Bajaj Consumer Care Limited (533229) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Bajaj Consumer Q4 FY '21 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manoj Menon from ICICI Securities. Thank you, and over to you, sir.

Hi, everyone. Good morning, good afternoon, good evening, depending on which part of the world you are dialing in from. At ISEC, it's our absolute pleasure to host the management of Bajaj Consumer Care for the Fourth FY '21 results conference call. The company is represented by Mr. Jaideep Nandi, Managing Director; Mr. Dilip Kumar Maloo, Chief Financial Officer; Mr. Rohit Saraogi, AVP, Finance; Mr. Kushal Maheshwari, Head Treasury and IR. Before I pass on to the management, I just wanted to take 30 seconds to quickly comment about our views on Bajaj Consumer at ISEC and what do we think for the company in the [indiscernible] term. In our view, Bajaj Consumer is on an improving trajectory. It appears to be a clear case of the trapped value story and not really a value trap, which it was probably perceived as in the last few years. We like the renewed trust on product relaunches, new SKUs, trust on digital, improving brand visibility trust on e-commerce. So when I think about it as an analyst, there are multiple actions on sales trend, marketing trend, HR trend, even in the visible presentation, there are slides on Bajaj being a great place to work, et cetera. So probably start without further ado, over to the team for the presentation and the Q&A.

Good morning, everyone, and as Manoj said, good afternoon, good evening to others, from the rest of the world. So firstly, thank you, Manoj, for hosting this call, and a warm welcome to all of you for attending our conference call. As Manoj said, I'm joined by Mr. Maloo, our CFO; Rohit Saraogi, our Assistant Vice President, Finance. Kushal, who is our Head of Treasury and Investor Relations, as well as some of my colleagues from our management committee. I hope all of you are and your families are seeing I'm taking due care and precautions. I mean, this is the second wave of the pandemic that is sweeping over India now. While we have got used to this idea of working from home in the last 1 year, this is the very first time we are attending this call from the comfort and safety of our homes. So still comfort in attended [ till ] now. So let me take you through the quarter 4 performance and the full year highlights of the company before we open the house for questions. So Q4 was a robust quarter, continuing its momentum from Q3 with improved economic growth and positivity around the COVID vaccination rollout for the country. Rural continued its growth momentum, whereas urban started showing signs of recovery. On the other hand, recent inflation in global commodity prices after a benign run in H1 has started posing pressure margins across most industries, not only in consumer but other industries as well. The company reported a sales turnover of INR 241.9 crores for the quarter with a growth of 43.5% over the same quarter of the previous year, albeit on a lower base. This is very similar to what we had delivered in the quarter 3. The EBITDA for the quarter was at INR 62.14 crores against INR 25 crores in quarter 4 last year. And the margin for the quarter was at 25.68%. The PAT for the company was at INR 53.9 crores against INR 24.5 crores against previous year's quarter 4. The company has delivered a healthy growth of 9.8% top line growth in FY 2021 and a PAT of INR 223.57 crores with a growth of 17.33% over the previous year. The Board of Directors of the company has proposed a final dividend of INR 4 per share, subject to approval by the shareholders. This is in the back of an interim dividend of INR 6 per share declared in February this year. The gross margin of the company was at 60.6% as against 63.46% sequentially in Q3 2021 and 67% in Q4 2019 -- '20. That is a year back. The drop in gross margin is led mainly by increase in prices of key raw materials and packing materials. And as we'll discuss, it is not only on LLP and RMO, but across the full range of raw materials and package meters where the price increase have been seen, many for the first time. Also because of the change in product mix where we have higher sales for Bajaj Amla Hair Oil. And also, we have taken a provision for our nonmoving raw materials at the year-end as a conservative measure, whatever nonmoving raw materials and packing material inventory we had of sanitizers as a prudent accounting practice, we have taken a provision for that as well. We have taken price increases in the months of February and March to the effect of about 2.5% overall to partially offset the impact of inflation. However the full impact of the price increase is not yet seen, but will be visible in the coming quarters. We are closely monitoring the pricing of [ free ] raw materials as well as the competitive landscape going forward, we may take appropriate pricing decisions again and optimize sales promotion expenses is required to protect our margins. Advertising costs at this stage is also not being contemplated to be lowered at this stage. The hair oil category as per recent data continued to recover with a value growth of 0.9% and a volume growth of 3% in Jan, Feb, 2021. The volume growth continues to outpace value growth as we still see the value for money brands leading the category growth. The rural markets continued their momentum with a 6% growth as [ per recent, ] while urban markets have recovered sequentially with a decline of 3% in Jan, Feb. As stated in the last quarter, we still feel that the [indiscernible] numbers are a little under-indexed for the hair oils market. As for Nielsen data, there has been a sequential increase in the market share for BCCL with a market share of 11.1% in Jan, Feb '21 and February '21, MAT market share of 10.4% in total hair oil as against 10.1% of MAT March 2020. With both the ADHO as well as AHO, both our brands gaining share, both in their respective categories as well as in total hair oils. During the year, FY '21, the company delivered a strong single-digit growth in hair oil as well, led by rural growth with some investments in driving distribution reaching closer to the consumer. Urban retail initiatives, which have been started in select metros from Q3, have helped recover business in some metro cities while van sales continue to power the growth in rural markets. Currently, we are working to optimize our van routes to drive efficiency and effectiveness. Urban business grew by 24% in Q4, albeit on a faster subdue base, with retails leading the growth. Wholesale continues to lag, as larger wholesalers in metro cities are yet to recover completely. Rural, on the other hand, continued its growth momentum with an over 60% growth in the quarter and 28% for the year. As for Nielsen, our products are now available in 43.6 lakh retail outlets as against 40 lakh retail outlets last year, showing an increase in distribution for the company. Clearly, the van initiatives to strengthen rural outreach combined with the better product assortment is helping build distribution for the company. Modern trade continued its recovery in Q4 sequentially with good traction seen around public and made we have dialed up our industries at various national teams we can increase visibility of our product, other brands as well, Zero Grey, Cool Almond Drops, Brahmi Amla to have increased shelf space as well as the stock in shopping [indiscernible]. E-commerce continues to show good progress with a 4x growth during the quarter on the back of [indiscernible] physical marketing and content optimization of e-commerce platforms. We have been aggressively participating in big events on Amazon, Flipkart, Grocers, et cetera, to increase our digital footprint. We are also revamping our e-commerce stream as well, to develop our e-commerce portfolio to fulfill our aspirations in this business. International business has grown by 10.2% for the year. The business still remains relatively small, and the focus of the company would be to remain profitable across various markets where we operate in. During the quarter, we continued to invest in our flagship ADHO brand across all mediums. The new commercial on TV is doing well on message communication and other key parameters of likability, relevance and purchase intent. Digital marketing for ADHO has been continuously dialed up and has been leveraged to reach out to new age consumers through various social platforms, such as YouTube, Facebook, Instagram, and this will continue to dial up further. In Q4, we also restated Bajaj Amla Hair Oil as Bajaj Amla Aloe Vera Hair Oil with improved formulation, adding Aloe Vera with claims of softness and moisturization. The product and packaging has been renovated with superior efficacy and consumer study on softness and moisturization. The product is now available in more than 388,000 outlets across major Amla markets. Currently, the brand is being supported by consumer offers and print media advertising. Bajaj Zero Grey Hair Oil, our digital-first brand, continues to grow in consumer traction and good reviews from the market. Consumers -- with a steady increase in sales in Q4 as well. The brand is supported with social media campaign across platforms to create awareness education and [indiscernible]. We'll continue to invest in our brands while strengthening our innovation capability as well as innovating our existing products while building our future portfolio in the mid to long-term. Investments will continue to be scaled up in digital marketing, while the investments in traditional media will continue as usual. The inflationary trend in key raw materials, LLP and RMO, continued in this quarter. As I said, it has also been seen across all other categories, like packing material costs, due to inflation in polymers and paper. The overall inflation in the material cost in Q4 has been in high single digits, and we expect in Q1, the trend not to soften. We continue to invest in and build our capability in terms of our teams. This is a very important area that we [ see ] for ourselves. While learning and engagement has been significantly dialed up in the year, it is with great pleasure that I want to inform here we have been awarded the Great Place to Work certificate for the third consecutive year with steady improvements on various parameters. Dimensions like trust, credibility, pride have also some significant positive shift in the year, and this will remain a key thrust area for the company going forward. We are working with a renowned consultant to redesign the organizational structure to make it future-ready and also support our business ambitions going forward. During this difficult time for COVID-19 pandemic research, the company continues to support its employees with various policies and initiatives. The situation on the ground is extremely fluid, and we are taking countermeasures to minimize impact of lockdown on our business by ensuring adequacy of stocks across factories, [indiscernible] distribution points by formulating and collaborating with our channel and business partners. In fact, on a daily basis, we are now involved with our [indiscernible] sales force to see where and how lockdowns are impacting and how we can mitigate the issues. At this stage, we will keep reacting to the market conditions tactically while maintaining our mid- to long-term aspirations of delivering sustainable growth through innovation; restaging of brands; improved execution excellence, which is an important area; investing in people and augmenting infrastructure to strength and capability; systems; processes and control. So with that, I end my opening remarks and open the session for questions.

[Operator Instructions] The first question is from the line of Mr. Manoj Menon from ICICI Securities.

Jaideep and team, just I got a couple of clarifications that I'll ask here upfront. So one, one of the important investor feedback has been on dividend over the last 12 months, which I'm pretty happy to see that the [indiscernible] dividend has [indiscernible]. So that's kind of somewhat addressed, I would say. The reason I'm saying somewhat is because there is still a consensus of [indiscernible] that [indiscernible] dividend is good. There is probably still potential to -- for it be a much higher payout. So just wanted to understand the debates or processes, discussions at the board level on putting dividend at this sort of a payout currently.

It's a fair question, Manoj. so let me take that upfront. As we had seen last year, there were lots of questions regarding what has happened to dividend, et cetera, from the INR 3.214 height, we have gone down to INR 2, and I had, I think, multiple times explained as to why and how we have to take those corrective actions. While I'll not say anything about normalcy being resumed, et cetera, if you look at the last 10 years average, the dividend payout has been close to about INR 8, INR 8.5 per year. I mean, you can obviously look at the particular 5 years before last year as a specific block and see that the number is lower than that. But overall, if you look at the last 10 years, the average has been about INR 8, INR 9. Now leaving that aside, the way you see dividend is basically on the cash utilization on the free cash that you have for the company. And so hence, going forward, while as a policy, while we will always have a back-end policy of somewhere about, let's say, [ take rate ] it will be about 1/3 of our dividend being issued of our profits being issued as dividend. You'll always look at what kind of investments you might be wanting to do in the mid to long term, even short-medium to long-term and hence also conserve cash accordingly. So the various investments, I mean, I don't need to go through that, but I still go ahead with it. One is obviously M&A options, which are... [Technical Difficulty]

Sorry, please go ahead.

Hello? Manoj, am I audible?

Yes. Yes.

So continuing from where I was saying, so the way -- basically, the way you look at utilization of cash, one is, obviously, while we have last made the acquisition in 2013, we continue to keep actively looking for these options. And I would still write to retail cash in the books to ensure that at least some part of the investment, if you have to look for an MA, comes out of our own results as -- itself. The other is investments in terms of looking at all the safety environment as well as in terms of general upkeep of our facilities in terms of factory as well as CapEx investments. We are now in the process of looking at our manufacturing footprint, looking at the overall manufacturing footprint to strengthen the overall manufacturing or basics of the company itself. So there will be some investments, which will be staggered over the next maybe 5 years, but that is also somewhere we would like to have cash reserves. The third area is obviously investments in brands, et cetera. While this year, as you would be aware, and I'm sure all of you will be wanting to know what is happening as far as our launches, et cetera, are concerned, and I'll also respond to that. But some cash will also be required for building our brands, et cetera, which will, again, stagger over the period of time. So these 3, 4 areas, anyway, we would like to conserve cash. If you look at this year, we have given about, let's say, INR 147 crores of dividend from a profit about INR 220-odd crores or so. About 2/3 of the profit has already been given as [indiscernible]. So this already is somewhere the benchmark or, the plus/minus very [indiscernible]. So while I cannot give a guidance on what the dividends can be of the future, this is where the new normal would be or plus/minus there, depending upon how each year the cash requirements.

Very clear. Second, one trajectory change in terms of disclosures of -- someone, let's say, have been tracking the company for 10 years. They've observed that the market shares within the [indiscernible]. Now it's -- it appears that the focus is actually on -- the market share at an overall ROI level. So there are basically a significant shift in the [indiscernible] of itself. So what I just want to understand is -- so the stock process is fairly loud and clear in your presentation and the coming [indiscernible] but could we just talk a little bit more about how the internal HR policy, incentive structures, alignments, et cetera, is done? Are you still fulfilling incentive to a segment market share? Or is everything the development [indiscernible] the market share?

So very quickly -- now that you have asked this question, very quickly, I'll just share with you the market share as historically it was short. So for example, the market share as far as MAT March 2020, as far as ADHO in the LHO segment is concerned, light hair oil was about 60.8%. This is Nielsen data. January, February was -- peaked at about 63.7% in the Nielsen data. And the MAT February '21 market share is at 62.1% because it has been consistently, from Q1 onwards right up to Q3, has been going up, it has peaked at about 64%. It's now at 63.7% Jan, Feb, 62.5% this year. So ADHO clearly has gained in the LHO segment and because all the actions that we have taken and seen the growth in the rural as far as ADHO is concerned, and that is what I was alluding to in my Q3 call as well, one of our most happening fact is the kind of growth we have been seeing in ADHO itself. So ADHO in the quarter grew by about 40%, both value and volume in spite of the price increases because the larger packs have done well in ADHO. Obviously, as you can understand, sachets and the INR 10 packs are not as strongly doing across category itself, even for us. So there has been really good growth as far as ADHO in this quarter. Not only in this quarter, overall for the year, if you look at ADHO has now recovered sharply and is a 6% growth overall. So both value as well as volume. So pretty good performance. If you are talking about the incentive structure, yes, we have now redesigned our incentive structure. We have now, as you are aware, we have put up a trade marketing as well as the sales analysis team. So a lot of work has been done tweaking in terms of looking at specific -- rather than we've just -- on overall value and volume, now it is based on a lot of parameters that they need to deliver. Both in terms of the total lines sold in terms of the distribution coverage, in terms of product level sales, the targets that we have for our ADHO, targets we have for Amla, et cetera. So there is in a lot of tweaking, which has been done for the incentive commission of the frontline sales forces.

Very clear, sir. So we've got a long queue. I have actually 1 more question, but I just want to leave the question and say we could move on. You may address during the course of the call. Some thoughts on the international business ramp-up in the medium-term basis will also be really helpful.

Okay. So very quickly, international, as I had said, right, maybe 5 quarters back or 4 quarters back, is clearly an area which is to me a low-hanging fruit. It's a hanging fruit. I don't think it's a low-hanging fruit at this stage. But it's clearly an area which is there at the corner of my mind at all points of time. It's a question of when, it is definitely not a question of whether or not, it's always a question of when. My point is we want to stabilize our India business a little more. Rather than stabilize well in the world, strengthen the India business a little more. And once we have done that, I think international is clearly one of the areas to focus on. So on the midterm, international will be taken, but it's clear the thing is where we can make money. So some of the markets where, traditionally, you don't really make money will not be our focus area. But in the places where we see there is a possibility of both top line and making a decent bottom line, those are the markets we'll be focusing on. So limited focused approach in international, maybe from next year onwards is what you should expect.

We take the next question from the line of Percy Panthaki from IIFL.

Jaideep, congrats on a good set of numbers. My -- I have 2 questions. My first question is on the price increases versus the cost inflation you've seen. So your gross margin is down 700 bps Y-o-Y. If I don't look at Y-o-Y because of whatever high base, et cetera, or no base for gross margin, even if I look at Q4 FY '19, that is 2 years ago, the gross margin is still down about 450 basis points. In context of this, your price increases in February and March have been about 2%, 2.5%. So just wanted to understand the thought process here. Are we saying that the gross margins that we have seen in FY '19 and '20 are clearly not repeatable going ahead, and we are okay to take a sort of material hit to the gross margin, and that will be the new normal. Is that what the thought process is?

Okay. So this is a nuanced question, so it will have some multiple layered answer. So if that's okay with you Percy.

Sure.

So first and foremost, if you look at a very, very broad-based approach, yes, there might be some dilution on the percentage EBITDA, which I've been continuously been alluding to because if we dial up our entire business and ADHO and if our top line keeps growing, which cannot be only filled by ADHO and we start building our portfolio around, not all of them will have the kind of margins that ADHO has. A classic example is...

If I might just interrupt 1 minute just to clarify my question, my question was on gross margin more than the EBITDA margin.

Yes. Yes. So gross margin. I mean, in this particular case, the gross margin itself. So let me revise the -- I mean, the statement remains same except you can replace EBITDA with gross margin. So the kind of gross margins that you make in ADHO, so products like Amla, et cetera, which is obviously a little more competitive, will not make it. The idea is -- that is always, as I said, and this is where EBITDA will come in, is that as long as ADHO gives us a positive EBITDA, which is what we will drive, and then percentage EBITDA will obviously keep climbing up as we -- as the business grows and the cost of sales promotion advertising on the brand itself go down accordingly. So as far as Amla is further concerned, that is the approach. Because if you're trying to build a portfolio over time, then the kind of gross margins that you have seen in ADHO will not be [indiscernible]. If you look at across all FMCG companies, et cetera, we will be at one of the highest gross margins. Now this is all possible if you retain and remain only at one brand. Then whether this brand alone can sustain itself, whether you would want to ringfence this brand with other products, et cetera, is the call that we have taken. And the answer to that, we have taken is yes, we need to ringfence. ADHO will remain a flagship brand for anytime foreseeable future, but we would also want to put some more products in the portfolio. As I've said, we would like to build this INR 100 crores brands over the period of 25 years, some more brands, which may or may not have that kind of margins, so to say. Having said that, this particular quarter has been a little peculiar. So really speaking, taking this particular quarter out and seeing whether this is a long-term trend, I would like to think that no because if you think -- if you see -- I mean, while we are one of the first ones in the FMCG companies to come out with our results, I would expect the kind of inflation that we have seen in terms of raw material prices versus the price increases that I see in the marketplace. I mean, in the almond category, obviously, we are the only one we have taken price into. And across most categories other than coconut, et cetera, there is no long broad-based price increases that we have seen from any of the hair oils, clear, right? So managing the -- and I would like to assume that the kind of inflation that we have seen from other companies would see a similar kind of a gross margin, while product assortments, et cetera, may be different, but they would also be seeing similar pressure on their gross margin. So obviously, we'll monitor the competitive landscape. We have taken a price increase, definitely not as much as raw material pricing as has happened in the quarter. We are even contemplating and seeing how we want to see it. And then in this quarter, we might take a price increase, we have not yet decided. So maybe we will. So we'll try and mitigate some of our effects, but we will not be passing on the complete impact of the price increases that we have seen in terms of raw material and packing material prices onto the marketplace because reversal is not so easy in a, essentially, kind of a setup. I mean I can't increase the price and then go back and reduce the price of [indiscernible]. Possible, but not something that's desirable. So hence, you might see some event that has happened in Q4 as well as in Q1, but I think by Q2, et cetera, you should see the normalizing of the gross margin.

Understood, sir. Second question is on the top line itself. See, from a COVID point of view, FY -- out of the four quarter of FY '21, Q4 has been the most normal. And actually, as we go into Q1 of FY '22, et cetera, it is again deteriorating. So Q4 is the best quarter if you look at the last 3, 4 quarters as well as the next couple of quarters. And in this relatively sort of good quarter, although the Y-o-Y growth is very robust, on a 2-year CAGR, we have basically grown at just around 1% or so. So just wanted to understand, you said your market shares are increasing. So that means actually that the hair oil category on a 2-year CAGR has not really seen any material growth. And if that is the case, how do we think about modeling in our next year numbers? I mean, in the best quarter, if we have seen close to a 0% growth and things are deteriorating. Is that really a big risk to the FY '22 top line growth?

Okay. So again, nuanced question. So first and foremost, we have not set the market share growth. I mean, these are Nielsen data. So I mean, they are under indexed, as I said, but these are what Nielsen is reporting. Second thing is, I think we'll have to look at the year that has gone by in a little more structured manner, so to say. For example, Q3, if we look at, 2 things happened in Q3 this year. So one thing that happened in Q3 was that the Diwali fell in November, so the sale [indiscernible] and many other places where we have some sites in Diwali happened in the month of October this year. So that's why you have seen a 20% growth in October this year on -- while last year, October was also -- October, December, it was also a renewed space, but we had grown by 20% in Q3. So that is one part. And the other that happened was Q1, Q2, there was a lag of demand. I don't think there is enough fulfillment that had happened both our distributors as well as our resellers, et cetera. So a bit of pipeline also happened in Q3 this year. If you compare to Q3, to Q4, I think the sales have been pretty robust. Now if you look at the 2019, 8 quarters back, I think there were some specific incentives that we have taken. I think that we had mentioned that also, they're specific program that we have taken to boost our sales in the quarter itself. So we have taken a huge spike in quarter 4 of 2019 itself as well as there was all these Nomarks et cetera, that we have also taken up in the -- in which we had to take some of it back in Q1 of 2019/'20, 2000 -- Yes, that's right '19/'20. So there was some impact in Q4 itself. So it might be a little more balance if you were to not look at a specific quarter and compare, but maybe look at the trends for an overall period and see how the numbers are there. So this is how I would like to take this performance of this particular Q4. So Q4 may not have been the best quarter as far as sales is concerned in this particular way. I -- In my mind, Q3 was definitely the best quarter. That's what I think. So this is one side of it. The other is going forward is far as '21, '22 is concerned, obviously, we have very, very robust plan such as '21, '22 is concerned. Now all of it is being revisited and revised based on what we see. So at this stage, if you say how do we model for '21, '22 really speaking it's a difficult question to answer. Because we don't know -- we have seen pretty decent sales starting in the month of April. So it was going very, very strong. And in the last 7 days, we have been seeing spreading disturbances in Madhya Pradesh, in Chhattisgarh, in Delhi now, in Rajasthan it started, Maharashtra which was also there, UP 5 cities, whether they'll go under lockdown or not. And every day we are revisiting. So really speaking, modeling based on what is going to be expected, et cetera. We don't know. We had originally planned to have double-digit growth, yes, but now we'll have to see how it works out.

Got you. Sir, just a more subquestion for Q4. Do we have secondary sales growth higher than primary or roughly, they are in line?

No, secondary sales growth -- In fact, if you look at primary and secondary, both are actually similar. So that's not the problem. But no -- but there is, again, in terms of base correction. So last year, for example, primary for us was very, very low, right? But secondary was still okay. Secondary was still okay. So secondary growth as such is lower, but primary and secondary is same for this year. So there is no buildup of inventory as of now. In fact, we have specifically ensured consciously that the year-end we don't build up in it.

The next question is from the line of Prakash Kapadia from Anived Portfolio Managers.

I have 2 questions. If we try to [indiscernible] PAT this year at around INR 83 crores. If you could give us some sense on the variable component in this? And on a going forward basis, Jaideep, is it fair to assume this will be more or less in line with the top line growth for 2020 and beyond? And secondly, you did mention about rural demand in your opening remarks. So given what has happened in the last few weeks, the second wave is spread across India, unlike metro cities earlier. So currently, what is happening on the rural side because that has been a big growth driver last year. So are we seeing some demand tapering off, are we seeing deferment of purchases? Are we seeing down trading? Give some color on these 2 points.

Okay. So let's look at the employee cost first. Now as far as employee costs are concerned, It's been looked at in 2, 3 areas. One is in terms of, I think the corrections we wanted to do as far as our management team is concerned, I think we have done most of it. There might be a few more corrections which are required, but most of the corrections have been done as far as the management team is concerned, we wanted to have it a little more robust team as such. On the other hand, we have also -- we are now engaged with one of the leading consultants looking at entire reorganization of the structure, looking at manpower capability cost-wise, the kind of output that we deliver. We are doing a complete benchmarking against all companies, et cetera. And In the next 2, 3 months, we might do some restructuring based on that as well, which will basically push our costs a little downward in terms of more of rationalization of cost. So we would like to invest only in the areas where as far as manpower is concerned, where we are seeing growth, et cetera. Now looking at the second part of your question, which is basically what are we doing about variable pay and fixed pay? Yes, we are now continuously dialing up the variable pay component of each employee. And grade wise, we are making it different. As you go senior right up to my level, the variable pay itself goes far higher based on the year's performance. while the fixed pay remains much more muted. So it is graded. And for the senior management, senior management team, there is a far more emphasis on the performance of the company and between as far as the pay structure is concerned. So this is what we are doing. So going forward, my thought would be that going forward, we would like to -- even with inflation, that is basically increments that we'll keep rolling out year-on-year, I would like to see the employee cost as a trend going down on a continued basis, mainly supported by the sales being higher in terms of percentage than the employee cost. That should be the direction that we want to take. And that's a target that we have taken for ourself, and I think that is recently achieved. I don't know what will happen this year, we'll have to see how the year pans out. But I still am confident that we should be able to do it even in the year '21, '22. So this is as far as the employee cost part is concerned. As far as the rural markets are concerned, now frankly, this is too early to say. As of now, even in the beginning of April, rural continued to boom and has been doing well. Even today, if you ask me exactly like last year where the lockdowns, et cetera, happen, the impact of the lockdown is still lower in the rural. So while we are hearing all these news, et cetera, about rural also being impacted, people are getting infected there. But I think the rural markets are still pretty much open. We are still -- I mean, like yesterday, when we were talking to all SOs, like our sales head was talking to all the SOs, and he was briefing me most of the rural market still is not struggling as far as whether it be in the van sales or whether the ISR's has been into the marketplace, not really. So we still don't see that impact. But yes, we'll have to keep monitoring it. It's very difficult to say what will happen 15 days later.

The next question is from the line of Tejash Shah from Spark Capital.

Dilip, you spoke about gross margin in the beginning in detail and you mentioned about some write-off and sanitizer inventory. So Would it be possible to share that number in quantum? What was that number?

So in terms of quantum, if you look at sanitizers, we have written off about a percentage point. So about -- that is what -- so it is not a write-off. We have just taken a provision on that. is basically all the packing material, et cetera, that you had accumulated in the month of May and June because we were over aggressive as far as sanitizer, and I think most companies were. So that time, whatever we had left up, we have thought that it is prudent that we take a provision on the books in case later, it gets reversed so weak.

Okay. So percentage point in terms of gross margin is because of that.

As far as the sanitizer inventory write-off is concerned, also, we have done a little bit of a whatever balance sale that we had, we had done a better deal of that sanitizer. So that has also impacted a bit on the margin, but that will less than a percentage point. So these are the 2 things that I think...

Sure. Second, now when we look back our history over last 10 years, when we were taking ourselves versus all the light hair oil companies, our pricing power was very dominant because we used to compare ourselves with all the relatively premium hair oil companies. Now when we are -- we have redefined our target audience as a broader hair oil market, we have to compete with the raw material like Copra also and Amla also, which are relatively low-priced products also. So does it mean that now that the kind of pricing power that we witnessed earlier to protect gross margin may not be the same? And in that line, how would you like to play this whole gross margin and EBITDA margin dynamics because you have been vocal about that It has been relatively higher versus FMCG standards. So you have opportunities and considering the long pipeline of products that we have talked about in the past, you will like to support. So where do we see the margin profile evolving because of all these factors from hereon?

Okay. So Tejash, again, 2 parts to the answer. The first part is ADHO in isolation. Now ADHO in isolation will -- the only thing that we have been dialing up is continuously the premiumness of the brand. So if you look at our entire approach this year, is basically to look at the new gen customers and look at how ADHO can be priced at absolute the premium. So here, if you see compared to the compact rates in the ADHO category, in the LHO and whatever Almond category, et cetera, we are just keeping on pricing out further and further up. So our premiumness on ADHO is going further and further. as we take price increases as we go forward. So really speaking, ADHO is not where we would look at margin dilution at all. So the way that we are looking at is in the portfolio play that we will do there, overall, if you look at the margins, et cetera, obviously, because it will not have the kind of margins that ADHO has. It will have some reduction in gross margins, but that should end up. But our overall gross margin, which is higher as well as an EBITDA, which is much higher as an absolute, and that is what we have been focusing. So ADHO's premiumness will not be dialed down. It is in fact being dialed up. So all our investments -- so that's why I was saying our money in terms of advertising and whatever brand building as far as ADHO is concerned, that is not going to be complemented. That's the large cost that we would like to cut.

Sure. But any visibility or guidance on margins?

As far as the full year quarter -- as far as Q1 is concerned, I think the margin pressure will remain. As you are aware, there has been continuous -- the inflationary trend on raw material has not really subsided and this is something -- so LLP has not subsided. RMO is at its all-time high, PAT is high, polymers are high -- polymers are higher as a result of that is high, paper is high, so correlated cartons, et cetera, high. So every cost is absolutely at its peak, and we still don't see downward movement. So as I said, we will be contemplating a price increase, but we're also keeping [indiscernible] we are also looking at tough competition is improving and where they are taking their increase. But most likely, you will see a pricing increase higher. So quarter 1, you will see pressure by FY '21, '22, I hope this will normalize and should be back to normal level.

Sure. So my question was exactly same. So when you say normal level, it means 30%, it means 28%. So where would you like business to upgrade from here on, considering the diversification agenda you have?

If you look at -- I would like to benchmark myself against most of the other top FMCG players and keep our EBITDA margins a little higher than that. So as you see, if I to -- without moving days, I look at EBITDA margins of '20, '22 and '23 of 2 of my competition and somebody who is much larger, we would like to keep it at about that 25% kind of an EBITDA margin going forward with launches of brands and with sales growth, et cetera. So obviously, it comes with [ riders ]. So with those kind of things -- So as I said, my focus is to keep it at 25% plus hovering between 25% to 28%, but more focus is to ensure that EBITDA as an absolute keeps expanding. So that will be the focus. That's where we will be focusing on. So keeping the EBITDA on a positive on a continuous basis for that whatever needs to be done.

Very helpful. And last one, Nomarks is missing from discussion today. So any plan there?

Okay. So this is a subject we have kept on discussing in and on within the company. Now there are only 2 options as far as Nomarks is concerned, I dial it up to prove what we have done about 2 years back or basically look at it. At this stage, exit doesn't make too much of a sense because there's not too much of money to be made out of the brand. They're not too many takers of the brand, and we are not in a desperate hurry to exit. So we have revamped 1 or 2 products in that category like the clean, et cetera. But beyond that, there is not too much that we are focusing on Nomarks, We'll keep it as business as usual, not too much of focus as far as Nomarks itself is concerned. There are a lot of other products that we wanted to launch in the e-commerce pipeline and some of in the GT channel itself. That's where we'll keep focus on. This does not [indiscernible]

The next question is from the line of Aditya Kondawar from JST Investment.

So last quarter, you said that in the next 2, 3 quarters, we are going to see more of e-commerce and digital-only brands. So I just wanted color on the kind of products or the product extensions that you're looking at? And number two, what is the e-commerce contribution to the total revenue?

So e-commerce has now got up to about 3% of our turnover. So it continues to be going up on a quarter-to-quarter basis. And that's a very good sign because this is somewhere we would like to go to about 5% in as quick time as possible and maybe take it even beyond if we can. So that's them aim, and I think e-commerce has been doing pretty well. ADHO itself has been doing very well on the e-commerce platform as is Zero Grey, which has started showing now some traction and so on and so forth. So really speaking, overall, we are well placed at the B2. And very clear, our focus is on the B2C only, not so much on the B2B part of the e-commerce while it adds up to the numbers, it really is not e-commerce away, if you would want to look at e-commerce, right. So there is a solidary part to it as well. So this is e-commerce. As far as the launches are concerned, both e-commerce as well as our GT launches. So the product extension, which is basically Almond Drop extensions, et cetera, there is a remote for the GT channel. and e-commerce, which is the premium end. So our branding work is over, the products are all ready, now it's basically an opportune time. Because these are high-end portfolios, these are not essential. We would also monitor how the pandemic goes. We had originally said that it will be end Q2, stroke beginning Q3 when we would like to launch these products. Our back-end work continues, whether be it in terms of designing the products, naming them, branding them, getting their packing material, et cetera, all to standardize. Everything is already there, where we make it, what kind of formulation, what kind of things. Most of it is already the back-end work continues without interruption. It's just that when we would launch, we will also tactically play it because not being essential, we would like to launch it when we think there is the best time to launching products. So whether it is Q3, whether it is Q2 end or whether it gets pushed by a few months is something that we will take call later to -- closer to the date rather than now.

The next question is from Shirish Pardeshi from Centrum Capital.

Yes. Heartly congratulations from my side. I just have few questions. The first question is that on FY '21, the full year growth is in the range of about 9.5%, 9.8% in the precise. Could you please break up what is the price and the volume overall?

So if you look at the volume growth, again, because our assortments have quite a bit changed. the volume growth are quite different. So our value growth rate is 9.8% on basic sales on sales of goods that is, while our volume growth is close to about 15%, 1-5. So that's what that has come up. And that is mainly because of 2 product categories. One is obviously the Amla, which has got scaled up. The other is also sanitizers, which is a lower price at we sell -- sold. So these 2 products actually help grow the growth of volume more than that. As I said, Almond Drop had a 6% growth on both sides, value and volume. So this is where It is.

Okay. So on a base of, say, 10% growth in FY '21, it's just an observation, what I came to know from the presentation. You have said that your Amla penetration is roughly about 388,000 while your overall penetration is much larger, maybe 2.5, 3x. So I just have 1 question that if you assume that your van operation and you are now trying to rationalize the van operation. And I think if there is a scale at which you are bringing this. So can we assume a more than 8%, 9% volume growth for FY '21 -- FY '22?

I would have been very comfortable giving this answer maybe about 15 days back. But given the way the pandemic is going on, there's really a little futile to give -- I can give you my planned numbers. And the answer to that is yes, we could have factored that in your plans, et cetera. And I think we had a pretty robust plan and pretty confident that we would be able to execute that. But given the way things are panning out, I still think that we will be able to achieve that because we have put in enough buffers in our system to be able to manage those kind of numbers. But I really don't know what is going to happen in May, June, et cetera. April seems to be still, okay. April still seems very true what it looks like. But May, June, July, I really don't know. So we'll have to wait and watch. I think every company will be impacted similarly. I think we have a pretty good network. And I think one of our advantages because we are very focused in only hair oils in our category, et cetera. I think in time for pandemic, et cetera, we have been able to react a little better because the larger the assortment, I think, going on reaching out has been a little difficult -- more difficult. I mean I'm not getting into this entire discussion [indiscernible] At least on a category-wise, it has been easier for us. I mean we found it easier to bounce back in Q2 when the market really open. So we are still finding it to be okay to be able to operate in the businesses that we are in and the kind of initiatives that we have taken in Glanz, Amla, ADHO in terms of rural growth, tax, et cetera, still doing well. But we'll have to see how it goes.

So follow-up on that Jaideep. You already had a Amla product, and we also added Aloe Vera Amla franchise to that. And when I look at the market leader is trying to play the value game at the Amla end of the pyramid. So do you think you have a merit and I'm counting on the distribution part and penetration, which is up North and Middle India. Do you think Amla will surprise or rather Amla is surprising you in terms of growth rates and what you have estimated that new product that you've launched will have a much more bigger scope and play in your revenue contribution?

So other than the surprise part, everything answer to your entire question is yes. I think there is an upside to Amla. Will it contribute to a significant portion? The answer to that is also, yes. Are we surprised? I would say no, really no because this is exactly what we have planned. And going forward, this year, also, we have a pretty strong plan in Amla, and I think we should be -- COVID or no COVID, we should be able to execute and achieve those plans, et cetera. So we had some more plans as far as going in little heavy on in terms of communication, et cetera, that we will see when and how to launch, we'll phase it out based on how the market places. Now as I said even last time, is a -- what you have to remember is this is a INR 2,200 crores market dominated at one end by 1 player and the other end by the other player, really speaking not too much other than the variance of various products. And if you see, that's exactly what the other 2 players are also doing. They are taking on variance to cut each other in those marketplaces. We see there is enough and more space for us. If you want to have an aspiration of INR 100 crore brand, which is about a 5% market share, that in itself, given Amla is a category where traditionally the markets where we have strong distribution, which is the Hindi-speaking ones, and that is the exactly nicely fit in to where we want to sell, really speaking I don't see that there's too much of a difficult exercise. And that's how the market is also reacting. So yes.

Okay. If I'm not too much pressurizing on margin, I have 1 question on margins.

No, no. Please go ahead.

The way I look at it, I think what you have done in your presentation again and picking up the saliency for rigid packs, like bottles has gone up significantly, and that has also reflected into the volume growth. Assume that the pandemic is elongated for a little longer time and consumer would upgrade from actually small pack to the bottle. I think in your numbers, I think you have been trying to be super conservative in terms of margin performance on ADHO. Given that you have already taken a risk cost taking a price increase and if the material prices are going to go up, you can take another price down the price increase. So tell me something is -- if I'm missing something in this?

No, I don't think you are missing anything on that. I mean, I think there is no point overpromising something unless you are completely confident of what you are going to deliver. So what I can deliver is all I can say. So yes, you're absolutely right. We are clearly seeing the larger packs doing very, very well last year, all the larger packs, right, from the newer launch of 160ml, which we launched the INR 99 pack in the Eastern markets that we launched, right up to 200, 300 to 500 as well as the 650 modern trades, all of them are seeing good traction. The 3ml, the 2.5ml, that is a sachet is not doing well, 19ml is not doing well at INR 10. But again, we have launched a INR 70, which was a gap last year. If you -- I mean we have been continuously saying there's the largest growing pack size, I mean rupee category, and we are not present in that. Now that is showing good traction, and we were -- we are spending some sales promotion money to ensure that, that packs is also catching up. So I think we are well covered as far as the reach on both sides. And as far as material cost is concerned, yes, most likely we might take a price increase this quarter is most likely, let's see, sooner the better. So yes, we'll mitigate some part of it. But as you can see the kind of unprecedented price increases that happened in domical and packing nature. This is the first time we are seeing an all-rounded price increase. So whether it is LLP or RMO, whether packing material, whether it is in terms of glass, tent, cardboard, you see everywhere the pricings are happening. It is not only on single. Most years, if you see, if LLP has gone down, RMO has remained stable, has gone down, otherwise, et cetera. Now it is completely inferential all across. So it is very difficult to pass on the complete thing to the consumer, especially in this kind of point of time.

Okay. My last question is you spent a lot of time giving us some dose of that you have hired a consultant and you're looking for a management structure. So if you can give some more understanding what exactly you're looking and what's the management structure? Is it more leaner or it is more contact? Or is it going to be more larger in terms of area of operation?

No, we are not looking at the management structure. We're looking at the entire organization structure. So basically, what we are trying to do is we are looking at mapping of our structure, both in terms of capability, our people, their job scope relevant and basically doing a map across the industry as well as what our aspirations are what we need to do. So basically, obviously, 1 of the objectives will be to optimize, but this is also to price and make it future ready. So where we see there is a fat or there is some fat to be skimmed we will skim it and where there is requirement to be dial up, we'll dial up. So as far as the management structure is concerned, I don't think even as we see from the consultant, what we have done versus what they are proposing, there is not too much of a difference. So at the top, you may not see too many changes over and above what we have done. But overall, in the structure, you might have some restructuring. It's not that we'll let go of people or something. But yes, some structural changes will keep happening over a 2-, 3-year period, where we make it a little leaner yes, and far more accountable as people are concerned. Accountability of people and jobs, salaries all being commensurated with the kind of work they are doing, designation so that there is aspiration as well as suitability as for the company. That is very, very important. That's what we are trying to drive it.

Yes. I completely agree your thought. But in analyst world, what it means essentially are you -- or have you given a target to a consultant for a cost reduction or job optimization?

That is a target given to our HR guys. So the more the consultant objective has to be to optimize, the target of reduction of costs, et cetera, is moved for the HR guys to do. Yes, there is a cost difference. But more than just looking at what absolute number costs is to be reduced. We have a target for where we want to see the HR employee costs expenses to go. We are looking at how competition is operating, Everybody else is at, and we want to benchmark ourselves. Being a smaller company, obviously, the cost structures are a little higher. So that as sales gets adding up, I think the cost itself will get neutralized. So yes, so costs are expected to go down over time, both as a result of rationalization as well as in terms of increased sales, which should bring down the percentage of cost. There will be not too many additions to manpower for sure.

The next question is from Dixit Doshi from Whitestone Financial Advisors.

Sir, you mentioned about the new product launches in the later part of Q2 or Q3. So I understand this is also in other than the hair oil category.

So, yes, Dixit. So basically, as I said, as far as e-commerce is concerned, we'll not only restrict ourselves to hair oil but getting to the newer formats in hair care as well as very different personal care if at all. Because we have been doing continuously on consumer research, consumer insighting, we have a consultant who has been working for us with us for the last 3, 4 months on that, looking at branding what works with the customer, et cetera. So the only areas that we will get into is premium, hair care, other formats or very, very adjusting personal care format. Nothing beyond at this stage.

And so that will be predominantly for e-commerce market only, not the traditional market?

No. So as far as the hair care premium end is concerned, yes, absolutely the premium end, yes, exactly traditional only for the e-commerce market. But for the personal care extensions that we are looking at, some of the extensions, yes, they will be for the General Trade as well. But that tranches might be about Q4 also.

Okay. And just -- so just wanted to understand your thought process in other than the oil market. So wanted to understand that this will be kind of one of the products we will be trying or this will be new normal, like every year or a couple of years, we'll be adding 2, 3 more products other than the oil side.

That's absolutely correct. That's what we would aspire to be, but we will also keep reacting and continue to keep the prices flexible. Aspiration wise, that's what we would want to do. The developing e-commerce portfolio, which is a little more robust, which is a little multiple branded, under maybe a single brand umbrella or 2-brand umbrella, different formats going to the customer. So that there are enough choices for the customer, et cetera, which is under the e-commerce umbrella. As far as regular brands are concerned, traditional channel, as you put it, there may be 1 launch a year or 2 launches based on how much we can absorb both in terms of costs as well as EBITDA. So we'll have to keep watching that as well.

The next question is from Naman Kumar, who is an individual investor.

And just a feedback to the management on what I'm observing on the ground. So I live in a small town in Himachal Pradesh. And in the last 2 months, I have been seeing the push of Bajaj Amla in the shops, like even the small shops like we'll see Bajaj Amla hair oil on the shelf. So yes, so that's interesting to observe like whatever initiatives you are taking that we are able to see on the ground. But from a question perspective, I have -- I'm not sure if you will have the answer. It's kind of an abstract question. Like would we know what is the demography of our consumer in ADHO category? And the reason I'm asking is because Personal Care products are sticky in nature, right? So someone has used it, they will continue to use it in -- for their life most of the time. But are we able to capture the younger generation who are becoming independent or like who are starting their own new life? Are we able to capture them in -- with our portfolio of ADHO?

Yes, that's absolutely fantastic question. I mean, why I say fantastic is exactly the question that we had been asking also in the last 1 year, and our entire approach towards ADHO has also changed. So while we look at ADHO being a flagship brand, et cetera, our consumer market research continuously keep saying that the brand is not offering anything new to us. There is nothing much else happening as far as the brand is concerned, and there is a risk of flag stores, et cetera, and especially the new generation. So entire -- if you track our entire approach towards digital marketing, looking at the new age, I touched upon it a bit in presentation, but there is an elaborate work that the marketing team is doing exactly to try and touch base with the new age customers. Because if you're talking of premiumness it also needs to be viewed as a premium brand, not only a nice brand as far as packaging is concerned sitting at the great shop, but also kind of user content that you are generating as far as the brand is concerned, influencers that they're talking about in Instagram, I mean, it should be a happening brand. I mean one of the great feedback, I mean a lot of consumer work that we have been doing in the last 1 year, so one of the consumer insights that we got last year was that while the CCA customer of, let's say, in Bombay, maybe South Bombay, what they are saying about the product as far as aspiration, et cetera is concerned, is no more than that we see in a middle-class household in Indore or In Jaipur because they have equal aspirations. It is not that they have a lesser aspiration because they are maybe not so much urban, so to say, as far as people are concerned. And that is our approach clearly, it has made us thinking and our approach towards it is. But ADHO needs to be seen as a very, very strong happening brand, much more connected to the youth, et cetera. And that's how our entire digital strategy, digital portfolio, where you have seen that we have dialed up heavily on digital spend this year is addressed to that. So you're absolutely right, and this is exactly what we want to do. So that the newer age customers are not lost for us.

Okay. Makes sense. By any sense, is there a plan to change or modify the packaging a bit just to appeal to the younger generation? So to give you an example, right? So Bajaj Zero Grey, like the packaging appeals -- may appeal to the younger generation, but the target customer are people who are in the 30 and 40s. But if you see ADHO packaging, it looks okay for people who are in 30s, 40s, but if you see from younger generation perspective, it looks dull, whereas Bajaj Zero Grey looks very appealing to the younger generation. So is there any plan in just to change the packaging just to target the younger generation?

Again, a very interesting question. But unfortunately, that's a double-edged sword. So because whatever Bajaj Almond Drops stands for, you'll have to remember that it is still INR 800-odd crore brand. And the kind of clientele that it has across the length and breadth of India, that is not something that you so easily play with. So that entire approach of the shape of the bottle, the glass of the bottle itself, which is -- I mean, there has been a lot of hue and cry that why can't we at least get the 200 mL or the larger packs 200, 300 -- 200 mL basically into pet bottle, et cetera. So that appeal of the glass for the 50 mL, 100 mL -- 50 mL, 100 mL, 200 mL is something -- not something that we want to risk playing with. So I completely appreciate your point. And that's why in terms of visual appeal, et cetera, we have done as much as possible to dial up that Almond Drop, et cetera, that you see in the bottle. And that itself has given good feedback, et cetera. But packaging itself, we don't want to do too much because there is too much of an existing clientele to play with.

Yes. I understand. And one last question is, in the presentation, I see on one of the page with Bajaj Amla, there was ADHO soap as well. So is that a soap launch in the pipeline in the coming quarters?

This is -- the one that you saw is typically what we -- this is an existing product. It is not for sale. It is a product typically given to the Maharashtra customers during a [indiscernible]. We also used a product to give it to some of the other consumer offers that we packaged with this thing. At this moment, this is not a product which is for sale.

The next question is from the line of Avi Mehta from Macquarie.

Am I audible now?

Yes, sir.

Yes, you are.

Sir, I just had one question. You highlighted that demand trends are broadly similar as of now versus the last lockdown, with rural-urban divergence in terms of that. I wanted to kind of just get your thoughts on how is the situation different when it comes to competition, both organized and unorganized? And in terms of channel readiness, how the different channels have behaved?

See, if you talk between the first and the second lockdown, it is too early to say. I was saying that as of today, we don't see too much of a difference. Yes, there has been sporadic lockdowns that has impacted a bit of business in Madhya Pradesh and Chhattisgarh and a bit in Maharashtra, where our business is not that high as compared to others. But rest of the country still keeps chugging along in spite of so much of hue and cry. That at no point of time saying that what will happen fortnight later, we really don't know. So as of now, I'm keeping my fingers crossed here -- there are some learnings that we learned from last year's pandemic. So those, we are now activating as in terms of stocking up our distributors trying to ensure that they don't get stocked out when -- if there is -- if and when there is a lockdown because clearly, distributors and wholesalers are much better place to ensure that the supplies pipeline remains while larger companies like us might find difficult. So that is something that we will continue to keep working, and I don't see too much of a change as far as that is concerned.

And in terms of competition, sir, do you think that is it going to be similar in your view? Or how would you see that, anything on the ground?

I would assume they would have also learned from the last year's experience. And I would not -- as of today, I don't see any competitor, whether it's in our field or some larger FMC space doing anything very differently. Everybody is trying to dial up the distribution, trying to ensure that material is available at the frontline, retail shops as well as the wholesalers and distributors back in the pipeline. I mean pipeline is all that they are focusing in.

Sorry, I meant smaller players, just to clarify. But okay, pipeline, competition is not much enhanced.

When smaller players -- so that's an interesting question because last year, smaller players across categories, you saw getting really, really impacted during the quarter 1, and they took a real long time to bounce back. So not in our category, for all other categories, you saw them really struggling. So they have found means and methods to come back. And I would assume they will be a little better prepared than what they were last year. So what the organized sector found so easy to basically acquire and -- acquire from the smaller players last year may not be that simple and easy in the categories that smaller players also operate. This is my assumption. But really speaking, this is just critical vision, we don't know how the pandemic will play out.

The next question is from the line of Aditya [indiscernible] from Branston.

So just one question. So rural is one market, I mean one segment where we have seen very strong growth in the last couple of quarters. And even last quarter, we see 50% plus growth. So I just wanted to understand, is it possible to bifurcate that how much of that growth came from our vans' operation or maybe from the focus on distribution versus from the actual recovery of the strength of the rural market?

Well, I would not like to exactly split the data, and I'll tell you why, not because I don't want to share the data. It's more because you see while -- so that will be a rough-cut kind of numbers that you are getting through vans, let's say about 10% of our business comes through vans now, 10% and maybe at times it goes to about 12% of the numbers come through vans. Now this is -- this number is a little -- has to be taken with a pinch of salt because there has been obviously a bit of cannibalization that's already happened. Because existing wholesalers from the larger cities, existing subs that we have, sub stockists that we had which now today are getting advantage because of the vans, they would have been doing some kind of a business, right? So it is not that the entire thing would have been off if you have not had the van page. So yes, there has been a bit of cannibalization that would have happened, but that is expected anyway because we are servicing the same channel. But if you look at the distribution numbers, clearly I mean, our internal understanding because you still -- we still don't have everything automated as far as the van sales operations are concerned. I mean we are installing all the software one by one, so it will take some time. So there, we clearly see our direct distribution numbers, which used to be about 5, 5.2-odd, is now up to about 8, 8.5 in terms of including the van. So clearly, we see distribution reach much stronger and that typical thumb rule that you take of 20% of indirect distribution should be direct. So that numbers, I think we are now comfortably doing. So clearly, that is happening. And going forward, our aim is to this year, look at urban distribution as well, which is basically direct urban retail distribution. That was the focus for this year, which we think we will still continue to do.

The next question is from the line of Rohan Samant from Multi-Act.

So my question is more on the tax rate. So if you look at the tax rate, it's around 17%. When do we see it normalizing to around 25%? So when does the tax benefit takes higher for us?

So the math, this thing will continue for about another 3, 4 years, about 2000 -- because now As you are aware, Dehradun got out in May of 2019, Paonta Sahib factory, which is HP factory that got out in March 2020. And so this year, we have -- that's why you see that other income has fallen this year. So the only place where we see the benefit being taken in the budget support is Guwahati, which will continue till above 2027. So yes we're still good to go on fulfilling this.

Okay. So for the next 4, 5 years, also, we should have an effective tax rate of similar 17%, 18%?

Yes, that's about right.

The next question is from the line of Devanshu Sampat from Yes Securities.

Am I audible?

Yes, Devanshu, you are.

Yes. So 2 broad questions from my side on the overall strategy, right? So many quarters ago, Mr. Sumit Malhotra had mentioned that it doesn't really make sense to play the hair oil only play given that it gets difficult to differentiate and pricing itself cannot be the USP. And there are incumbent players who have already a stronghold and position in multiple categories, so it's Amla, Coconut or cooling hair oil and such. So -- and basically, his view was that it will be tough to break into these segments while maintaining profitability. And of course, the strategy right now is to double market share in the overall hair oil space by entering such categories. So how has the thought changed, your view on this?

So except your last segment, all of it is correct. Yes, for a time when Bain was engaged, the thought was to take the market share to 20% in the hair oil category itself. I think my sense is I would rather tweak that just the point itself rather than say that the objective was to take it to 20% market share. I think the objective of the company is to double the revenue of the organization over that period of time rather than double the market share. Because moment you said double the revenue, then you are no longer restricted to only that hair oil segment. Because if you hear both these statements in unison, there obviously seems to be a bit of conflict, right? On one side, what you rightly said, what Sumit had said, saying that some of these markets, it will be difficult to really be money spinners if you have to get into some of these categories, et cetera, which is correct. And on the other side, if you say that you want to go to 20% market share, now only ADHO cannot give you 20% market share. I mean I would love to have that, but that really possible, looks like the more like a aspiration rather than an expectation. So given that, we would like to have a more reasonable mix where we see that we can have profitable, maybe not kind of profitability of ADHO, but profitable brands that you can establish, reasonably decent priced, we will play in the hair oils market, Amla is an area where we'll play and we see profitability there easily available, not profitable in the sense that we make in ADHO but positive EBITDA coming in from there and being a decent size in terms of top line that is there. I mean there are 1 or 2 hair oils as well in some premium hair oils and some niche and maybe some of the others, which I do not want to discuss at this stage. We are just in a contemporary stage of that. So that will play along with that wherever we see there are rights to win for us. This is what we have been talking about. We would like to play. So whether it be the hair care or the adjacent personal care, again, looking at where we can make a positive EBITDA in 3 years' time and it's a sustainable EBITDA that we can do. So with this put together should be the composite strategy of the company so that, at least, we can look at doubling our turnover over a reasonable period of time.

Okay. Okay. And taking a previous participant's question. So there was -- on the non-hair oil product launches. So from your perspective, what are the expectations in terms of how much they would contribute? And will it be -- will this be the area that you're largely looking at for acquisitions?

No. So acquisition, unfortunately, you cannot pick and choose. I mean there are opportunities which will keep coming up. And we'll have to evaluate only where -- we would like to look at an opportunity not whether that company can add value to us. It is -- the way I would like to look at an M&A opportunities, whether we can add value to that company rather than whether that value just adds on to my top line and bottom line. Because managing an acquired company also has its nuances. If we see an opportunity, which is at the right value, which obviously is an important point. then we will look at -- first thing we look at is whether we can add value to that company, whether our strength of distribution or marketing skills, et cetera, we can take that company further. Only then we will take it rather than look at -- we might look at some acquisitions if they open up in some forays for us where we are not firm, but in areas where we want to go and very, very closely associated with us, in areas where we already have some kind of strength, not completely divest. So this is where we would like to keep our acquisition options for.

Okay. And sir, last question, any update or development on the Worli property?

So the Worli property at this stage is all there. So we will relook at it. Now the COVID times are going on, so we'll see to releasing, it is maybe in the coming quarters, we'll keep you updated as to where we are as far as the property is concerned. We have that aspiration to build that property. So when, how, it is something that we'll have to see.

The next question is from the line of Sunil Jain from Nirmal Bang Securities.

Yes. Congratulations for good numbers. My question is with longer period, what's the game plan for the company, like you're already there for over full year in this year and how you think the company can be in next, say, 3 to 5 years? How much share of the total revenue this ADHO will have? And how much product you can add up in that particular free period?

See, if you look at -- I think I have been stating what our action plan is. One of the action plan is obviously continue to keep dialing up the premiumness of ADHO, continue to get more new-age customers into ADHO bracket and dial up ADHO in places where we are not that strong itself, which improve apparently high market share for us. Even there, there are enough pockets and more for us to be done. So ADHO will be a complete 360 plan and we want to continue to focus on ADHO so that ADHO keeps having healthy growth. I mean I don't think -- it's a no-brainer as far as we are concerned, the way we are structured. So ADHO focus cannot be diluted. Its premiumness cannot be diluted, its pricing power cannot be diluted. So this is something that we'll keep dialing up. Along with that, we will keep building the brands that we have been talking about. Some of the hair oils, which want to grow to a little reasonable size where we see potential for us to have some size as well as make a positive EBITDA and be in a comfortable zone. So those kind of products as well as some premium hair oils, premium hair care range in the e-commerce, that may not initially have large value basis. But as we keep adding more and more products into that portfolio, we want to create a brand over the next 3 to 5 years, which is recognized as a brand coming out of Bajaj in the e-commerce portfolio. I mean I would not like to say the [indiscernible] on the wall because they really have taken off really well. But that is the kind of direction -- directionally is where we would want to go as far as brand is concerned. And then also I have some of the amount of extensions or Bajaj extensions in some of the other hair care or personal care products where we think we have some rights to win. So that is roughly the portfolio.

The next question is from the line of Rohan Samant from Multi-Act.

Yes. So my question is maybe on the Amla hair oil market. So can you kind of quantify what is the size of that market and how much of it would be unorganized? And when we talk about Amla had already gaining market share, would it be mainly from unorganized players or we would be kind of taking away from the organized players?

As I said, the market size, I mean, that's an easier part of the question. The market size is about INR 2,200 crores, and that has been one of the highest growing markets, right? This year, if you look at this market grew about 6% in the year itself. So that's a pretty good growth that we saw as far as the Amla market is concerned, 6% in Q4. So INR 2,200 crores, and as you can understand, these are Nielsen numbers, so these are on MRP, you have to discount it by 30% to get the net sales numbers as we report the numbers, if you want to have equal to equal, then discount about INR 600 crores. So about INR 1,500 crores is the net sales value so to say. So this is the size of the Amla market. Now if you're looking at how much we want to gain share out of some of the regular competition? I think that's a very difficult question to answer. I don't think, as a company, you target where do you want to take market share from? You basically position your product. Basically, obviously, you have the competition in mind where you want to take it, but you don't actually state it upfront saying that okay, this is where we want to take it. You position your product. You look at the markets you want to sell at and the kind of pricing and the promotion that you would want to place at and the kind of brand aspiration that you have, where you want to take it, et cetera. And that, as we said, is where we would want to push this brand to about INR 100 crores net sales numbers, that is on the INR 1,600 crores kind of a number, which is about a 6% market share, which I think is pretty doable over a reasonable period of 3 years from now.

Okay. Perfect. So how big could be the unorganized market within this or difficult to quantify?

I mean I don't have the numbers. I would assume. So, Abhishek do have some numbers, if you can just tap it out for me -- I mean, unorganized sector? I'll just respond that to you. I would assume it is about 40%. Let me just take the numbers. I don't think we have the exact numbers for the unorganized. But all I can tell you is that both the larger competitors have a range of products which come under this. I mean in the last few years, you've seen a plethora of launches in different variants of this Amla, et cetera. So it's no longer the typical 2 dominant brands alone. They have also their variants, which have been doing well. So very interestingly, you might see, and if you were to look at the data, some of the variants are actually cutting into the main brand itself of -- some of this thing. So that's a very interesting analysis to see because the larger brand is getting cannibalized by the smaller launches, which obviously If you focus on 2 categories of the same brand, I mean, there has to be a give or take somewhere. So that's a very interesting observation, is all I can say. Yes.

That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

Thank you, everyone, and thanks for patiently hearing our stuff. I think as all of you have rightly pointed out, I think the work for us as well as, I think, for our country is cut out for the year going forward. While we have all our plans in place, both in terms of the marketing work, the sales work as well as in terms of a lot of work has been happening on supply chain and manufacturing as well as HR, I think all of it will have to be continuously kept on going. And in sales, particularly, we need to remain flexible. And on a day-to-day, as the ground situation keeps changing, we have to continue to keep our -- keep changing our strategy as well. And in this time flexibility is the only key and we have to keep learning from what we have learned in the previous year and try and implement it better. I think for the first few months now, I think execution will be of prime importance rather than our strategy, and that is what we will be focusing on. So while strategy is all there in place, and we have a clear-cut thought as to what we want to do in '21, '22, some of it, as I said, and what we wanted to do in Q2, et cetera, we might want to revisit later closer to that date if that is required. As of now, we are not changing any of our plans. We are going ahead with what we wanted to do. But we will keep revisiting on a 15-day, 1 month basis, et cetera. So by Q2 end -- by Q1 end, when we have the call, maybe we'll have better life, maybe or maybe not, I don't know. So we'll see how it is. So as of now, April has started well. We'll see how the year goes. And thank you for all your interest.

Thank you very much. On behalf of ICICI Securities Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.