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

Ladies and gentlemen, good day, and welcome to the Bajaj Consumer Care Q1 FY '22 Earnings Conference Call, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aniket Sethi from ICICI Securities. Thank you, and over to you, sir.

Thanks, Karuna. Hi, good morning, everyone. Thank you for joining. It is our absolute pleasure at ICICI to host the management team of Bajaj Consumer for Q1 FY '22 results call. The company is represented by Mr. Jaideep Nandi, Managing Director; Mr. Dilip Kumar Maloo, Chief Financial Officer; and Mr. Kushal Maheshwari, Head Treasury and Investor Relations. Before I hand over to the management for their opening remarks, I just wanted to highlight our view on the business very quickly. So we have been long-standing believers of the Bajaj Consumer validation story. And like it's brand building and distribution expansion efforts, along with the intent to have a comprehensive portfolio of hair oil in the medium term. With that, I hand over to the management. Thank you. And over to you, sir.

Thanks, Aniket, for firstly hosting this call, and good morning, everyone. My name is Jaideep Nandi as mentioned. And I've been joined by some of my colleagues from the management committee over and above Mr. D.K. Maloo, the CFO; and Kushal Maheshwari, our Head of Treasury and IR. I hope in this period, all of you are keeping safe. That's very important at this stage. And as I start, let me take you through the performance of the company during the first quarter before I open the house for questions. As the quarter started, we saw disruption due to the second wave of COVID-19, which led to the lockdown in the month of April and May as well. The impact was very severe for us in April where our sales really dipped. But by May, the normalcy in operations has resumed, our business also came back. June saw a very good recovery for us when the lockdown restrictions were eased, sales actually rebounded in the month of June, and that saw our highest ever monthly sale for us for a single month in the month of June. And fortunately for us, July also seems to be continuing the same momentum. The company reported a sales turnover of INR 211.99 crores for the quarter with a growth of 10.7% over the same quarter of previous year. The total value growth for the company for the quarter, excluding sanitizers, was 20.4%. The contribution of sanitizers have gone down from 9% in Q1 of last year to about 1 percentage in Q1 '21. The total volume growth for the company was 16.2% and, excluding sanitizers, was 24.3%. The EBITDA for the quarter was 53.67%, which is a decline of [ 7.9% ] this year. The EBITDA to sales ratio was at 25.3% for this quarter. The gross margins were at 58.66%, a decline of 4.9% over the corresponding quarter previous year. The drop in gross margin was primarily due to sharp price increases in LLP and RMO over the quarter. The commodity prices still remain inflationary during the quarter with strong uptrend in global edible oil prices, which is having an impact on the RMO prices. The MRP price increase of about 2.5% that we took helped to partially offset the impact of raw material prices and packing material inflation. We'll keep a close watch on the commodity prices in the coming quarters and take corrective actions if and as needed. PAT for the company was at INR 48.87 crores against INR 54.19 crores for Q1 of last year. There has been a recovery in hair oils category as per Nielsen's data in the months of May and June, with a 25% value growth in Q1 and June MAT growth of 5.4%. The rural markets continued their strong growth momentum, reflected in June MAT growth of 10%, while urban markets have also recovered sequentially, posting a 22.1% growth over last year, though on a low base. For BCCL, both urban and rural markets have shown healthy growth, reflecting in share wins in both. The rural markets continue to outperform urban markets for the fourth successive quarter for the company. As for Nielsen data, there has been a sequential increase in total market share by value for BCCL to about 10.8% for quarter 1 of FY '22, a 120 basis point increase over the corresponding period last year, an all-time high MAT June market share of 10.7% on the total overall hair oils. There has been also 125 basis point market share increase in volume terms as well in Q1. The van operations for the company was very badly affected in April as well as within May due to this extensive lockdown in rural markets as well as an urban impact as well. In June, they have recovered to the pre-lockdown levels. In July, we are now back to actually absolutely at the quarter 4 levels that we were at. While we continue to increase our van footprint and optimize our operations, we expect our non-ADHO portfolio to help improve efficiencies and [ top line ], but our ADHO will remain where it is. We expect the non-ADHO portfolio to take over a little more of the share in the van routes. There has been good growth registered across all zones in the country, but Central Zone, which bore the brunt of the lockdown, so all the states in Central Rajasthan, Madhya Pradesh and [indiscernible]. And this caused a delay in their recovery. And Central actually was the only zone which had a negative growth in the entire quarter against last year. And as Central is a large component of our business comparatively, that also impacted our overall. ADHO, our flagship brand continues to do well, recording a sales growth of 20% in the quarter and increasing its market share in the total hair oil category by about 100 basis points. AHO, on the other hand, doubled its turnover in the quarter, albeit on a low base. There has been a preference for large packs in general trade, which has helped drive both ADHO as well as Amla Aloe Vera Hair oil. While wholesale business has been a challenge as most of the wholesale markets were disrupted in the first quarter, our focused retail initiative, which we had talked about and wanted to take over as our initiative for the next -- as a key initiative for the next 2, 3 quarters, has been doing well, and this has helped our retail grow by over 40% in the quarter. This will continue to remain a key initiative for the company for the remaining part of the year. Despite most of the Modern Trade stores being partially or fully closed during the months of April and May, the channel has delivered high teen growth for the company. Most of the stores had resumed normal operations in the month of June, and outlook for Modern Trade at this moment looks optimistic. We continue to increase our visibility in modern retail outlets with shelf space display for our products and promotion of consumer outlets. E-commerce continues with its triple-digit growth figures in the quarter. Our products are now available with more online retailers, while there has been increase in assortments with existing retailers. E-commerce will continue to remain a thrust area for the company as we gear up for escalation [indiscernible] team with a senior resource joining the team to spearhead the business, while we prepare for our next phase of digital first brand launches in the coming quarter, while strengthening our presence of our existing range with the retailers. International business has shown good growth for this quarter. The travel restrictions continue to hamper the growth in the GCC markets. And despite the strict lockdown in Nepal and Bangladesh, these markets have managed to deliver healthy double-digit growth. The contribution from exports to other parts of the world have also gone up. During the quarter, we continue to invest in our flagship ADHO brand across all mediums of TV, social media and print media. Taking a break in May, we came back to normal levels in June as the market conditions normalized. The new commercial on TV has been doing well on message communication and other parameters of likability, relevance and purchase intent. Digital marketing for ADHO is being continuously dialed up, and we are actively using new age influencers now to reach out to younger consumers. Bajaj Amla Aloe Vera Hair Oil that we launched in the last quarter continues to gain market share in key Amla markets despite lockdowns impacting rural van sales. The new TV campaign for rural -- rural markets is already on air and has been providing additional marketing support for accelerating trials of Bajaj Amla Aloe Vera Hair Oil through advertisement of local deals. As a part of our initiative to expand our portfolio, we have just launched Bajaj Pure Coconut Oil in the last week of July. We believe there is sufficient room for all branded coconut oils to grow in this category and gain share from unorganized players. Our strategy in pure coconut oil is to offer a reasonably priced premium product with 100% pure coconut of the highest grade. As a part of the initiative to reduce the overall carbon footprint in the value chain, we have reduced the consumption of glass by 16% by optimization of specification of bottles and paper by 7%. Further initiatives are being taken to optimize the consumption of laminates. We are also taking initiatives to explore the usage of recycled PCR as well as recyclable laminates. As part of extended producer responsibility, we will be collecting and disposing 100% of our consumption of plastic materials. In Q1, we have already collected -- we have started collected and disposed of 13% of the same. One of our primary objectives is also to build an efficient and a capable team in BCCL, a variety of initiatives have been embarked on the company towards this objective. We have also been inducting crucial talents to create a strong management team for the future. The company has received accreditation from GTW with strong numbers of sites in areas of management credibility, business acumen and training and development. The company has also launched Bajaj Care program to assist our employees. We launched it during the second phase of the COVID-19 pandemic, both for our employees and families and has had good feedback from the employees on that. Now with the market conditions normalizing and having had a good start for Q2, we are optimistic for our performance for the rest of the year with the brand launches that we have for the next 2, 3 quarters. So with that, I end my opening remarks and open the session for questions.

[Operator Instructions] The first question is from the line of Vishal from PhillipCapital.

Yes. Just 2 questions. Sir, what is the combined buyback that you have taken during 4Q '21 and 1Q '22?

So the total price hike is close to about 3%. We have taken close to about 0.5% -- close to 1% in last quarter and about -- a little more than 2% this quarter. So total comes to about 3%.

Okay. And sir, you have taken a lot of cost saving initiatives, I think, that have been mentioned in the PPT. So can you just highlight that what kind of benefit that we're expecting in the coming years from those initiatives?

See, roughly, we are looking at -- so typically, we are looking at about 20-odd initiatives that we have taken as far as supply chain is concerned. So across both in terms of raw materials, in terms of logistics, in terms of looking at alternate raw materials, et cetera. And we are looking at roughly about INR 5 crores to INR 6 crores of cost -- pure cost benefit coming out of that. So not a large number to start with. But this is the direction we want to take going forward in the future because this we want to make an integral part of our entire efficiency system.

Great. And the last question is on that. You've made a lot of senior management hires. I think your Head of E-commerce has come as well as head for International Modern Trade has come. So any more areas left or hiring is done now?

So e-commerce, we did not have anybody who is specifically for e-commerce. As you are aware, we are looking at e-commerce -- like everybody else, we are looking at e-commerce. I mean we are betting big on e-commerce. So the brand launch in e-commerce will happen in this quarter by the end of this quarter. So we wanted to be geared up for that. We have already -- our back end is already geared up in terms of digital marketing, et cetera, in terms of sourcing efficiencies. All that work has already happened in the last 2 quarters or so. Now we have had 2 hires, which is the Head of International Modern Trade and E-commerce, who's the senior resource has come from a very large organization and a specific person who had e-commerce under him who's specifically only into e-commerce. So that as well as some other team members we have already acquired. So this is what we are now going to dial up. And there will be further more -- a little more hiring happening in e-commerce system, but more as junior resources, more to beef the team quota and the offices that we have.

Right. Sir, last question from my side on coconut hair oil. So I think in the past, have you launched or not another -- launched a current hair oil or not in past. And if they launched, so how different is this kind of proposition is going to be versus in the past?

I think what we -- we have had launches in the past. And in fact, there, the issues were that offtakes for the product somewhere could not take place. And basically, we had to take back a lot of material at that time, point of time, which has happened for some of the other products also that we have had in the past. Now how this is different, et cetera, will be a difficult question to answer. All I can say is that at this stage, this launch has been planned for quite some time. We wanted to look at specific markets. The objectives of this launch are twofold. One is obviously we -- this is a large market, and we do not want to completely remain out of it. We understand there will be challenges as far as gross margins are concerned. So we are also playing the game, exactly looking at how and being conscious of what the gross margins are and be clear as to what our own objectives are. Our objective is -- there are 2 objectives, especially if you look at these 2 markets of West and South. If you look at West, we already have a limited distribution network, not as strong as the North, but we do have some distribution network. And we feel with our learning from what we got from our brand initiatives happening even in North, while we were pushing Amla as a part of the assortment, which was going in because ADHO gained as a result of that. We feel that in some of these Western markets where -- just to Amla itself, we'll not be able to add on to ADHO. We think that coconut can help us generate a little better assortment in terms of market penetration. In the South, it is a clearly a distribution game. In fact, with the planned launches that we have for the general trade may be coming up somewhere around Q4 and then beyond, or maybe end of Q3, Q4 and beyond. I mean the kind of launches that we are planning, we would like to have a distribution network as far as South is concerned. Today, we have nothing. So this will help us have a distribution network to start with. And not only ADHO itself, which we will try and push through, but there will be also a set of launches, we like to use that channel. So West and South, 2 different strategies as far as coconut is canceled at this stage. Going forward, as we see coconut happening, we will come back to you.

The next question is from the line of [ Aditya Balfani from Braxton ].

So my question is related to coconut launch only. So sir, historically, you have always talked about launching the hair oil or a product which is which can -- wherein some value addition can be made or which can be differentiated with the existing competitors product. So what really changed? So I just wanted to understand the rationale behind getting into a mid- to high-roll category? And secondly, what would be the strategy to compete with the key players like Dabur and Marico?

So yes, good question. So there are obviously, there are 2 ways to look at products. One is obviously you look at a differentiated product where even if it's a value for -- even if it's a me-too, you look at me-too category, you look at a differentiated product and see where you can have strategic advantages as far as the product is concerned. The other is obviously, when you're looking at a very, very large product category, well-established product category, where you have had not only me-toos coming in from one company, this is more a generic category. This is not a branded category. If you're talking about Bajaj Almond Drops and somebody were to copy it, that's actually a me-too because there's no existing category as such. But if you're talking of an amla, if you're talking of a coconut, these are traditional existing categories. So while -- yes, I mean, obviously, with an established player, it will be seen as if it's a me-too brand but it's basically you're entering a category, which hitherto were not at. So this is one part. Second part is, obviously, which I answered. The biggest challenge you will see as far as this category is concerned is the gross margins and, being a large player in that category, you will have to be a little smart in terms of maneuvering. In our case, very clearly, we see potential for us, as I said, in the South in terms of having a distribution presence, which we are not able to have a foothold today. We require a foothold because not only for coconut but also for all the brand launches that we would want to have in South today, we do not have any operations in South of any realistic [indiscernible]. This will allow us that entry into the South as well as I said, in some of the other key markets. And our coconut story is not completely over. This is more a starting launch, we will also want to see how it works and then we have some more plans as far as coconut is concerned. Maybe in the next 3, 4 months, it will slowly get on.

Okay. Okay. And sir, second question is with respect to market share. Now in this quarter, in terms of value growth, we have underperformed both industry as well as the key players like Marico and Dabur. And despite of that, if you -- if we see Slide #6, so the quarter 3 and quarter 4 shows all India market share of 11% and 11.1%. But the graph above shows a little different numbers. So I just wanted to understand, so have we lost the market share or have you gained the market shares?

So what you saw is quarter numbers, and these are basically the MAT numbers that -- the graph above is the MAT numbers, right? So it's a moving average for 12 months as the market is. And the quarter -- the below graph that you see is the specific quarter. Now as you are aware, Almond Drops typically peaks during quarter 3 quarter for the winter month. I mean that's a known data point, right? So you will always see Q3, Q4 market shares going up and then Q1 again drop, Q2 being the lowest and again Q3 and Q4 going up. So the bottom graph is not really -- can we refer you to the graph. The top graph is a 12-month continuous MAT market share because that's how you look at the market share. Now as you said, the -- our performance -- our apparent performance in terms of underperformance is -- I completely take that. But I think you'll have to look at it a little more in nuanced manner. One is obviously a 20% growth in hair oil is lower than what you see in the other companies. But you have to see that in terms of the primaries versus secondaries, the way our secondaries have happened, and we are seeing the result of that in June, in July, et cetera. Because we had gone down in the primary, specifically in the market. So just to give an example, let's say, Central, which is a large contribution, which we have one of the largest contributions from Central zone, actually, went negative. Even though we had 20% growth in hair oils, Central zone was negative. I mean, was a deep single-digit negative as far as you are concerned. And given that our impact of Central zone is high, it had an impact on the market. Now this is getting stabilized. I mean July has been -- June has been very good. July has even better. April, May was completely cash out. And this is known, right, Madhya Pradesh, Rajasthan, and all that. UP, the wholesale market of it. That is the second impact that we have. All the wholesale markets -- again, that is the other deep negative here. While retailers -- retail has had a 40-plus percentage growth, wholesale product has been negative. And as you again are aware, wholesale product has a larger contribution than most of the other companies. And we have had a deep negative in April and May, which is started getting normalized in June and again in July. So really speaking, I'm not very concerned about those numbers are getting negative. Because in terms of where we wanted to grow, whether be it in retail, whether it be it in the sublease, et cetera, those markets have been trending pretty well. So this temporary growth, I see by quarter 2 will all get neutralized and -- so not really concerned. So Central wholesale markets, I mean, clearly, are the 2 big temporary Q1 drops that I see.

The next question is from the line of Abneesh from Edelweiss.

My first question is on D2C and the businesses. I know your company size is much smaller than many of your peers who are investing in the D2C companies in the startup taking up-stake. But what would be your thought process? You do have a lot of cash in the book. So any thought process on that? Or you want to do it through the own organic group?

So now it's actually not one question in that way because these are multiple layered questions. So let's first take this cash in books first. Now cash in books is obviously -- that is there but that needs to be utilized. I mean, whether there were cash in books or whether we better borrow and leverage ourselves, the business parameters will not really change. I mean you will not take a decision based on cash on the balance sheet for taking a business call. So whether we go for a -- as you asked, whether we'll go for a ready-made M&A for a smaller e-commerce brand, whether we develop it ourselves, et cetera, we'll have to also look for opportunities. Yes, we are -- we will keep scouting for opportunities in the e-com space if such opportunity does arise. But we will, on the other hand, we'll also look at what we want to do ourselves. As far as D2C is concerned, before I answer you, did you see, let me take you through the journey of our own e-commerce, et cetera. So e-commerce, as a company, you would have seen that we have started late. But then they keep saying, e-commerce is more for a democratic world, so you can quickly catch up and ramp up. And that is exactly what we are trying to do. Our results are quite better from 0.5%. Now we are close to about 3.5%, 4% of our turnover, still lower than some of our competitors. But I think the direction seems to be correct. And now we want to really place better on that. So what we are planning to do at this stage is launch our own brand, and it will be our own digital-first brand with uplift products which are coming in. So that is something that will go on. And we'll also scout as you asked, whether it's out in the market for any opportunity there. Yes, that is a journey that we want. As far as D2C is concerned, that is something I think is a little more evolved. And while we have been already discussing that, we have been having our internal discussions on that. I think we would first want to have our portfolio ready. Because the moment you get into D2C as a consumer, I will be looking at what kind of assortment and what kind of portfolio you are having to offer. And unless you have a portfolio, really seeking D2C will not happen. So D2C, something, it's not a question of if, it's only a question of when. So it will happen, but it will maybe a few quarters away.

So that's helpful. My second question is on the broader leadership level. So you had joined the company around 18 months back from an extremely large formidable company like Asian Paints. So when you are joined now to see versus initial expectations, how has been the journey and where still there is room to improve? And in terms of the second-line leadership or at the leadership at the top, are there more hirings which will be required?

So see, as far as the second line considered, if you look at individual level of, like my direct reporters, you will see them they are absolutely top-notch resources and comparable to any other company. I mean, today, at least I'm proud that we have a management committee, which can actually sit shoulder to shoulder with any of the best in class. And that's what we had aimed to do. And in 18 months later, at least we have that across all functions, whether it be in sales, marketing, any of that. Now what we are moving towards is minus 2s, basically their direct reporter, because 2 things that we want to address, which is basically not only the strategic thinking at the company level, but also operational excellence. While that is being dialed up through system processes, et cetera, we also require strength in people. So that is something that we are focusing and maybe in the next 5, 6 months, impact will happen. So I think as far as manpower is concerned, I think good progress, and the team now has started working towards in terms of what they want to do strategically and so on and so forth. That is more or less in place. Now what we have now also started doing in the earlier stages of system processes, governance, et cetera, a lot of good work has happened in that. But I think that's a longer journey. So whether we're talking of a manufacturing footprint, supply chain footprint, IT footprint, et cetera, that's more of a journey where good start has happened, but I still think we are still 2 years away from the final end result that we would want to have. And I would also not want to fast track it too much because we would rather want to keep investing slowly and start building strength rather than want to jump into something absolutely 5-star overnight. So slow and steady is how we would want to go there. But yes, all of them seem to be, at least in terms of our -- whatever benchmarks we have set, there it seems to be on track on that.

Sure. That's very helpful. Last question. A lot of questions on coconut has happened, but I'll be very specific here. So one is, does the sourcing advantage, economies of scale matter here? Because the #1 player sources almost 10% of the coconut in the country. So does that matter? Second, your packaging color is exactly similar to the market leader. So does it make sense to do that? And third is in terms of pricing, are you differentiating? Or is it just that you just want to be there on the shelf, it helps the distribution? Will there be marketing support for this for the medium, long term?

Okay. The first is the easiest question. So obviously, it helps. I mean, I don't think even I need to answer that question, does sourcing and economies of scale help. I mean being a large player, being for such a long time invested in this with the kind of backward integration, you can't even dream of questioning that. So obviously, it does help. But as I keep saying that it's such a large market, there is always space for some other players also. And we have to give credence to Bajaj as a brand and its strength, and that is what we want to ride on. I mean a lot of questions are also is the me-too going to erode the Bajaj brand or not, really speaking no. Because finally, at the end of it, Bajaj Almond Drops, honestly only [ equity ] stands. Because Bajaj itself is a much more of a conglomerate brand because of whatever's in the family and so forth. So that and hair oil is something that people clearly relate to. And our initial responses from the retail, this thing, is also the same. Even a little bit of consumer study that we have done, overall, clearly says that, yes, we have a right to also play in this market, whether right to win or not maybe too much of a statement to make at this stage, right to play definitely. But as I said, we also have a strategic intent for launching the coconut. This is also to not only establish the brand, but also get some headway into some of the markets where either we are underrepresented or not represented at all or maybe suboptimally represented. Because with the larger portfolio that I have in mind, we require vehicles. And we think that coconut will help us as a vehicle. So as far as pricing, et cetera, are we differentiated? Yes, we are differentiated. In terms of consumers, we are offering a price, which is obviously more attractive for the consumer to -- for a first trial, et cetera. So this product is given us that. In terms of whether the brand looks deceptively similar or not, if you were to look at the actual packaging, there are a lot of differences and a lot of difference. So really speaking, I don't think there is too much of competitors between the 2 brands as far as physical look, feel, et cetera, is concerned. Yes. The only thing that you can talk about is the blue color. Yes, obviously, now if you look at all the coconuts, which are there in the -- except for the eastern part of the world, all the rest of pan-India, all of them are in blue color because that's how the leader is. If you look at, let's say, almond oil, all of them are in that golden yellow, which is the typical yellow. I mean you can make almond oil in any color if you wish. But then almond oil is the golden color in a transparent bottle. So I think neither does have an impact in terms of influencing what happened. So that is how it does tend to side. So I will agree to that point, yes. Are we in the blue color? Yes, we are in blue color, but so is that area.

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

I had 2 questions. You mentioned the rural is better than urban in terms of growth. Is it just the COVID impact being rural in the second wave as compared to urban, is that the only reason? Or anything else you can attribute to?

So this year, actually, rural was also very badly impacted. It is not that rural was not impacted. Last year, for example, urban was absolutely impacted, rural was not impacted at all. So last year, we flew in rural. And last year, actually, if you look at our urban-rural balance, it actually -- the imbalance that we had positive towards urban actually got neutralized. This year, you see our rural has gone ahead of urban. So now we are looking at rural having a higher share than urban as far as the markets are concerned. So I think what has happened is last year, which we did with this entire van drive and with the entire increase in penetration in terms of distribution, I think that helps. In spite of muted van sales that happened in the months of April and May, where we will actually also suffer. Momentum came back in June, and we are seeing that also happened in July. As we came back, rural really bounced back. And that is what gives me a lot of confidence and comfort saying that as the market stabilizes, we can come back and basically reap back our gains that we have created in the last year. So rural is actually -- that is the reason. Rural impact was less bad, but we have been able to survive rural much better.

And if I look at the gross margins, they are almost at a 7- to 8-year low. Obviously, these are unprecedented times in terms of inflation and input costs. So in the near term, what should be the focus? Will it be driving growth at slightly lower margins than what we've been doing over the last 2, 3 years? Or would you want a balance of margin also bouncing back and volume being lower? So this is more from a midterm perspective because these costs could remain high in the near term also.

I think that's a very good question. In fact, I think there we will not veer from our stated objective, which, while one side, we are driving 2 things. One is assortment of portfolio because we want to actually ensure that Almond Drops is also supported by some few other brands. We will continue to invest heavily on Almond Drops. I mean that's our only cash cow at this stage. So obviously, there's -- it's a no brainer that Almond Drops will always take our lion's share of everything. But we will also like to give it some more support by the side. So Amla is one of the products. Coconut is more a strategic launch. There will be some more products which will come in. So that effort will always continue. On the other side, because some of these will be gross margin burners or EBITDA burners, we'll also try and ensure that we put a guardrail on the total EBITDA that we make. So in terms of a long term or at least in the midterm, the 2, 3 years period, we would want to ensure that the EBITDA remains as an absolute positive. Even as a percentage point few points drop in, I'll really not be worried. I'll try and ensure that the EBITDA as an absolute number keeps growing. Because if I am in the process while maintaining this EBITDA, if I'm able to establish some of these brands, I think then we are good to go for the next few years.

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

Sir, my first question is what is our margin for ADHO on a year-on-year basis? And if my understanding is right our rough ADHO as a percentage of our revenue is around 91%, 92%, is that right?

That is correct. So as a percentage see, I would not want to get into the exact percentage of ADHO. I mean as you can understand, with a 90% contribution, I mean, obviously, ADHO's percentage contribution is higher than the overall contribution of the company because Amla, coconut or coconut anyway is not there in Q1. But these products will not really have a higher or lower gross margin than ADHO. But more importantly, at this stage, their contribution much lower does not really impact the overall condition of the company. So you can take roughly the contribution of the company at a few percentage points, and that will be the gross margin as far as you can see. You do math, 90%...

Okay, sir. Sir. And with respect to the newer category launches, you had mentioned that pharma store presence is something you were looking at increasing. Has it showed any good benefit?

Sorry, can you come -- sorry, I missed that question. Pharma, what?

Like product placements at pharmacies, that kind of a strategy?

Okay. So pharmacy is not -- see, I mean, last year, we did an experiment some -- do some 2 experiments on pharma as well as institutions. But those were not growth drivers. Those are more tactical operative things that we'll keep trying once and for all. The 2 drivers as far as the new products are concerned, other than hair oils where we would want to complete our portfolio, I mean, not only with coconut with a few more launches in hair oil. The 2 other large areas that we are focusing on is the entire e-commerce digital first launch, which will take it on a completely separate track and basically the general trade launches, which is mainly -- not mainly, I would say, some part of it is the Bajaj drop extensions into hair care, personal care format and some of them will be in the relevant hair oils, et cetera. I mean we'll see where we fit into the hair oil. So these are the 2 main lines that we will take, but this will mainly go through the e-commerce, will obviously go through e-commerce and maybe some of them make -- comes through the Modern Trade format stores. And the General Trade will be through General Trade and Modern Trade. So these are the main 2 approaches that we'll take. The pharma, et cetera, we'll see as it goes. Not really big revenue generator plan for the next quarters.

Yes, sir. Sir, and directionally, can we tell that the worst is behind us with respect to margins? Because this quarter, I think it's like one of the relatively like a lower performing quarter. So can we expect that to improve in July in the next quarter?

So that's an interesting question. If you asked me this question a year back, the answer would have been an unequivocal yes. But if you see today, and fortunately we may not be the only ones impacted because of that. While LLP prices, the crude prices have been going down, we are getting by, but the exchange on the other side has been nullifying the impact. So LLP, do not think immediately, you will see a benefit. Maybe Q3, yes; Q4, yes; Q2, immediately, we don't see huge benefits coming out to you. Some softening, but not really major softening happening. As far as RMO is concerned, on the other side, we see RMO prices have been rocket high actually because of the demand situation as far as edibles are concerned, which is in shortage, RMO prices have remained high, and we don't see that softening in the current quarter. So people who have products with, let's say, mustard, et cetera, they will have a little more impact. But yes, whatever the impact has of RMO is there, we'll have an impact. And we will monitor the market. We will see 2 things. One is in terms of consumer behavior, whether we are able to take price increases further or not. And obviously, we'll monitor the competitive landscape. If we see that others are going that part, we will also follow. Yes.

The next question is from the line of Shirish Pardeshi from Centrum Capital.

I have 3 questions. The first question is that, if I understand correctly, and what we know for sure, when I add Rajasthan and MP, these are roughly about 30%, 35% of our contribution. And if I add UP, which is a larger contribution. Now the question is specific you said May and April was a factor in this market and June has started recovery also, it was -- there was an impact of vans in operation. Could you talk something about how these markets have performed in the second half of July? I mean is it back to normal, ahead of normal or still there are some more room? And just a follow-up on that, how many vans we have deployed in these markets?

Okay. So yes, that's an important question. So you're right. I mean these markets actually is about 2/5 of our business, and that got impacted in April and May, very badly. In fact, April was actually a disaster for us. May recovered pretty well. May was higher than April 1. In spite of me being more COVID impacted, our business in May was better. June, as I said, was the best month we have ever had. That trend continues in July. So all the pent-up that got created where inventories were far higher in April and May in these markets, which got little neutralizing in June, not completely. By July, had already got neutralized. And we see growth in both Central as well as UP being much, much higher than the rest of the country. But that's not surprising to us because we knew that it is a matter of time that the secondary will catch up -- the primary will catch up. The -- while having said that, I would still say that the wholesale markets, some of these have not completely recovered as yet. So that is something that we also see as a trend. So while our rural has been doing well, our retail has been doing well, wholesale, some of our markets are still not completely back. So our growth rates are good, but if wholesales will happen, we'll be actually flying. So that's still not happened, completely.

So how many vans we are flying out of whatever numbers we have published last time, 700-odd back?

We back to the Q4 numbers. And now with some more assortment coming in, we are looking at some of the zones where we would want to actually go beyond what we were doing in Q4. So one of the key things that has happened, one of the great things, I see that has happened even during the April, May and the June period is the throughput per van, fortunately for us, has gone down. So a lot of cost benefits that you see, some of the cost work that happened as far as even the ASP costs are concerned, in the van cost, which will assist in the ASP cost, the throughput for the vans have been managed very well by the team. Operational team has done a great job, and we have had better throughput in the quarter of quarter 1 than that we had in Q4. Obviously, the van numbers have gone down. So by June, we were nearly close to what we were doing in Q4. July, we are equal. And August, we are looking at exceeding that.

Okay. Wonderful. The second question, again, on the coconut hair oil. You did mention that you have right to participate. Could you just tell me which market we have launched this product? And in a medium to short term, what is it you are expecting? Are you benchmarking that distribution to a certain level? Or you are expecting some contribution as a benchmark to overall, something some more quantitative data points?

So I'll only be able to share with you the markets that we have launched in. So we have launched in the West and the South, as I told you with 2 clear objectives that we have. We have also launched in a particular one state in the East, which is Bihar. So at this stage, Bihar and Chhattisgarh is where we have launched this product because it's a [indiscernible] so that's where we think we have rights to participate, as I said. And the objectives I just told you. In terms of numbers, I think it's a little too early to discuss numbers. So at this point, I'll refrain. Maybe by another 3 months when we, again, talk, we will have some numbers to share with.

Okay. Just one follow-up on the coconut again. You mentioned that max number says that it is INR 4,800 crores category. Could you please tell me how much is the South contribution be in the INR 4,800 crore and West?

INR 2,100 crores, so roughly about a little less than half, INR 45-odd crores.

That's South?

That's South, yes.

And West?

So if you look at -- I'll tell you, overall, the top markets, if you do look at South as one market, the #2 market will be Maharashtra and third market will be West Bengal. The 3 put together will be about 70%, I can tell you.

Okay. Wonderful. My next question is on the international foray. I mean you did do about 3-odd percent contribution in this quarter. In a medium to long term, like 4 to 5 quarters, how are you seeing your international strategy? And what is it that we can expect in terms of participation in the markets? Or what are the products which you are planning to get into?

So once again, Shirish, if you recall, we had discussed that even, let's say, 4 quarters back or 3 quarters back, that e-commerce and international will remain 2 of our growth drivers. I mean, new products, et cetera, will always be there. But both of this clearly is something where we think we have rights to win. And I think we are also building capability to win. So because only rights to win and knowledge to win will not help. So capability, and I think in my mind, we are in the right direction as far as that is concerned. Anuj joined us to head this international business, is already working on the strategy. I am also with a little bit of experience in international. I'm also lending my bit on that. And I think we want to -- so in medium to short term, you will not see anything, but in medium term, which is maybe 4 quarters from now, 5 quarters now, you will see our momentum in international because we want to go a little at this thing. We know the pitfalls that are there. What happens in Middle East, what kind of money is possible or no money possible in the Middle East, et cetera. Being aware of that, scoping the market, we see there are some sweet spots which exist, and we would like to make some progress in those. But I think I'd like to share that as we move forward, there's no point at this moment sharing what our strategic intent and what we go to do. Rather, when we have something to talk about then.

Okay. My last question is on the e-commerce. You did mention that there is a team which is there, which is responsible. But could you talk something about the Zero Grey? And how many products which we have now on e-commerce? And some more color that -- how this business will look at, which are the other platforms we are using for e-commerce platform?

Okay. So e-commerce, I mean, again, good question. So Zero Grey has been doing well. I mean, obviously, it is not a large brand in terms of value markets that we want to do some huge -- make a big difference to our top line or bottom line. It was supposed to be a statement. I think the statement has gone well. Consumers have had a good liking for the product, and the product has again grown well in this quarter. Is it at the kind of levels which where it will make -- whether it will move and shape? The answer is no, but then it is part of a larger portfolio. The other thing that has happened out of this Zero Grey launch, which is more qualitative than quantitative, basically a lot of learnings for us. I mean, how do you manage a premium brand with a premium packaging. So a lot of learnings, which will help us maybe with the launches that we are planning in the next quarter also. As far as the next 2 quarters, as far as e-commerce is concerned, yes, there'll be a number of products that we will be launching in that. Because as we discussed in earlier question, the final end goal will be to have a D2C, which is a credible sustainable D2C. We understand the value dynamics as far as this business model is concerned in terms of how much of cash burn, et cetera. So we are also managing that properly. So it will not be in the [ Walmart ] range, obviously, as you can understand. But I think still there is a viable business model there. So this is something that we would support. As far as the existing range is concerned, that all of it is being channelized through the e-commerce. And as we are getting more and more with newer e-retailers, ADHO itself is showing good growth but also some of the products like Amla, et cetera, which is basically on the higher end. We wanted to consciously push the Amla because we see potential for that product and those have been doing pretty well. So Zero Grey, Almond Drops, Amla, et cetera, has been on that platform, a bit of Nomarks well, but more importantly, with the new range coming in, I see good potential for that.

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

Sir, my first question pertains to margins, and you spoke about the near-term pressure, but I was coming from slightly longer-term perspective here. So if I see FY '16, we had 35% margin. And then obviously, there's an NDS impact also in between. But we exited last year with somewhere around 25% margin. And this quarter because of all the pressure that you spoke about, we are actually at one of the lowest. So some of this was designed based on the commentary that we have been hearing from the management for the last many years that they wanted to operate at a lower margin and to make the management in growth and margins sustainable. So where do you see this point now? Because 25% is something which is not very high versus the rest of the industry. And do you believe that at this -- at this margin, you can actually balance the growth aspirations versus profitability aspirations of the company under management? Or you believe that you want to take it back to mean revert to 30% in due course of time?

See, that's 30%. Am I audible? I think there's been some change in the...

Yes, sir.

Sorry, I just wanted to understand. Yes. So coming to see the 30% is a nice number to have. If you have as we discussed, to find a product with that kind of equity and that kind of margin. Now ideally, I would like to have that. But is that really possible and feasible? Because ADHO, I mean, whatever stance we take beyond the certain point, growth in ADHO will have to mean that either the market itself booms in the hair oil markets, which being a mature market, there is a limit to which it can boom or the LHO as a category itself takes a large leap, which again sounds a little difficult to achieve. So you may reach 11%, 12%, maybe 13% if you have every single activity right, whether be it your assortment, whether it be it your placements, whether it be -- everything, your marketing strategy in terms of reaching out to the new age customers, et cetera. Now if you have a larger than that aspiration, you will have to play in all the categories, not only hair oil but also in some of the other existing categories where Bajaj has the right to win, which is the strategy we are taking. The fact that, that is assuming that Bajaj Almond Drops cannot be attacked at all, which itself is a thought process. I mean, it can be attacked even though it's best possible brand in hair oils with the best equity, it can always be. And it had been attacked until we started some of the real actions. So given that situation, that 30% is a nice open thought process, but may not be sustainable in the end. So given that the options that we have, I think you will have to come to something where the top players are at in terms of EBITDA. Maybe keep it to yourself at a little higher because your tipping point is a bit higher, but then also build brands to ensure that keeps getting supported. And I think we now are working towards that, and I'm confident that we'll be able to build that 3 brands, as I keep talking about, which is the INR 100 crore plus for our size today, which will keep supporting Almond Drop. The Almond Drop continues to grow at the pace that it has to be gaining some a few percentage points -- a few decimal points quarter-by-quarter, while some of the other arrangements. That has to happen, your margins will fall. And I would like to stabilize at that 25-odd percent margin. And with this kind of healthy group, I am pretty comfortable. The manager, the Board at least, is comfortable with that strategic direction...

Sure. But sir, interestingly, we have reached that 25% without making a lot of diversification or visible diversification in our revenue pool yet. And if I see the 50% of dilution of margin actually came from one line item, which was employed as a percentage of sales. So should we believe that as growth comes from new products or growth revised in core ADHO also, this 5% erosion, which happened from employee costs will actually shift to other expenditure to support new brands. And hence, 25%, despite all the initiatives that we'll take in the new brands will remain at that level, and there won't be further dilution because of those new launches?

So see, if you do the math on Q1 and take that percentage on the lower base, yes, this percentage will look exactly like the way you put it. But if you just shift the scale to, let's say, Q4 which was more of a normal quarter, right? Normal quarter. You look at the HR cost, and you will see for yourself how many percentage, the 6 points that is lower there. And I think those -- that is what you will have, if the market situation remains normal and that will always be an assumption. If market situations do not remain normal, then nobody can sell too. But if you look at the market situation, it's remaining normal, which was, let's say, Q4 of last -- Q4 of last year, your employee cost that you talked about was about 1.17% -- 2.17% lower, right? I mean and as sales grows, these percentage, these economies of scale will follow on. Being a smaller company, every single bit that happens, the percentage goes haywire, both positive as well as negative. I accept it can also go positive. But I think as you build scale, these numbers will get a little flattened up. So for example, just to give you an example, the fact that sanitizers with a contribution we had of 9%. I am not sure whether many of the other [ SMT ] companies, which just started sanitizers would have a 9% something. And hence, the growth for us has a 10-point difference of 10% growth going to a 20% growth with our sanitizers. I don't think -- so as size increases, these numbers will have lower impact. And that's what we are planning, and I'm very comfortable that, that is the direction, that the basic fundamentals seem to be known.

Very helpful, sir. Sir, my second question is you spoke about interventions that you made in the last 12 months in the talent pool of the company. And now we are ready for strategic interventions. So any 1 or 2 strategic measures you would like to talk about, which you will pursue in this fiscal earnings fiscal?

So these are the ones that we talked about. In terms of 3 things. One is, obviously, in terms of the brand launches that we are looking at in terms of portfolio expansion, both in e-commerce as well as GT I just talked about. So that is one. E-commerce as a business itself, which we want to push through. This is I'm talking pure from the business point. And third is obviously in the area of basically international, which we want to talk of maybe in the next fiscal, you'll see some things moving. This fiscal will be more scouting this thing. Unfortunately, we are not able to also make these visits, which will be very, very necessary for making any international forays. But at least we seem to have a thought process in order and at least we are going in the right direction. So this is as far as the business, the front end side of it is. At the back end, there are a lot of activities that are happening, which is not maybe visible to the eye directly. But in terms of ESG, there's a lot of work that is happening in ESG initiatives, in terms of securing our manufacturing systems, making it far more robust, safety initiatives, et cetera. I mean, making efficiency and scale in terms of IT, infrastructure, which is not really very strong for this company, we have been making it as close to any of the best in practice. So those are the back-end work that is happening just to strengthen this organization's backbone as such. So those are the work that is also affecting that you don't see. And these are -- definitely would not have been possible without the talent pool that we got.

Fair enough. And sir, if I may try my luck here, if we have to convert those measures into some strategic number and not near term, let's say, slightly medium range planning, we have been stocking INR 800 crores, INR 900 crores turnover range for the last almost 5 years. So if, let's say, even in the next 7 years, which is just 10% CAGR, if we have to add INR 800 crore turnover more, what will that composition be? or what will be required from your side interventions to make that number achievable in the next 7 years also?

So firstly, I mean, our ambition is a little more than that. But yes, but I am always very wary of making these number commitments because again, as I keep saying that we need to walk the talk before you start believing us that these numbers are possible. So really speaking, some of these measures that we see and whatever our common learnings and most of these people that we are talking about, who is in the management committee today, come from very large successful organizations. I come from one, but others also come from equally successful organizations in FMCG as well. And most of the things that we see as to what they have also gone through on this journey is just getting the basics right first and having the strategics initially will be in the first year, second year and then the 3 year, fourth year. It will not happen by magic, and I am very comfortable in not having any magic and have 20%, 25%. Because if we have these basic processes in place, and we have that belief and consistency, I think the numbers will be achieved. And these little steps that I talked about is basically in that direction. I'm pretty comfortable with that. So the numbers that you talked about or at least in terms of direction, I think we have little more ambition than that.

The next question is from the line of [indiscernible] from [ Vallum Capital ].

So I just wanted to know that our rural growth has benefited in the last few quarters because of the expansion of distribution and very good strategies like the van sales. So how sustainable is this rural growth? And just wanted to know your view on the rural growth going forward?

In fact, if you ask me -- that's again a good question. So rural growth, as I said, I mean after the April, May or rather the April fiasco that happened for us and May just was more consideration. June, July itself is telling us that, that is clearly a sustainable thing. Because the way we were able to bounce back so quickly and come back to exactly the levels that we were at, we were very -- as we ended April and as we were in the middle of May or ending of May, we were really worried as to how the quarter will look like. But the kind of recovery that happened that continues in July, even August looks like that seems sustainable. And now what has also happened as a result of the bank sales is the kind of learning that has happened as of that is letting us go even one mile further. And that's why some of these launches that you are seeing happen because it gives us -- it makes us believe that we have a better assortment, I think this penetration can further go up. I think in terms of numbers, we are still not completely exploited as far as through the country. Having said that, we also -- which was decided by the team here, which is basically that while our rural drive continues and rural will continue, I think in urban, we have been more a wholesale-dominated company, and our retail presence has remained weak, which we have talked in the last 2 quarters, which is where the focus had started, Delhi, Bombay initially and now into 10 cities, and that has been giving some fantastic results. As I said, this 40% growth is clearly -- I mean, last year, yes, we accept that retail was low. But as you say, even wholesale was low. This year, wholesale is negative. Retail has gone 40% positive. And clearly, those initiatives that have been taken as far as retail drive is concerned, is gathering momentum, and we are seeing positives. So both rural as well as urban retail will remain continuous focus for the company. And I think the company's GT strengths will obviously accrue out of that as well as with the assortment, which will only help augment as well. So pretty sustainable in my mind.

Also, you had mentioned earlier that the ADHO premium quotas will only be up for the gross margins to be at the existing levels or probably even above. So the other competitors have also launched premium products. So what is your outlook on the demand for such premium SKUs?

See, so there are 2 categories then if you look at it, because of what the ADHO has done in the past, in the last 15 years or so, I think it has created a new category of light hair oil, right? So I would still like to keep light hair oil as premium, it's not like super premium. It is on the higher side of the, let's say, normal oil. So that category will keep existing, and we'll keep upping our tempo. Because we feel that if ADHO has to keep demanding the kind of premium, it has to mean something extra for the consumer, be whatever equity it has. We have to keep maintaining that equity, and that is the drive that you will see continuously happening in ADHO. Communication will change, our entire approach towards the ADHO will change and maybe next year, even the product will go through some kind of a revamp because we want to keep improving continuously by making it exciting. On the other side, as you are saying is the, let's say, resurgence or insurgence or whatever is the word you want to use for the premium hair oils, which you are seeing in for -- through this entire drive on e-commerce, et cetera, premium is happening across all categories in FMCG. So that niche category, whether it will explode tomorrow or not, we don't know. But that category clearly exists. I mean there is one, obviously, a large player, which is pushing that category in the GT itself, but there is obviously a large number of e-commerce players who are there. So that is a category we feel that will happen for the niche nuance customer, that is something that will always be there, and you'll see us also getting into that category as well. So I will still keep almond category, not really in the premium category. It is in the high-priced category, but the other is the premium category. Both different. Really speaking, interplay between them may not be too much because the price difference will be quite high. There will be some bit of interplay, but that happens then across all categories.

That's helpful. My last question is that also we have recently launched a lot of variants like Zero Grey and Amla Aloe and also coconut oil and all. So what will be the strategy to drive growth and to gain market share for these kind of products? And also, are we looking at acquiring any regional brand to gain market share?

So again, good question. So 3 products, very 3 different strategies. Amla Aloe Vera, I'll start with that. That will be -- that is clearly today our second flagship brand after ADHO -- flagship may be too much of a word. But yes, clearly, something that we can drive. We feel that we have good rights to win in that. That's not a right to participate, that's a pure right to win. And whatever initial signs we have, we see that, that business has been going well. I mean I should not be talking on July, but July was the highest ever sales of Amla by a fair distance, by a fair distance. And I am not saying that it coincides with the TV ads, which have started coming in, but we see that Amla has a great potential, and it is doing well for us. So no worries about Amla is concerned. Zero Grey is a product which I said was a foray into premium end through a digital-first brand. So a lot of learning coming out of that. It has had good impact, but we were never expecting the kind of numbers that we are talking about as far as Amla or any other concern. So we are pretty happy with the kind of learnings, kind of market understandings that we have got and the kind of business that we have got in that. So we'll keep it like that. And then the other products that we launch will have a lot of learning and help from that. So Zero Grey for strategic intent is there as well. As far as coconut is concerned, I have highlighted why we want to get into coconuts, so that it helps us in distribution as well as also in the back. So we'll play coconut like that. So 3 different products, which are 3 different strategies because we are looking more at the future and how this product fits in the future context rather than these products in isolation. All of them -- I mean, Amla is in isolation, but the other 2 is more for the future, what we are looking at our basket and how to fulfill, so that's more for that.

[Operator Instructions] the next question is from the line of Abhijeet Kundu from Antique Stockbroking.

My first question was on getting into a new category. You have entered into categories like, the larger ones, coconut oil, Amla, [indiscernible], you are here. Would you plan to get into the natural anti-hair fall category? Because that is one where in your geographies, your strength in geography, that has got a good sell in. So anything on that?

You're talking about anti-hair fall?

Yes.

So if you look at -- one of the biggest claims for Almond Drop itself is anti-hair fall. I mean, that is what we have been dialing up. If you look at our entire directional stance that we have taken on Almond Drops is to make it a more functional brand. One is make it a more funkier brand in terms of attracting, keeping it attractive to the newer age customer, but also make it [indiscernible]. Earlier, it was more an aspirational brand, a luxurious brand, so luxury, styling and so and so forth. Slowly, we have taken the stance of it being a functional brand because people saying that extra premium for a product needs to see a value add. So you see the new TV ads that are coming up in terms of lab tests coming up showing how it is stronger, how it is reducing hair fall, et cetera. So Almond Drop is clearly on the air first time. That's why you see Amla where we have changed, the subtle change of other things. So that's talking of silk, luxurious and so on. If you were to look at both of our ads, that's how it is very, very different. So this is what we are pushing as far as our brands are concerned. But if you're looking at specific just only anti-hair oil, yes, we might be looking at some of the premium range of products, not only be anti- hair fall but there'll be many other criteria we're looking at. Whether you're talking about the organic oils or the anti-hair oils, et cetera. obviously, as being a hair oil player, we are also scanning those markets and also looking at what -- where we feel we have some rights to win. But there, unlike, let's say, coconuts, there we look at how can we offer a differentiated product in a cluttered market so that at least we can have some consumer eyeballs there. So that is what we are looking at, and that will give a curated content as we go forward with the launches.

Okay. And just some data points. What would be your rural contribution to overall sales -- and rural contribution and also retail contribution to overall distribution? And in terms of direct distribution, you have been penetrating markets or servicing markets better through your van operations. But are we also appointing such stock in what would be the number in terms of distribution now versus 1 year back or whatever period you can take?

Okay. So Abhijeet, let me start answering before I forget it. So the first question is rural to urban. So as I said, rural has now overtaken urban. So it has a higher than 50% contribution. Urban is lower than that, but that's just a little higher than 50% as far as rural is concerned, just a little less than 50% as well as urban is concerned. So thereabouts percentage points. I don't know to get the exact number. If you want the exact numbers, just a little higher. Let's put it that way. So about 3%, 4%, 5% difference between urban and rural. So this is where we are. So 52% and 48%, let's say, if you want a number. In terms of -- the other question is very important to me. And in fact, that's a far more important question to me. The distribution of retail and wholesale in the business. Now out of that 50% in urban, we typically used to operate with a 15%, 16% to about 30%, 32%, 33% kind of a thing, which is really close to half of the thing. And that, in my mind, is one of the key -- let me put it the way, a key area of improvement for the company. That retail needs to touch wholesale in terms of overall numbers, unless -- because that is the base strength that you would want to put in as a company because you will want to have a control on the channel that you have. And that is the right direction we have got into. That number is now up to 20% and 30%. So 20% and 30%. We are now having a 20% coming out of retail and 30% or rather 40%-60%, if you want 100% being all of it. So 40%-60% this thing, which we now push for 50%-55% in this thing and not by reducing wholesale but by upping retail the way we have been. So that is going in absolutely the right direction. So this were -- sorry, you were to ask the third question. What was the third question?

Yes. In terms of pure direct distribution appointment of maybe, some soft year increases of profits or distributors now versus 1 year back or 2 years back?

Yes, correct. So again, distributor numbers remain over 1,100 or so. So there's -- if you ask me, has there been a large increase in the number of distributors or not? The answer is no. But what we are looking at in terms of rationalizing some of these distributors, the underperforming distributers, those corrections have already been done. Not major number changes happened. But yes, we are looking at foot on ground, increasing the number of these. I mean that is something that we are wanting to do. As our van sales have improved and our direct distribution went up from 5.5% to about 8.5, 9-odd lakhs as far as numbers are concerned, we are also looking at how we can have a little better direct nonbrand approach towards that. So that strategy will keep on working. I mean, obviously, situations like COVID and rural, et cetera, does not help in that. But on the medium to long term, that is what we would want to, have more sub-teams directly for us, feet on ground so that we can control that network and not only through ad sales. So this is the gradual upgradation that will keep happening, and we are in the right direction for that as well.

Okay. On any sense -- can you put any sense on expanding your penetration in your noncore geographies? Like there are geographies which are large for you, there are geographies which are smaller for you. So have you found some promise in newer geographies and there you have expanded your distribution? I know last 1 year has been or 1.5 years has been really difficult scenario to really do that, but anything on that?

So again, this will be 2 parts. If you're looking at increasing distribution, there will be 2 parts to it. One is obviously where you are represented poorly or suboptimally. Obviously, the upside is high, but the difficulty of entry is also high. So that is what we are trying to address with some of these launches that we just talked about. So at least we're able to have some presence in this network. So Southwest, where we are a little less represented. The other part of it is also while we are doing that and we're also looking at also increasing penetration in places where you have high market share because at 20% is not high market share. When you have 50% market share, then you can talk of high market share. So there, we still see potential, and that's what has come out. I mean, in places like Punjab, et cetera, many other states, I don't want to mention all of them. But all of this, we have seen great upside happening because of just our ability to go further deep into the distribution into even lesser villages. [Foreign Language] last mile, we have been able to cover all the advantages. And that is something that we'll continue to exploit further and further. We were -- with the SKUs that we had launched in ADHO in the smaller packs, the INR 20 pack, et cetera, as well as on the other side, Amla that has pushed. So it has helped in the Northern belts where we -- our market share was high, but still good distribution. Now we are pushing the ones which is with a lower distribution, with a lower market share.

Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.

Thank you so much. First of all, thanks, all of you for an engaging interaction. I think a lot of interesting questions and all of you must be, I would think a little set back by the kind of growth that we have had. But as I said -- I mean, I'm not really that concerned because the reason why we saw this lower growth with Central and wholesale, et cetera, has all come back in June and July. So I would be more keen to see how our Q2 and Q3 goes, and that seems to be right on pace. Also, I'm happy that all the plans that we have stated at the beginning of the year, even though there this was 2-month impact, none of the time lines of any of the initiatives have changed. Our initiatives exactly remain as per plan. So while April has been a disaster, the total overall in terms of keeping track of where we wanted to go as far as top line is concerned, it remains bottom line. We knew would be under pressure. It is under pressure. We will continue to monitor that. I don't think further bottoming out as possible. But we'll have to come back a little bit as far as the bottom line is concerned, which is what we'll try and do both in terms of looking at what kind of price increases, if any, possible and in terms of sourcing, but a lot of the supply chain efficiencies that we'll start slowly building into the system, which will have its own impact on the growth. So overall, more or less, we sit in a comfortable position. The team is in place, and we are just waiting to see what happens in Q2 -- the balance part of Q2 and Q3 and let's see how the guidance goes. So thank you all for joining our meet, and stay safe. Thank you.

Thank you. Thank you, members of the management. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.