Bajaj Consumer Care Limited ($533229)

Ladies and gentlemen, good day, and welcome to the Bajaj Consumer Q4 FY '26 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. Ashutosh Joytiraditya from ICICI Securities Limited. Thank you, and over to you, sir.

Thank you, Sagar. So hello and good evening, everyone present on the call. I, on behalf of ICICI Securities, welcome you on Bajaj Consumer Care's Q4 FY '26 Earnings Call. I would like to thank the management for giving this opportunity of hosting the call. . So from the management, we have with us Mr. Naveen Pandey, the Managing Director; Mr. Dilip Kumar Maloo, CFO; and Mr. Akash Gupta, Head Finance. I now hand the call over to Naveen for his opening remarks. Thank you.

[indiscernible] here to share the update of quarter 4 FY '26. In an extremely volatile environment, we've been able to deliver an extremely solid quarter. In this quarter, we registered a strong growth across all segments, channels and markets, building the confidence behind our brands and the strategy chosen by us. . Before I get into the details of the quarterly results, I would like to highlight that we have ended this year delivering a net revenue of INR 1,153 crores at a growth of 21%. This is special for us as this is the first time we crossed INR 1,000 crores more. Further, we have delivered a gross margin of 16% and a full year EBITDA of INR 224 crores at a margin of 19.5% and a full year PAT of INR 190 crores at a PAT margin of 16.5%. It has been a year of turnaround for us and sets the base for the company to March. Coming back to the quarter. In quarter 4, on a stand-alone basis, the revenue of the company stood at INR 308 crores, a growth of 28% year-on-year. On a consolidated basis, the revenue stood at INR 327 crores with a growth of 32%. Continued the work on margin expansion. Our gross margin stood at 63% for the quarter and 60% for the full year. registering a significant improvement of around 650 basis points against the last year on a full year basis. This improvement in gross margin, as previously shared has come on back of a mix of actions around strategic pricing, the revenue management and mix improvement. In the previous quarter, we also optimized the MLA of some of the key packs based consumer insights and revenue management principles, which delivered a realization improvement for us. We feel extremely confident in the place where we have reached with respect to our gross margins and intend to now operate in the same zone over a medium-term basis. Consequently, EBITDA on a stand-alone basis for quarter few grew by 131% to deliver an absolute EBITDA of INR 78 crores for the quarter, which translated into an EBITDA margin of 25%. On a consolidated basis, our EBITDA was INR 77 crores, which was a growth of 135%, translating into an EBITDA margin of 23% and 7% . The stand-alone impact for quarter 4 stood at INR 64.1 crores with a margin of 20.8% and the consolidated staff was INR 63.6 crores with a margin of 19.5%. In the current quarter, we saw a continued recovery in our general trade channel, which grew ahead of the other channels and has delivered a strong team growth on a full year basis. This performance came on back of a strong momentum on our key brand ADHO and the distribution efforts could buy us through project our own. Both urban and rural channel and within the urban channel, the key sub channels, retail and wholesale have done well for us. The Roval business, which was muted in H1 and saw a revival in quarter 3 continued with its strong performance in quarter 4. Organized trade as a channel continued to perform well. It registered a strong 20s growth Y-o-Y in quarter 4. And within organized trade, modern trade and e-commerce performed well and ahead of the channel. However, the performance of CSBCPC was muted. . At a channel level, now we have covered a significant milestone with OT as an overall business contributing 30% to our overall sales. This gives us ability on the scale to premiumize and innovate at a much faster [indiscernible] in international business, we overall had a challenging year. This business declined in this quarter. In the key markets of Nepal and Bangladesh. However, we saw growth and the highlight for us in this channel was the breakeven of Bangladesh and further margin improvement in Nepal. We will continue to grow the businesses in Nepal and Bangladesh on a profitable and a sustainable manner. At an overall basis, in IB, we also had a leadership change. And with the new leadership, we have renewed our efforts behind getting and fixing the markets of rest of world in MENA, and I'm confident that we will soon be seeing a turnaround in this business. Moving ahead at a brand level, ADHO has delivered [indiscernible] here with a full year revenue growth in the 20s. What gives us great joy is that while this growth came across PAT groups in China. At groups and channels. At a volume level, for this quarter, we had a near double-digit growth on a brand on an adjusted ML basis and a mid-single-digit volume growth on an absolute basis. We continue to register volume market share gains on the brand on a quarterly as well as the MAG business. Our consolidated advertising spend for the quarter were up 34% against the same period last year. We are very happy with the SOV intensity being maintained by us and by the performance of our digital campaigns across various platforms. Moving ahead, we are happy to report that in FY '26, we have delivered a revenue of INR 225 crores from the non-ADHO portfolio, which we internally refer to as group portfolio. This portfolio is already a positive contribution portfolio and a profitable portfolio for us. . And we will be further focusing on growing this portfolio to around INR 500 crores in size over the next 3 years. Within this, while Bajaj Coconut and Bajaj [indiscernible] would be the 2 brands in the portfolio. We will use a combination of scaling up some of the existing brands and introducing some new brands to help us achieve our ambition of INR 500 crores. Mangara, which was in its first year under Bajaj ownership, saw a double-digit growth for the year and a low-teen margin delivery. We feel confident about our ability to scale this business further through brand building, distribution expansion and portfolio augmentation. On input costs, the war in the Gulf has created extreme volatility in the prices of LLP and packaging material. It has also delayed the price pooling in case of [indiscernible] and copra, which have held on to the pre-volume levels that I've not fallen further as expected earlier. We are monitoring the situation on a nearly daily basis and are taking calls as need. We believe that this situation will need us to take pricing and optimize costs across the line. We are already in the process of executing these changes. Despite the current situation, we feel confident about our ability to maintain margins in the current approximate range. However, as the situation unfolds over the next month or so, we will freeze our strategy and continue to fine-tune our actions over the subsequent quarters. Overall, like we always maintain, we will remain focused on strengthening our brands to enhance advertising and digital spend and through further expansion of our digital footprint. And -- basically through such focused execution and continued capability building. We will focus on unlocking the next road of growth for BCCI. Thank you, and back to you, Ashish.

Sir, should we open the floor for questions?

Yes, please. .

[Operator Instructions] Our first question comes from the line of Abneesh Roy from Nuvam Institutional Equities.

Congrats to Naveen. Extremely strong performance. My first question is specific on Q4, I see that generally in hair oil seasonality is a bit low. But in your case, you have managed to deliver almost 6.7% quarter-on-quarter sales growth. So I wanted to understand if you could give some color, how much is volume is volume, the main driver behind the 6.10% quarter-on-quarter growth. And if I see the cost of goods sold, it is down 3%. So it's not matching, obviously, if I take a presumption that most of it is volume growth. So is the decline happening because maybe copra has pulled off or obviously, is not a very big RM for you. Sir, if you could explain this math interesting performance, but I wanted to understand this matter.

So Abneesh, if you were to look at quarter 3 versus quarter 4, what you would see is margins have expanded a bit for us. So obviously, there is a margin expansion and that has come on account of mix change and positive mix movement for us. Within that, obviously, big brand has done better between Q3 and Q4 is much more sensitive for us to reveal. But what you will see is that we have improved margin. But at a volume level, overall, we are in the same zone by and large as we were in the quarter 3 versus quarter 4. So not much change. But within the brand, there is obviously a mix change for a more accretive mix for us in this quarter, which is yielding both a margin improvement as well as a revenue uplift.

Sure. Last question. So what you said in your opening statements on the pricing part. So we have already seen many FMCG consumer categories have taken price paints, edible oils, so companies, addition companies have taken price [indiscernible]. So if you could tell us, for your company broadly, LLPs packaging is what portion of the raw material because that is fairly understandable given direct and indirect linkage to crude oil is there. And second is a great 9 months start to your tenure, how much does the hyperinflation become a challenge? You did mention that the band of margins, you are reasonably okay with achieving in the near future. But in terms of the template or strategy or in terms of challenge, how big is the challenge, given it's a hyperinflation?

So Abneesh, for the first one, what I will say is that if you look at seed oil, basically, which is mastered, almond also behaved very closely in line with the overall oil index. And hence, nearly 100% of our cost base is under inflation. It is that some of them is under maybe a 50%, 60% inflation and some is under that 20%, 30% inflation. So I think every -- the entire cost bucket is under inflation. Where we are fortunate is that we have -- we are holding good positions, which cover us for a good portion of the quarter and which will help us buy time to tide over this cycle. And hence, is this 3 [indiscernible] in the near term, in the next few months, I think the impact to us as an organization and what we will need to pass to the consumer will remain limited. Second question, I will come to what actions we have taken. So in the 1 quarter, quarter 4, we've already taken certain MLA adjustments, which we have mentioned about, which also basically help in terms of margin for us. And in this quarter, I think we will have to take some out of rental pricing as well to manage the quarter. So I think these 2 are a given set of actions, which we will be taking. Now quarter 2, quarter 3 onwards, the scenario could be that we might see cooling off and is coming back to at least a new normal, if not the old price. And if that happens, I think we will be in a much better position. If the hyperinflation continues and is that continuing right now, we will have to further fine-tune our actions going quarter 2 to see how we will continue to protect our margins and be fair to the consumers at the same time.

Your next question comes from the line of Binay Shukla from PhillipCapital India.

So just first question on the [indiscernible] So this [indiscernible] drive up by those to IT. So I just wanted to get us some sense on within the GT. So what would be the growth mix with retail [indiscernible] process versus [indiscernible]

All I'll tell you is the full year basis, GT has grown high teens, Binay. And if you were to look at urban, which is the combination of direct retail and wholesale has performed higher for us as compared to rural. So if you take a high teen number, we are nearly 20 is in terms of when it comes to retail and rural is basically a bit lower mid-teens kind of a number. I think that is what I'm comfortable sharing.

Understood. Lastly, on the user side, the market has growth in time was very strong to the year. So is it a [indiscernible] change in macro environment? Or is it a category ship being the [indiscernible] market?

Sorry, can you repeat, Binay, the first part? I was not able to hear you clearly.

So the second question was on the rural market. Since this real market growth was very strong throughout the year. So [indiscernible] very keen to know that this growth was largely driven by the improvement in macro environment? Or do you see that there is a category shift within the [indiscernible] market form a upgrading from point a oil to [indiscernible]

So Binay, actually for us, Urban has performed better than rural, if you look at a full year basis. the rural has not outperformed more for us. And we are a more premium brand. And hence, if there has been any shift or benefit to the category on the bottom of the end brand. I think we are less likely to feel it as compared to some of the other players. But for us, our turnaround in both urban and rural has been a direct action of our focus on our brand, fixing the advertising on ADHO and basically having strong investments behind the brand as well as fixing our go-to-market through project our own, wherein we are focused on enhancing our direct distribution and just gearing our system up to date. So I think those are the things which have worked for us overall in GT. And that is what we attributed to. And again, within that, Urban has outperformed.

Okay. Just last question. So what percentage of growth improvement should we see from your projects are new initiative in FY '27.

See, if you were to look at it, what we've experienced, this is around anywhere we give it to 2% to 3% improvement delta performance for us. in places where we have done 1 versus places where we have not done our own. So I think that is the kind of benefit which [indiscernible] is yielding up, and that is what we should keep on expecting from the new states where we will go and deliver ROI. .

Your next question comes from the line of Vivek Gautam from GS Investments.

Yes. Congratulation, sir, on good set of number. My question is first one is are there any one-offs in this quarter? And are these numbers sustainable? .

There is no one-off with it. The only thing is that we have -- basically, we've acquired a company in quarter 1 of this year called Vishal Personal Care, which is seeing its first year into the consolidated revenues. So that is basically there is no base to that. I think beyond that, there is no other one-off or any additional item which you should be considering.

Secondly, the -- is the - if the hair oil sector is a start of a sunset sector in the -- especially in the young generation and [indiscernible] generation today and versus rural and versus LLP vessel natural oil based also how are we placed [indiscernible]

I don't believe hair oil is a sunset sector. It's a $2 billion-plus market with a 20% plus margin with a 92% penetration. There are not too many categories in the country which have 90% penetration has basically such large basis, continue to operate profitably and grow at a high single digit year-on-year. So I think this question basically has been there for the last 20 years, where the hair oil is a sunset sector, I don't believe airlines context. It's a mature capital that. And I don't think that is something also which is a worry for a company like us. we are extremely high headroom to grow within the category. So that's the way I would choose to respond to your view.

Sir, actually, sort of explaining the [indiscernible] otherwise, the numbers have been quite good. And what changed actually has recently started taking the company, sir? So what changed the company because it used to be -- you're coming in has proved to be a sort of a catalyst and there were a lot of old brands, Luma, Bajaj Amla and other things. So we're not -- how are they performing? And what have in the last 2 years of rule, what have been the steps taken by you to move the company to a mixed of it?

I think let me say on the commentary, I think actions basically start much before we start yielding color. So there is a lot of action which basically the team has picked up even before my joining, and we've continued a lot of it, and we've added some more often. But essentially, what is working for us is very simply 2, 3 key things: focus behind our brand at ADHO, ensuring that we continue to support it with the right level of advertising, go back to our old aggressive levels, driving distribution and execution on the ground through projects like our own, but not limited to it and many more. and really just sharpshooting priorities and getting the overall execution focus into the company at a high level. And I think that is what is working for us. Obviously, when you are on the early stages of exiting reversal, you get a lot of low line for hanging in. And hence, we are witnessing the benefit of that. But essentially, it is these set of actions which are helping us where we are. .

We especially appreciate in view of the slowdown in India and the overall FMCG sector our company is section? And how is the opportunity size and the expected growth rate for us in India and export. .

We have less than 10% market share in our category. So less than 10% category player basically shouldn't worry about too many things. we just have to execute and win our space and gain more share in our category. I think that is where we are focused. We operate in certain international geographies, I think we will do that. But our bullsize focus is and will continue to remain in India while we do some of the work behind our international business. I think India will continue to remain our focus market and we want to gain and get to a much higher market share than where we are currently, and that remains our priority #1. .

So then India especially remains an attractive market for us versus [indiscernible] or...

No, I think all markets are attractive for us. But yes, south is an opportunity wherein we have very little penetration and very low share. And hence, the opportunity to have a delta would be much, much higher, whereas there is enough and more data available even in the Hindi-speaking belt and Maharashtra and Benal and the other states. So I think there is no single state in the country wherein we would not aspire to gain share. yes, the aspiration of how much gain will differ from state to state plus to cluster. But we are at a level where we would aspire to gain share across all single markets all channels. .

Besides that massage oil is also the category, I believe, and health benefits for the same is being recognized by [indiscernible]. .

Your next question comes from the line of Percy from IIFL.

I just wanted to understand what has changed between last quarter and this quarter. In the last quarter's conference call, you had mentioned that -- for now, the margins will take a pause at the current levels, which were at around about 18.5%. And then after a few quarters, we will see the journey towards higher margins. whereas now we have seen in 1 quarter only the EBITDA margin going up 500 basis points sequentially. So what has changed for the outcome to be so much different versus what your commentary was.

So again, Percy, the commentary always has to be taken directionally. Please, I will hear that again and again. But coming to your question, what is the -- what are the 2 things which are happening. I think 1 action, which is the action which I talked about that we have taken for an [indiscernible] reductions, and these average reductions have been supported by a high level of transaction growth, which has not impacted overall revenue. And hence, being able to take MLS reduction and hold on to revenues as well as expand margin. . Also, there has been a little bit of favorable mix movement between quarter 3 and quarter 4, which I spoke about early. I think these 2 things are helping being in a place which is slightly there. Also, what you will see is that on an absolute basis, quarter 4, the revenue delivery has been higher than quarter 3, and there is a good delta between quarter 4 revenue and quarter 3 revenue. And in our case, at a gross margin company when you have a higher revenue delivery, it flows through. So I think you are witnessing a combination of these things to get there. But over delivery on revenue is also a very, very key factor. .

Understood. So the MLH reductions have happened before the cost inflation has actually hit the cost inflation started only in March, and assuming that at least some inventory you have, it will hit probably in Q1 or Q2 -- so just wanted to understand, in light of that, what is the sustainable margin that we should take over the next 2 to 3 quarters? because this INR 23.2 or 23.4%, whatever you've done this quarter is on the back of effective price increases through ML reductions before the cost inflation has come through? .

So Percy, I think what we need to see is that, again, our operating desire range does not change. We said that anywhere . From low 20s to mid-20s is where we would aspire to operate, and that is where we continue to aspire. Our objective will always be to enhance revenue as much as we can by remaining within this zone. And I think that is what we will intend to do. As far as coming quarters is concerned, as we speak today, we are not worried, but then you know it's a dynamic situation. I think we will remain within this range is what I spoke about previously. That is what we feel at this moment. .

Next question is just wanted to know your plans on the non-ADHO portfolio. You have said that coconut is 1 of the focus areas what else are you going to focus on? And what is the kind of pace at which we should expect diversification in the company in terms of like this year, you've done 20% non-AD how much should we take over a 12-month period as well as a 36-month period in terms of -- I mean I know you can't give exact numbers, but just directionally, whatever commentary [indiscernible] .

We want this portfolio to basically become a close to a INR 500 crore portfolio over the next 3 years, which means it has to do active kind of CAGR. Our core brands would basically give anyway said that if we do around a double-digit revenue CAGR over a period, we'll be happy you can basically do the math when prime [indiscernible] lending.

But what are the -- what is actually the plan or what is the action that you are...

Within the portfolio. So again, you will see us doubling down on Banjara's portfolio, where we believe we have a significant scaling opportunity. We believe we have a significant scale-up opportunity on Cocoa. There are a few brands which we are tweaking and playing with currently, which are part of our portfolio, which we are kind of testing the model and seeing what can get scaled up from the current portfolio. And this year, you will also see certain new launches come into the market, which we are hopeful about. So I think it will be an action on multiple fronts, and hopefully, some of them will become big to contribute to the INR 500 crore aspiration we have.

And the INR 500 crores would we be independent of any future acquisitions, and that would add to the 500? Or are you saying that 100 is including any sort of -- or rather you would need some small acquisition to reach that INR 500 crores in the 3-year period.

I think when I'm outlining our aspiration, we are outlining with what we have today, we buy something else that should come as a top up.

The next question comes from the line of Amit Purohit from Elara.

Congratulations on a good set of numbers. Just a clarification from your previous statement that you made on volumes, the first question asked. So you said broadly volumes are similar. It is a mix improvement and some LL reduction, right? So that is how one should think about, right? So we see volume growth broadly closer to like double-digit or mid-teens in that range. How does one think about it? Because you see the [indiscernible] kind of volume growth.

So Amit, I'll tell you, we give -- we primarily indicate volumes for ADHO because otherwise, we have a very varied portfolio. So we're giving ADHO, which is the main brand for us to get a sale. We told in Q3 that we have a double-digit volume growth. In Q4, what we have called out very clearly is that if you take MLG adjusted growth, that is just about double digit. And if you were to not take ML adjusted, but to take just pure, it will be mid-single digit.

Sure. Sure. And sir, just on the distribution side, one of trying to understand the channel dynamic is playing out. Also last quarter, we indicated that I think, correct me if I'm wrong, but GT is not doing that well. It is the urban channel, which was doing pretty well versus the [indiscernible]. And the difference was almost like 700, 800 bps higher rural growth versus urban growth versus over growth. And the organized channel continue to do well at that time also now also. . So if -- from a broader mix, it's 30% is organized sale, which kind of is doing well, growing in '20. Now the GT has also started to do well. So what -- I just wanted to understand, last quarter, there was basically a point that your wholesale channel and direct reach in urban is doing well. So how do you think that this can continue, especially on the urban side, driving wholesale as well as the direct reach incrementally in FY '27. For us to have this -- like I understand that the organized rate can do well, but the rest of the portfolio, if you could give us some clarity of it.

See, Amit, the new levers which we have executed in the market have kind of, in a sense, reset our revenue to a new base. Now this new base will give us, hopefully, a very high growth momentum at least for another 2 quarters before it tapers down, wherein we will start overlapping very high growth basis. But we are also at the same point of time executing the next set of levers, which are required to continue to drive growth. So I think that's how the cycle of growth or us. We have executed certain levers, which are giving us the benefit today and we then now are starting to work on the new set of [indiscernible].

And this new set of [indiscernible] one indicated that could be new product launches and your expiration of going beyond and the others would be largely around distribution itself?

Yes. So what we've also said is that Ron, which has given us good benefits. We are getting into the third phase of our own, which involves us going to 5 new states where we have not gone so far, and we would be executing our entire playbook of our own in these states. We have started the work towards the end of and we will work and extract the benefits of the project in those 5 states through this year [indiscernible]

And just lastly, on the margin side, how do you think about the outlook for, say, next 2 should we think somewhere in the band of 19% to 20%? Or should it could be higher also, money or [indiscernible] different type of [indiscernible] .

Let me clarify, we don't give guidances. So I can't give you a guidance on where it is going to happen, that's [indiscernible] an environment like this. Where and -- which is our happy zone, I've already indicated there is no fun doing that again, but guidance is we don't give. Please excuse me for that. .

The next question comes from the line of Shirish Pardeshi from Motilal Oswal.

I just have a few questions, should the INR 1,153 crores, what would be Vishal or [indiscernible] contribution?

Less than 5% [indiscernible]

Okay. You mentioned that Bandar is still fully not to the level of -- in terms of profitability. So what can change is the back-end supply chain improvement will lead to margin expansion? Or will it be scale or maybe throughput?

I think the biggest benefit will come from scale, Shirish, because this business is still a sub INR 100 crores business. I think as we get this business to INR 100 crores to INR 200 crores size, I think there will be a lot of scale benefits, which will automatically flow through because the categories which we operate in inherently are high gross margin category. So at a gross margin level, we don't have a worry. It is about the next flow-through. Also at what we kept in light, Shirish, is that we are continuing to operate Bandra as a separate business unit because we believe that is the best way to execute on the business. But what that means is that we are not fully optimizing on the cost of integrating to minimize cost. And that's a conscious choice from our side to drive up revenues. So I think will scale up and with the revenue is becoming larger, I think would be the biggest lever for improvement in Banjara profitability. While others will also do everything which you said will contribute, but the largest lever will come in from here.

Okay. Second question on ARO. In the first phase, year of operation in Delhi, Haryana, [indiscernible] that. Is there a material contribution change from these states, which has happened. Maybe if you can help me the number, what is the current contribution from these 4 states?

So Shirish, I think what I'll tell you is that between RO and non-RO. We are roughly seeing around a 4% growth delta. So that is to the extent of what is coming out of Also, let's say, that the businesses which have gone through R1 roughly are around 2/3 of our current business and 1/3 of our business is yet to go through our RO. I'm giving you broad ranges, I think that's the best I can do.

So the 1/3 what you are saying is the Bihar, Gujarat, Jharkhand, Orissa.

1/3 is what will go in this year in FY '27, 2/3 has already gone, which means that it's already basically we have executed us. And the benefits we are always in -- into our P&L, and we are continuing to work on extracting more.

So I assume that in second half of FY '27, all the states will undergo through the RO. So do you think this 4% contribution, which growth contribution you're seeing is sustainable from the entire project?

I think 4% is sustainable. There will be a lap up which will start happening statewide there. So that might lead to some tapering, but we have done enough mixes within the current set of states and various kind of models, various people, various interventions. By and large, a delta is holding true for us. So I feel very confident about that. When we get into [indiscernible], I think we will also figure out how it is unfolding.

Sorry, I'm switching a little more. On this Aroha, our core product, which is ADHO is driving the growth which is there or it is non-ADHO portfolio, which is helping us to penetrate the market?

I think ADHO is seeing a larger benefit as compared to the other ones because ADHO is seeing benefits across GTM types. It is seeing benefit in carbon a distinct benefit in wholesale is benefit in rural, whereas the other portfolio is primarily seeing benefits in retail, where we are going ahead with that playbook. So at an overall basis, ADHO is a larger beneficiary of the R1 exercise.

Okay. Last 2 questions. What is the total FY '26 wholesale contribution urban rural mix?

So the way I will say is roughly 70% of our business is GT. Half of it is and half of it is rural within the Urban half, roughly half of it is wholesale. -- are, by and large, basically channel mix as a status.

No, why I'm asking this question because quarter 3, most of the FMCG companies said that the GST stability is yet to happen. So my question is more inclined towards now GST dispersion would have settled. So is there a channel filling or maybe if you can give me an STR number or maybe create a mix.

There is no channel filling for us, Shirish. There is [indiscernible] some challenge.

This inventory in the trade is normalized to the level before GST devices [indiscernible].

We are very happy with the level of inventory we have actually trade has not seen any major stock up at a distributor level also, our inventory is very lean, and we are very happy with the stake of our inventory [indiscernible] .

Okay. And the last question, I think we've spoken a big number in terms of coconut and its family. So if these efforts are in on and we still bank that South is going to be a key entry point with coconut -- and what is the effect which has happened or it will be a tactical opportunity.

So Shirish,, INR 500 crores when I'm saying it is out of the growth portfolio, it is not out of coconut. It is out of the growth portfolio, which includes open. So coconut will harm a part of it. It wouldn't be INR 500 crores out of coconut. If you've integrated in that way, then just please take a note of that correction. Coconut is an important part of our strategy, but that is not the only strategy which we have. And again, similarly, while South is a gain strategy for us. Our attempt and our game is not only focused on south or only restricted to a south.

And last, if your growth in terms of volume ADHO, what is the non-coconut or maybe you can specify the value-add hair oil category growth in the quarter? .

So value-add basically series, Shirish, for us, if you were to look at within value-added hair oil 98% of value-added oil is ADHO, which we already disclosed. I don't think so there any point further dissecting that number into the balance store.

The Next question comes from the line of Gurit Singh from Countercyclical PMS. .

Congrats on a great set of number. I would like to understand a couple of things. So firstly, regarding the margins currently. So we see that LLP prices are peaking on the [indiscernible] basic packaging prices also are taken. But in the previous discussion on previous discussions, you mentioned that I mean, you don't see any problems as of now in terms of margin, I mean, at the moment. So I would like to understand how are you managing the situation currently with that you delayed purchases of raw materials and are waiting for prices to pull down because you already have inventory, I would like to understand, I mean, how are we managing it?

We have inventory. We are being cautious about purchases. We are managing pricing very, very closely and will narrow that. That's all I can share as of now.

Are we taking any place is this looking at the situation? .

Yes. Already outlined in my statement.

Got it. So you mentioned that one of the levers for higher margins this quarter was how is performance and the revenue. Generally for a company, we see that there is not much cyclicity in terms of revenues, the quarterly, they are more or less 5% ARPU down. So considering this -- I mean is it fair to consider this around [ 315 ] [indiscernible] to give a new base quarterly? And considering that we have reached this outperformance revenue, as you mentioned, should we expect, I mean, the sweet spot of margins that you mentioned to continue and this being one of the reasons for it?

We have already given we will not give margins on basically, we will guide your guidance on margins. But what we've repeatedly said we aspire to maintain margins between the low to the mid-20s. That is what we'll aspire to do. That's all I can say. .

The next question comes from the line of [indiscernible] Shah from Vivo Commercial.

Congratulations on the great set of numbers. Sir, I just want to understand what would be our [indiscernible] strategy going forward in FY '27?

We will continue with our strategy. Almond Drop remains our focus brand, and we will continue to double down on that. additionally on the growth portfolio, we will continue to invest behind select debt, which we will make on a quarter-to-quarter basis to dial up some portions of the portfolio.

So going forward, basically, the advertisement and sales promotion are the cost of 14% of the revenue [indiscernible]. And is there any decrease in FY '27, we can expect because the even 20% increase in the advertisement expenses. And it's almost around 15% of the revenue. So going forward is it going to be decreasing?

What we are witnessing is a very volatile situation on input costs and actions. I don't think so. I will be in a position to give you forecast on a line-by-line level basis as to how we will manage each one of the cost lines and the revenue line. I think it will be impossible for me to do so. If you were asking a question from a year perspective, if you are asking a question from a multiyear perspective, we believe this level of advertising is the right level of advertising for a brand like us and you want to maintain. But what will happen next quarter, what will happen next year. I'm not in a position to tell you because this position is extremely volatile, and we will basically respond as how the market base. .

[Operator Instructions] Our next question comes from the line of [indiscernible] Jay from Swan Investments.

Congratulations on a good set of numbers. Sir, my first question is, I'm just looking at your gross profit Y-o-Y? And when I look at your chart relating to all RMs, you see an increase there. And given that we maintain only, I think, 20% to 25% of RM inventory on our balance sheet. So I'm just trying to understand this 54% to 64% improvement in gross margins, obviously, you mentioned somewhat on the revenue front. But wouldn't they have replaced some inflation in the cost procurement side? Or do you think we were sitting on some low cost inventory for this year?

So your question is consumption inflation as it as in quarter 4, the answer is, by and large, no.

No. So I just frame my question, I'm just trying to understand with the 30% top line growth, COGS increase of 2%. So I'm just trying to understand how have we managed to do this.

I responded to that earlier in my I think. It's come on back of a mix improvement as well as ecentricing actions. So that is basically -- you will need to deflate also. Anything else, which you want to add? .

Sir, you also mentioned that this gross margin now sets the base for next year. So you were talking about Q4 as the base or the full year gross margin of 60%.

Again, as I said, given the volatility of the situation, it is impossible for me to give you any guidance. We [indiscernible] don't give guidance as a principal. Further, I think we can't give you a guidance. What I meant was that we are in the right zone. There are set up the -- you have to look at it from the context of where our P&L was 4 to 5 quarters back wherein we were at possibly 1 of the lowest levels of profitability. This company has been over a decade, 1.5 decades. And I think from that point, we have taken a series of actions to basically get the revenue growth back up to get the margins back up. And I think there have been a set of actions which have followed over the past 4, 5 quarters for us to reach here. And it is in that context, I had mentioned that I believe a lot of the hard work which we have done is behind us, and we have now reached a place wherein we can continue our steady operation. And the task of fixing where we had reached where we want to be is by and large. I think it is in that context that segment has to be interpreted.

Okay. Okay. Got it, sir. And just last thing on the non ADHO actor, INR 225 crores is the [indiscernible], right? So I'm just trying to understand if you remove INR 50 crores, INR 60 crores of Banjara, the balance would be split in in coconut and amla, right, and a majority of that would be coconut. Is that a fair understanding?

A large part will be coconut, yes. .

Thank you. Ladies and gentlemen, we will take that as our last question for today. I now hand the conference over to Mr. Naveen Pandey for closing comments.

Thank you. It's been a very strong year for us with review crossing INR 1,150 crores in margins recurring back to respectable levels from the all-time lows we [indiscernible] over past year or 2. We began our journey of diversification of reducing the dependence on ADHO and within that, in the JT channel. And I think both on channel diversification as well as portfolio diversification. We are in a good place in that place, that's really a springboard for us to continue to go forward. And that is what we will be working on and accelerating. Again, we want to reiterate, but we will continue to focus on brand building and focused execution in the market, which we believe will unlock the next layer of growth for us. Thank you, everyone, for attending the call, and have a great evening.

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.