just I mean, the way to look at it is sequential pickup rather than a YOY look at least for the next couple of quarters. Absolutely. My second question was on the promotional intensity part as it has been with the other players as well it has contributed to your revenue growth for the quarter. I just wanted to get a sense of who do you continue to see promotional intensity being fairly low in the marketplace given there is there are still challenges in availability. And in that context, this was a driver or a reliever you were using to drive some growth in share gain as well. So how do you see that in the current context? It? Well, I think it's going to be a mix of availability as well as kind of eventual kind of scalability, I mean, from our own end. So my sense is at least in very, very short term, this may continue driven by kind of mix impact also across categories. However, the larger point is my sense is we should continue with this pricing led growth, whether it comes from kind of lower trade kind of sales promotion spend or activity kind of mix, promotional premiumization, right? I think the whole of last year, especially for India, we see kind of a mismatch between value and volume. And I think in the pre call, we did call out that F21 we should see conversion to value and volume. My sense is the way F21 is shaping up in the second line, we should continue to see a pricing level growth. And the last one was on the rural side. I think in your initial remarks, you mentioned that rural has been far ahead of urban. I just wanted to get the sense on how you're thinking about the portfolio currently given that for the India business, rural is still 30%. So how do we kind of capture this opportunity in a larger manner? And what would be the key kind of activities or product setters looking at to use this opportunity? Yes, I think rural will continue to be a big growth factor for us, as it has been, right, because let's talk having around 60% of our play in rural but also because of lower hunger intake, we have the burning format. So we have I mean, to recruit consumers, we have to sell it to our consumers and we will kind of continue to build it up or down on our distribution also. So we will Agil and Anshul will continue also to be one of the lead kind of growth pivot for us, Harish. Okay. That's it for me. I'll come back tomorrow. Thanks. Thanks, Harish. Thank you very much. Next question is from Latimer Gupta from JPMorgan Chase and Company. Please go ahead. Yes. Hi, Nisa and Sameer. Thanks for the opportunity. My question was more medium term. Nifai, you mentioned execution and growth is the focus to you and that would clearly support revenue growth. But what are your thoughts on the margin front? Considering with the last few years, the growth in domestic and maybe for initial few years even in Indonesia for subcar, but you continuously saw momentum on the margin front. So are you willing to invest this possibly higher to drive the compliance growth and want to keep margins more or less stable? Or is this going to be still on some of these will be a very key metric to evaluate when you take your decisions on the top line? Let's take a look. It's Samir here. No, I think the thought process is very clearly to kind of try kind of sales growth, whether that be driven by new launches or distribution or communication, these kind of strategies, right? And if we see opportunities of disproportionate growth, we won't even shy away from having upfront investments. But my point is that once you have a sustainable scale, you will see a natural pull out of it seeing a margin expansion. So it's not either or. I mean to begin with, but at least internally, even as Nifu mentioned earlier, the big focus is driving across categories across countries. And I think is that in place we should see kind of margin expansion, not necessarily again quarter after quarter, but at least on a kind of 9 to 12 month lease rate. Sure. Because I just want to mention in Indonesia, I remember you have talked about plans around expanding your product portfolio into more head categories, post wash, hair colors. And then of course, there was a discussion around tapping into more markets in Southeast Asia using Indonesia. Any color on the strategic initiatives on that front, please? Yes. So I think to begin with at least over the last 6 to 8 months, the push in terms of the care care space has honestly given a little bit of back while we've been extremely committed to scaling it up because the overall opportunity itself in Indonesia is kind of quite sort of a big one. So we will continue to invest on new brands as well as to bring new product launches within the larger air care, air care. Also in outpatient market we are exploring, I mean, sports model and it's not just kind of plain money like this model, it's a model where you have 2 feet on ground in terms of kind of creating brand awareness alongside maybe strategic distributor kind of arrangement to kind of lead the entire kind of post market initiatives. So that's also happening to Ratita as we speak at this point in time. Sure. Thank you and all the best. Next question is from the line of Richard Beow from Jain Financial Service. Please go ahead. Hi, thanks for taking my question. Hi, Nisa. Hi, Sameer. Can I express your perspective on what you think is going on in strength in nature? The reason I ask is that this is the 3rd write down to be an earn out liability position. And for INR 800 crores odd earnouts that you originally estimated when you acquired it, how many have already now written down? Can you just help us understand how much of the original forecast of the business has changed at the persistent discount or the earn out? And on the related point, Nisa, if I may, with Kanesha at the helm now, what are the kind of changes to strategy that you envisage for SON and particular and also for Africa in general? Hi, Richard. So let me take the first one and then I think Nishtha will share kind of thoughts on the second one in terms of strategy. I think we have shared this in the past that we had kind of conservatively detailed higher kind of EBITDA as well as kind of financial liability, right, I mean, in the balance sheet for our kind of authorized kind of promoter to have enough synergy, right. So that was one thing which we had called out all year. So honestly, the performance has been relatively kind of weak compared to even our own sort of internal expectations. And that's where we are working towards in terms of scaling it up to begin with driving sustainable growth and also driving sort of efficiency from the business. Yes. And to add what Sameer said, I think the strength of nature business was strategic to our overall sort of Africa portfolio of consumers on a full scale of what their hair needs are from we have the extension through Darling and through strength of nature, we got all the know how on styling products, relaxers, care products. The truth of the matter is that we've executed in that business pretty terribly. So I think in terms of COVID, I think there's 2 parts to this sort of turnaround on both growth and the bottom line. I think one is there are some strategic choices to be made, But I think those are actually those are not bad because we had some good categories. We mentioned that we need to build out something like API, which is a huge trend for us and where you find actually not the kind of innovative value for money product that you find in India. So I think so while there will be some portfolio choice making, I think my execution needs to sort of get much, much stronger. And I think that's where Suneesh comes in because his past experience, he was the Head of South Africa Sales for Nestle. He was the CEO of Nestle Nigeria. So I think his on the ground knowledge correct, whether it's from pricing to GPM to Taro Radler factories more efficiently. And I think that's really what we need to be doing much, much, much more strongly. I think the other thing that would possibly be positive that even while the last couple of years in Africa performance has not been good, we've not been sitting with our legs up, not doing anything about it. Starting from our product portfolio, strengthening the team, there has been quite a bit of work going on. So I'm hoping, not hoping, we need to make it happen. But I'll tell you, taking over the CEO as CEO of the company and having a strong operator who knows the market in and out definitely lets me sleep a little bit better in at night. But I think it's in my mind it's actually more execution than strategy for that business. Sure. Thanks, Sumit. And Sameer, one follow-up on this, if I may. The earn out liability that you originally provided, that has now halved, right, a little bit of 3 round out write offs or write back that you took. Does that also mean that your expectation of 1% from the business in terms of, let's say, 5, 6, 7 years now, probably, is actually half of what you would have seen in the past performance, right? And it's not necessarily an indicator of how the future performance would be. Also, if you see the recent past kind of financial liability, it's just sort of 6% if I'm not mistaken. So it originally was close to around 30%. So yes, it's more reflective of how the performance has been over last few kind of 3 years, which we shared that has been relatively low in our internal expectations, but not at all reflective of My question was on the cost structure of both the India business and the Africa business. Last quarter, you had highlighted that on the cost management side, there will be accelerated savings at least which you will initiate. Now I understand that this quarter, there have been some incremental costs coming in from the business environment, etcetera. I just wanted to understand from a year's perspective, how should we look at the overall cost structure, both in the India business and Africa business particularly when I look at obviously there is a deleverage disadvantage during the quarter. Yes, I think in the last quarter, some of the reductions are getting offset by single one offs, especially in India, which have been sort of comped. But in absolute terms, we have seen significant reduction on the year over year decrease in the controllable SG and A spend across countries of our operations. And that's something which we will also continue going ahead. I mean, experience over last 3, 4 months has sort of taught us many things that we can work virtually with not necessarily actively use some towers and stuff like that. So we are making all those kind of pieces into our kind of ways of working going ahead and essentially that will be reflected in the overall cost, how they will pan out, I mean, many more years to come from here on. And you said some there is some one offs in the cost? Yes. I mean, in Asia Business, I mean, in other expenses, we did have a couple of, one offs, which were provided for fixed assets and supporting for 1 off customer's balance. Understand. Okay. My second question is, you have highlighted in the results that there is a sale of certain brands within the group of cities. Just wanted some details around that? Yes, I can hear you. Sorry, Amit. I'll just Indonesian based kind of entities because it's eventually the assets funding which belongs to the Indonesian kind of business. And for that, I can create basically a different tax kind of asset because we do get any of those tax benefits for a period of time in Indonesia or the recipient sort of country. It happened in Q1 of last fiscal year, Amit, and it also happened in Q1 of this fiscal year. Sure. Thanks a lot. Thank you very much. Next question is from Abinish Roy from Middle East Financial Service. Please go ahead. A few follow-up questions. One is how has been the mix in Itay? You mentioned India mix overall margins were impacted. But within Itay, has oil grown faster? Has the lower end of Itay grown faster? And is that the reason why rural is also doing much better? Yes. So I think if you look at our format, like, Subnish, with the HRI categories, it is very strong growth in burning format as well as in electrics. Aerosol is actually in 2 halves and in the Mercator part of Aerosol did quite well. We had significant Aerosol supply chain challenges in which is part of Aerosol 6Q, 2, which sort of struggle is just because of back end supply chain issues, but those have got results and we have seen, I mean, again, meaningful growth coming in that part of portfolio also or kind of past 20 to 40 days now? So, is the HI margin down y o y? I would say, yes. I mean, in quarter 1, yes, because of adverse format mix, I mean, which we had in house of restricted category. That to me, I mean, gets more than corrected now in the coming quarter. And also one of the reasons why we will keep it on gross margin declined with the quarter gross margins. Hi. Second question is on subject to India, Indonesia. You are seeing very good growth in Yes. I mean it's a dynamic, I mean, to begin with and there are different models kind of purely insisting around safety and hybrid ones actually, right? I mean, you have historically shared this that none of our categories adding soup and in our very digital intensive, right? It's an extent even in terms of scaling up or having new launches, assuming for the moment that we are in sourcing it, we do not expect any meaningful kind of capital expenditure, whether it be India or Indonesia, I mean, in terms of the year as well as the year thereafter. My last question is to Mr. Vaas. So multinational companies are exiting the fairness, not specifically the proposition, but obviously, Fair and Lovely and all those. So you do have a scope called Fairglow. I do see that on Amazon selling. It is not a poker brand. I understand that. But when we see features in the sector, would you scale up because of the aggression, maybe not just in full payment simply in the longer term? No, we wouldn't. Actually, we didn't invest in clients at low or we moved away from that plan for the very reason that other companies are doing that now. We had done it a while ago. And actually, even for the it's a miniscule brand, we're actually sort of changing the name. To taking the even on the minuscule brand that it is changing the name from there to something else. So, no, we don't want to take advantage of the situation. There are other things. It's the right thing for the consumer for us. All consumer product companies not to be doing this. Okay. That was quite helpful. Thank you. Thanks, sir. Thank you very much. Next participant is Girish Kureshi from Syntron Broking Limited. Please go ahead. Hi team. Thanks for the opportunity. And it's a phenomenal growth which we have seen in, sorry, insecticides. Would you be able to share this growth is more of a pipeline filling or ahead of season loading with a lot of promotions? Or it is a natural demand which has come up in this quarter? Yes, I think we're happy to report that it is natural demand, it is one of the other things. Frankly, in the like Sameer sort of mentioned in aerosols and stuff, we didn't have enough supply earlier on in the quarter. So there is a high consumer demand. People do not want to get sick and they want to protect themselves. Sameer, do you want to add something? Yes. Hi, Suresh. And just to add in further what Nisha mentioned, the pressure I did even for the industry in the India business, primary and secondary sales emerged largely. So there has been absolutely no change, I mean, in a way between primaries and secondary, Kumar and in post quarter, yes, it has been all sort of consumer kind of demand consumption there. So, Sameer, if I understand correctly, the rural is driven by the working format and urban is more of an electric format which is driving across this kind of growth. That's right. So as I mentioned earlier, we did very strong growth both in electric as well as kind of burning format, obviously, let's see much pick and choose between both formats. Rural, I would say it's also alongside kind of warning format upgradation play, right? I mean, consumers do sort of upgrade from Intensix, perhaps, coils and then gradually come all through kind of electric right over a period of time. So that's the other growth vector also, I mean, which is very, very evident. I think one of the things, obviously, the penetration of liquid inside the electric is much, much lower than the overall category. And obviously, it would be lowest in sort of rural. And I think one other thing we need to think about is how is electrification also changed in India over the years? In boarding format, whichever ones we are the main reason to people's upgradation is, obviously, electric are more put down price, although on a per night basis, they will quite economical if people do want to avoid smoke, correct? So there is a strong sort of oxidation story there and we definitely there is a long run-in rural India. Yes. Thank you, Nis. My related question on this, if we have a value growth of 67%, how large would be a volume growth in this in HHI? I think for us there is not too much to choose in the last quarter, Shirish, in terms of value and volume. I think again value and volume growth could largely be more of the same. Okay. One question on HI business, Suneetha. What is the penetration level and what is the level we see in terms of penetration growth in India versus Indonesia? And if you can specifically, what is the financial level? This is Pratish. I am going to give you the exact numbers right now here, but I think obviously rural sanitation is behind urban penetration. And then say something like liquid digitization in in Northern India would be better than what it is in rural India. So our business has always been on this oil oxidation sort of business. I think Chris having this new liquid vaporizer in our portfolio was much needed, I think the efficacy asked from consumers has been going up. They are actually saying we have more of a product problem, the teachers are getting to be more sort of resistant. So I think this highly efficacious LV product will sort of let us drive penetration. Any thoughts on Indonesia? Indonesia again is it's a similar story that aerosol penetration would be sort of behind coil penetration. So it's always an oxidation story. And I think in these markets, still value for money sort of really matter. So while you upgrade consumers, you still need to give it to them at affordable prices to be what we're doing. Actually what we're seeing, electric now in Indonesia is growing very strongly. So that's also a very good opportunity for us. Okay. My last question on the new products. So not this 1 or 2 quarters. So where do you see these new products and you may have done a phenomenal work on this. So where do you see that new products maybe after 3, 4, 5 years in terms of size and scale? Which ones are you referring to? Nature or Yes, nature. I think we see these as extremely big sort of opportunity, right? And this these are either sort of value for money, high on sustainability, they have a good margin to us. So we are only clear that there is a very large opportunity to build them out. Okay. All right. And I wish you all the best. Thank you. Thank you. Thank you very much. Next question is from Parthiv Bhatanji from Indian Fluent. Please go ahead. Hi. Just a follow-up from me. Sameer, you mentioned that the primary and secondary for this quarter is the same. So if that is so, it means that at the end of March, was your pipeline normal? And if it was normal, then what was the reason that Q4 saw sales decline? I think Q4 was mentioned, if I get it kind of correct, we had primary decline of around 17% to 18% and secondary decline was 12.14%. I think 12%, 14%. I think if you look at our kind of distributor inventory, I would say it is relatively on the lower side, especially as of sort of June end compared to at least what it has been over past sort of few years. So I think the way to also look at kind of comparing quarters is that you are kind of looking towards the seasonality, kind of terms of distributor stock especially because of the supply chain disruptions, Bakken and Skel would be one of the sort of distributor stock as much low as we can, which is what we did in the June end. And if you sense that, I mean, the supply chain is perhaps going to be disrupted again, we will kind of be again very dynamic in terms of ensuring that there is no eventual kind of sales loss, whether it be services to the channel partners or even consumers. Sameer, March obviously was a little lower than normal in terms of the distributor inventory and you are saying that June is continuing at that low level. So is it that you are comfortable with this level and this is like a permanent cut in the distributor days? Or is it that you haven't had a chance to fill in the pipeline and therefore in July, August or somewhere in those months, you will actually see some amount of distributor inventory fill in? Well, I think for us, I mean distributor inventory will be more driven by keeping supply chain disruptions, especially if that's move up from June and sort of level, right? That's going to be the single largest driver for distributed inventory based on the June level, the kind of move up from June. As I told you, I mean, the distributor level, I mean, in June was relatively on the lower side compared to the averages in the last kind of 18 to 24 months per se. Understood, Sameer. I'm just saying that a lot of people are taking opportunity of this kind of disruption to sort of relook at their entire business model. And if they believe that it is possible to sort of do business at lower inventory levels, they are saying, okay, we do not want to fill in the pipeline anymore. Whatever cut has happened, we are comfortable with that level. So I'm just asking, are you comfortable with the June level? Or do you plan to sort of take it back to a more normalized level which is where it's recorded? No, at this point in time, we are quite confident. I mean, the June, we are keeping room for distributed stockholders. I mean, there isn't really much input ROI for our channel partners, front end. Right. And one last small sub point on this that while for the overall India business, the primary and secondary were equal, was it different for any of the main categories? Yes, I think there would have been some mismatches across categories, but I would say nothing through kind of meaningfully different currency. I mean, you are across the categories. Okay, I mean, it would not be sort of Thank you very much. Next question is from Sangeeta Purushottam from Cogito Advisors. Please go ahead. Yes, hi. Good evening and thanks for taking my question. I was hoping you could give a little bit more color in terms of how you expect Yes. Hi, Sanit. I think to begin with, as Hritha was kind of mentioning earlier, execution is going to be the key sort of focus area, right? And also our thought our thought process is to drive your gradual returns, again with on the sales growth. And the drivers for that would be market initiatives, select launches. I think also one other thing which we should kind of remember and that's something which is paying out in June July, it is a significant competitive advantage, especially in dry hair portfolio for us, multiple up to 10 markets, right, because the competition over here is more of kind of import and kind of sales in the market competition is not really at least a part of it. And where that bone especially on supply chain is very, very destructive and we are seeing that getting played out especially if you look at June wherein the performance is nearly flattish on sales as well as in July when the performance was quite kind of robust to begin with. It is the core of how do we play this over a period of time, so execution to begin with, go to market initiatives, kind of launches, scale up of kind of net hair put scale up of housing and 50,000,000 to an ex sort of pivot. And that's the way we are. And again, very high control on costs. These are the 4 or 5 kind of drivers, which we are sort of working on. And that should result, I mean, at least what we feel in terms of gradual recovery in this Africa U. S. Business for rest of the year and make it a strong way for us to kind of take the growth through the next leg over next kind of few years. I chain of your competitors who are importing products has actually helped you because your supply chain has been relatively intact. So has that helped you gain share? That's one question. And the second thing is you're talking a lot about these execution challenges. This has been in the portfolio for a while. So what exactly have been the exceptional challenges and why has it taken so long to fix them? Yes, I think to begin with, I mean, on your first question, we do have kind of on ground manufacturing in the centers that compared to a lot of our competition with sort of imports and that kind of is a significant contribution advantage which is playing to our keyword at this point I think execution is basically basic. I mean, to sort of begin with, it's not that we are discovering it here and now we have been. I mean, in this particular sort of past kind of period also. But there is a renewed focus and more so kind of very kind of precise the do's and do's in terms of how do we go at executing a lot of this kind of packaging as well as medium term strategy, which we are sort of starting out on, Gautam, whether it be go to market initiatives, whether it be within go to market, say, channel kind of prioritization, feet on ground and start leveraging technology and stuff like that or whether it be even launches, how do we go ahead with some of the launches, pricing and the margin profile of it. So, it's all that we are sort of kind of beating in and sort of making it happen kind of on ground rather than just being extremely receptive, I mean, to each of those sort of local countries? So, Am I just trying to link a more before and an after picture? I mean, many of the things you're talking about should be like a normal part of running a consumer business and I'm sure you're doing a lot of this in India, in Indonesia and the other markets where you've been successful. So we're still not getting a handle on what were the challenges. Was it a leadership challenge? Was it an issue of not having the right people in place? What exactly was it that went wrong? And what is it that's going to be fixed now? Yes, I can hear you. I thought Nisa wanted to sort of come in, but I think she has just got sort of disconnected. So let me just take the questions and get that for you. So I think it's a mix of kind of many things, I mean, which we are sort of working upon having realized experience of past at least in a few years, right, from whether it be kind of sourcing to kind of capturing efficiency to even go to market. But again, it's not like everything in one country or sort of what What are you doing? Am I in or no? Yes, I'm in now? Okay. Sorry. Sorry. Can I come in? Sorry. I've been trying to get back on this. So I think the execution challenges have happened in the Africa business over the last couple of years. I think so far execution challenges even in India have been over the last 18 months also and we're seeing a turnaround on that. And you're obviously obviously running a company when we're not sending rockets to the moon. So it is some sort of basic stuff that we've not got sort of fully, right? And I can't it's a mixture of leadership, it's a mixture of getting your DTM, right? So I think there's a lot of pieces to that. I mean that we have a new CEO in Dinesh Gordon who is very experienced on the Africa sort of market. So she tells you via commitment to the geography and what we should do. So I don't think look, when I've been sharing the bad news and stuff, the bad news is not in there for 10 years. Bad news is from the last sort of 18 months to a couple of years, and we're pulling up our socks, rolling our sleeves and getting it done. And I just to the best of my capabilities or this company's capabilities, I'm going to now say, oh, you've growth, make sure we're brutally honest with ourselves, make sure we're brutally honest with ourselves about and it's not like this illegal incentive did happen to us. It is a difficult sort of situation that perhaps from an institution point of view, we hadn't pushed back hard enough. We hadn't brought our full muscle to it. So that's what we really are trying to do at this time. So I think some of it might be leadership, some of it might be other things. But I think it's also our attitude at this time is to say we don't want to externalize things because they're always external issues, including a global pandemic. But we are a strong company. We have 2 categories that consumer wants and let's go for growth. And once you've set the business right, would you be introducing the HII products in Africa post that or is that going to be in parallel? It's going to happen. It's happening right now. I told like I said, we just dropped those slides because we didn't really want to fully tell us what exactly we were doing. We're at it as we speak. Okay, great. Thank you. You're welcome. Thank you very much. Next question is from Sushil Kapoor from Antimbus Advisors. Please go ahead. Hi, team. Thanks for the opportunity. Most of my questions have been answered. Just one, which is slightly medium to long term. So I understand that as an organization today, our focus is firmly on driving operational efficiencies and on earnings growth. And you got this message in the annual report and we've been hearing through yourself since Sameer. So that's very encouraging. And on the earning growth, hopefully, using our better innovation engine that kind of offers or formulates the products that benefits the bottom of the pyramid, which is the where the majority of our consumers are internationally and give them those products, superior quality products at a price point, which is very appealing. So that gives our business some stickiness. But my question mainly is around the return on capital on a console basis. Can it revert back to where it used to be or close to that before we started diversifying internationally, so driving more earnings growth and making the balance sheet leaner perhaps by sort of faster deleveraging. So what aspirational target do you have maybe on a 5 year basis for this consolidated ROCE? Sure. So I think to begin with, we are quite focused in terms of driving ROCE, no targets to be honest at this point in time. Of course, ROC as what we see today, which was around sort of 'nineteen is also decreasing because of the capital incurred or the capital which you invested, right, and then in buying out the business. Operating RoTE would be close to around 60% ks plus. I think what is important to keep into is the Evers, which is sort of the employee, whether it be capital expenditure or working capital, which we are kind of pushing towards in terms of improving and as can we see also in our results over past kind of couple of years. So as well as margins, right, I mean margin launches driven by off year, but also margins which are set up more sustainable and driven by kind of sales growth fewer. So that is absolutely a big factor in terms of driving kind of risk fees, kind of risk fees kind of up, putting upon some of this issuance as well as reduction in working capital. That's helpful, Sameer. Just to clarify, so directionally, our aim is to drive the margins. Of course, we, of course, cannot quantify what that number would be except 2025. But given the fact that we accept the mistakes and we are putting in place the remediation plan and the message is very clear even on the annual report in several places, And directionally, I think some 2025, it should be a much better than leaner business. Is that the message we can be keeping away? Absolutely. Thank you so much and all be very best. Thank you very much. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing comments. Thank you all for taking the time out. In case of any imminent questions or innovation inputs, please feel free to refer to anyone of us within the Innovation team. Thank you so much. Yes, a big thank you for being with us on the call today. And we look forward to continuing talking to you and please stay safe and stay healthy.