Dabur India Limited (DABUR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 Results Investor Conference Call of Dabur India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Gagan Ahluwalia. Thank you, and over to you, Ms. Ahluwalia.

Thank you. Good afternoon, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to this earnings conference call pertaining to results for the quarter ended December 31, 2023. Present here with me are, Mr. Mohit Malhotra, Chief Executive Officer, Dabur India Limited; Mr. Ankush Jain, Chief Financial Officer; Mr. Ashok Jain, EVP, Finance and Company Secretary; and Mr. N. Krishnan, DGM, Finance. At the outset, we will have an overview of the company's performance by Mr. Mohit Malhotra, and that will be followed by a Q&A session. I now hand over to Mohit.

Thank you, ma'am. Good afternoon, ladies and gentlemen. Thank you for joining us today for the results call of quarter 3 financial year '24. FMCG sector continued to witness year-on-year improvement in volume growth, although there were pockets of stress due to liquidity issues and delayed winters. Impact of pricing decelerated, as price increases started to come into the base and growth was largely led by volumes. Dabur's consolidated revenue grew by 9.6% in constant currency terms and 7% in INR terms to reach to INR 3,255 crores. This was backed by 6% volume growth in India FMCG business, including Badshah's. International business grew by 11.7% in constant currency terms. Talking about the categories, HPC portfolio recorded a 7% growth during the quarter. Oral Care portfolio grew by 8%, led by volume growth of 5%. Herbal segment and Toothpaste category outpaced the non-Herbal segment by almost 200 bps, now reaching 31%. The Home Care category grew by around 7%, which was led by double-digit growth in Odomos with a gain of 1,067 bps in MRC category, taking our market share up to 65.2%. Odomos brand continue to outperform the category with an increase in market share of 180 bps. Hair Care recorded a mid-single-digit growth and our market share in hair oil improved by 140 bps, to reach 17.1%. The Health Care portfolio recorded a 3% growth for the full year CAGR YTD of 8.3%. We gained market share across the health supplement portfolio with Chyawanprash gaining 151 bps and Dabur Honey recording a 33 bps improvement during the quarter. The Digestives category saw a 15% growth on back of strong performance of Hajmola franchise. Within OTC portfolio, Lal Tail's, Health Juices and Shilajit performed very well, while Honitus had a muted performance in the quarter due to delayed winters. Our Therapeutic portfolio is performing well and is on track. In F&B portfolio, beverage business saw a growth around 7% during the quarter. The newly acquired Badshah business saw a growth of 33%, driven by focused marketing efforts and rejuvenated brand portfolio. We remain committed to exiting the year with a run rate of INR 500 crores from our Foods portfolio, including Badshah. We continue to drive our distribution expansion initiatives. Our direct reach stands at 1.42 million outlets and should increase to 1.5 million outlets by the end of the fiscal year. Village coverage is at strong 1.17 lakh villages, being ably supported by more than 18,700 Yoddhas across the country. The Edge score, which is the marker of the efficiency of the distribution, continues to see improvement and has been further improved by around 15% in the quarter. I am pleased to inform you that the Board of Directors have approved capital expenditure of INR 135 crores for setting up a greenfield plant in South India for capacity expansion of Red Toothpaste, Odonil and Honey. This will enable us to enhance our presence in South and add to our growth in this region. Now coming to our international business, with moderation and inflation and distribution changes, the international business registered a CC growth of 11.7% during the quarter. This was driven by MENA region growing at 14.3%, Egypt business growing at 43% and Turkey business growing at 43.8%. Our focus on innovation and consumer-centric strategies has enabled us to gain market shares across categories and countries. Coming to the consolidated profit during the quarter, our gross margin saw an healthy expansion of 310 bps, as we saw material deflation during the quarter. In line with our stated strategy, we have increased our A&P investments by around 36% in the quarter. We believe these media investments are essential to drive long-term sustainable growth and maintain our market leadership. The consolidated operating profit recorded a growth of 9.5%, with 50 bps improvement in operating margins and PAT grew by 8%. Excluding the exceptional legal costs, our operating profit grew by 13%, with 120 bps expansion in operating margin. On a like-for-like basis, our consolidated PAT increased by 15%. Overall, while the demand scenario is still challenging, we are cautiously optimistic about the future. We will continue to drive profitable growth across our business verticals, backed by investments in our distribution network, brands, manufacturing, digital and organizational capabilities. With this, I will conclude my address and open the floor for the Q&A. Thank you.

[Operator Instructions] The first question is from the line of Mihir Shah from Nomura.

Congrats on a good set of numbers. So firstly, on the Hair Oil and Oral Care portfolio. In Hair Oil, Dabur's performance seems to be better, while in Oral Care, the value growth now is in line with the market leader. Can you share what is working for us in the Hair Oil portfolio? And can this outperformance continue? While in Oral, what steps can be taken to get growth back to a higher trajectory? Is pricing growth can be under consideration? So that's my first question.

Right. So thank you, Mihir, for asking. So in Hair Oil, we have a strong performance in the Hair Oil, so we've gained market share around 140 bps. And this is a secular growth in all the subsegments of Hair Oil, whether you consider coconut oil, perfumed oil, cooling oil across the board we gained market shares. We had a substantial improvement in our market performance. So if you look at Amla portfolio, even perfumed hair oil has also grown and we gained market share. Sarson Amla has also done well. Coconut oils have also registered a 50 bps gain in the market share for us. So overall, while the primary sales was at 4.5, but our secondary business has actually improved further on, and we think the trajectory will continue. At the end of the day, we are only around 16%, 17% market share. We have a huge headroom of roughly around 80%, 85% of the business there, so Dabur has got a great equity in Hair Oils, and we are pivoting. So one thing that we can slow in Hair Oils is in terms of premiumization. We are stepping the pedal on the premiumization in Hair Oil also and trying to plug the gaps wherever we are not present. In last 1 year, we plugged the gap with cooling oil with launch of Cool King. And Cool King has gained a little market share of around 3% to 4%. And in the coming summer if summer is great, I think we'll gain the ramp up of our cooling portfolio. Ayurvedic Hair Oil has been launched in South India is also showing tractions. And we are launching premium variants on e-commerce and in modern trade. That's as far as Hair Oil is concerned. As far as Shampoo is concerned, Shampoo category is -- as far as Shampoo is concerned in Hair Care category is growing by 3%, we're growing by around 11%, thereby, substantial market share gains there. Our sachet portfolio has gained substantial ground in rural, driven by our rural distribution. And in modern trade and e-commerce, the large packs are continuing to do well. As far as Oral Care is concerned, our growth is 8%, backed by a volume growth of 5%, as compared to the competitor where it is only 2%. So therefore, we are substantially increasing our penetration. We are the #2 brand in the country now after the market leaders. And placated the #2 player, happens to be a very big player. We've plugged the gap in Oral Care also in terms of gel, Bae Fresh Gel is what we launched a couple of months back, and that's notched up turnover of around INR 17 crores and gained a market share of around 1% to 1.05% in the gel category. So we are also looking at plugging the gaps in other parts of our portfolio. That is on -- so Dabur Red continues to do well, growing ahead of the curve. So we gained around 8.8% market share as far as gel -- toothpaste is concerned. And Meswak we registered a double-digit growth, on back of market share gains. So our Herbal portfolio, still a lot of work needs to be done there. There, we test marketed ourselves in the South of India, and we'll be extending our Herbal Toothpaste portfolio across India also. So that's as far as the Oral Care portfolio is concerned. The penetration of Herbal category has actually gone up in the market. And I think on back of that tailwind, we will continue to ramp up our Herbal Care franchise as well.

Got it. Understood. So my second question is on the Health Care portfolio. Can one expect the late onset of winter benefit 4Q sales? Or will the inventory in the channel be sufficed to take care of the demand? And can you also talk about the progress in the therapeutic initiatives that we had called out earlier? What kind of incremental sales can be expected? And from when can we expect that, sir?

Yes. So there's not much of implication on the weather as far as the Hair Care portfolio is concerned. So I think Hair Care winter is muted. So we feel that Hair Care trajectory of a double-digit secondary growth for us will actually continue going forward, and we will continue to surge ahead of the category growth rates and gain market shares as far as Hair Care is concerned. And there's so much of potential there like I told you 80% market is still there. In shampoos, our market share is only 7%, and around 93% of the market is there for us to take and the Herbal category got a tailwind and on back of that we continue to gain shares in shampoos also Hair Oils. So I hope the summer is good. And Hair Cares were somewhat skewed for us. If the summer is good. I think the business will trend up well, but our strategy doesn't change. I think as far as Amla is concerned our strategy is to have flanker brands around our core brands of Dabur Amla and create moats around that and be present in terms of pack price architecture on all price points of Hair Oils. As far as therapeutic portfolio is concerned, we created the division for the advocacy, which is also selling the products, and it's grown by around 14.8%, around 15% growth of therapeutic portfolio, which is driven by baby care, our branded ethical division, and also our pharmaceutical division, by which we go to the dermatologist. So that's trending well and doing well.

Sir, I was asking for health supplement, the Health Care, not the Hair Care, sir. The late onset of winter on health supplement, health care portfolio.

No. my mistake. My mistake. I thought it was hair care. So yes, health supplement business definitely got impacted because this time the winter has been little muted, contracted and also delayed. So all three factors in the winter impacted our health care -- health supplement portfolio, so we call it. Basically, Chyawanprash and Honey we categorize in it. So Chyawanprash business got impacted and therefore, the growth was very muted. We had a flat growth as far as Chyawanprash is concerned. So that -- we put in the stock. But one good thing, what is happening is that the winter is getting delayed. So whatever stocks that we put out there with the stockist is going to get now lifted in the marketplace. And we've [indiscernible] will get liquidated with the winter getting delayed, the offtakes will happen. While the trade will not take more stocks. So the growth will be what the growth is in the quarter 3, but the offtakes will happen going forward in the quarter 4 for us. So I think flushing out of inventory will happen there. As far as Honey is concerned, we've seen an 11% growth as far as Honey is concerned in terms of penetration of the category. So any category is doing well, and we are ahead the pre-COVID category growth levels also and stabilized. We've gained market shares in Honey by around 33 basis points and is doing extremely well for us. So all the new players who've made an entry into the honey category have been placated Dabur Honey and we continue to make good strides in the Honey. And the category is also growing well as far as Honey is concerned. So we are looking at modernizing of Honey. We launched premium variants in Honey called Organic Honey, Forest Honey, Sundarbans Honey, et cetera. They are all getting a good traction in the marketplace and also our squeezy brand with multiple SKUs down the market place is facilitating the breakfast usage from therapeutic usage to breakfast usage. So Honey is also doing well. As far as Glucose portfolio is concerned, the winter -- the summer is good for us. Our Glucose portfolio is also fine. Glucose also increased market share albeit being north -- winter is not being the right season for Glucose consumption for you. So that's a health supplement portfolio for you.

Got it. Sir, one last bookkeeping question. Adjusting for the INR 22 crores of one-off of legal cost and other expenses, the cost has still gone up. Is there any additional cost? Or will this be the new normal going forward?

Mihir, just to add on. Excluding this, this is 10%. But if you see at based on phasing issue of certain expenses. But if you see YTD, excluding legal costs our other expenses has grown by only 4%.

The next question is from the line of Abneesh Roy from Nuvama Institutional Equities.

Congrats on good recovery. My question is on Shampoo business. So it is your star category within your mix, so 11% Y-o-Y growth and 15% CAGR over 4 years. So I wanted to understand, is pricing a big component of this, both on Y-o-Y and 4-year CAGR basis? And in terms of the Naturals, within Shampoo, how would that move within the last 4 years? Because the growth seems much stronger than the industry growth rate of 15% CAGR over the last 4 years.

Thank you, Abneesh Roy. So I think we've been sustainably growing. So I'm commenting upon recovery. I think it's sustainable, enduring growth that we've shown quarter-on-quarter. There's no recovery here as such. So I'm commenting on your choice of words there first. As far as Shampoo is concerned, sorry that was a pun. As far as Shampoo is concerned, all the Shampoo business, yes, our growth has been the industry beating growth of around 11%, and this growth is coming on back of both rural as well as urban. In rural, our sachet distribution has actually gone up. And because of sachet distribution, I think this growth has come because we put ahead of the curve, rural distribution network and infrastructure and our sachets are actually riding that infrastructure, and that's why this growth is coming. So sachet is quite price-sensitive to your point and we are maintaining. There is no price growth here. It is more volume growth. Entire growth is volume growth as far as sachet is concerned. Now coming to bottle. Bottle is more modern trade and e-commerce phenomena. We are introducing premium variants in our Shampoo, which we think will -- it's early days for us to comment, but I think premium portfolio in bottle should be driving pricing growth. And as far as our regular bottle is concerned, we are driving bottle, which is very low. It's 20% of our overall portfolio and -- which is continuously growing and gaining market share in modern trade and e-commerce. So that's as far as -- we have a huge headroom in Shampoos, to your point, because our market share is only 7% here.

And the Herbal category is still very small.

And Herbal category is strong with higher growth rate as compared to the normal herbal category here, also, which is basically mirroring the Oral Care. Oral Care and Herbal category is around 30%. And we feel that Shampoo also it has a potential to go up to around 30%, 31% the way it is as far as Oral Care is concerned.

My second question is on Oral Care. So when I compare market leaders' performance in Q3, they claim to have grown double digits in Toothpaste, with a low single-digit volume growth, which implies almost high-single digit price plus mix growth. So if you could tell us what kind of price plus mix growth you would have seen in Toothpaste? And second, when I compare your portfolio in Toothpaste versus the market leader, clearly, in premiumization, you would need much more products. I do understand the Gel Red Toothpaste, et cetera. But if you see, consumers in terms of the market leader, the options in terms of sensitive, whitening and so many products, would you also now need to think beyond the normal way, which you are thinking, say, Naturals being extended to gel, et cetera? That is good, but is that enough from a 3- to 5-years perspective from a premium kind of a market share?

Yes. So I think very well eluded Abneesh, you're absolutely right. As far as the first part of your question is concerned, volume and value, we've grown 8% in terms of value, which seems equivalent to the market leader. But our volume growth has been 5% implying that we have a 3% of price factor as far as Oral Care is concerned. And going forward, we want to drive our volume and increase our penetration levels, which is the part of the core that we do. But premiumization and trying to plug the gaps, where market leader is paving the way, I think that is the way. Also identifying more gaps in the premiumization is what we would follow. You will see that change as far as Dabur's portfolio [indiscernible] is concerned. So we are working on the same and trying to capture those premiumization segments, which includes whitening, which includes tartar control, which includes gum, which includes sensitive, et cetera, et cetera. So our full-year CAGR is around 11% in Oral Care, and we've been growing ahead of the category. And we feel Natural, as a subsegment is growing 200 basis points ahead of the non-Natural. So that tailwind is there. So Natural plus scientific benefit, is the way to go in the market. So that's what we will see those changes in the next 2 to 5 years. I think 2 to 5 years is a long period. I think in next 1 year, you will see a couple of initiatives from our side.

Sir, last question is on Badshah. So Q2 Y-o-Y growth was 16%, which has jumped now to 33%. That's a sharp acceleration, but there is a sharp inflation also in spices. So this good recovery, in terms of growth number, how much is because of pricing? And in terms of exports and going beyond the 2 states, what is the status on that?

So in terms of -- Abneesh, in terms of volume, volume is close to 20%, 23% in this, and balance is pricing 9% to 10%. And currently, it is primarily in 2 states. A bit of exports we have started. There's still alignment with certain countries, but most of this growth, I would say 90% of this growth is coming from organic sales -- same-states only, as of now. But there are plans to expand this to other geographies, and we are aligning our route to market with our current setup.

Yes. So just to add to what Ankush just said, I think huge vectors of growth possible in Badshah. I think, first of all, as you know, spices is very customized in different regions. So today, we are only relegated to the Western region, and there's a potential of enhancing the portfolio from the Western-related salad product portfolio to more North driven to South driven which is what we guys are working in terms of portfolio expansion. Then distribution expansion, we are only limited to Gujarat and Maharashtra. I think, going forward, we will extend ourselves to adjoining states, which is what the plan is to extend it to Madhya Pradesh and Rajasthan also and extend distribution and leverage Dabur's distribution and expand our distribution. The third vector is international business. International business, to Ankush's point, hardly is around 5%, 6% of Badshah's sales which going forward, will go up to like Dabur's International business of 30%. So the potential is there. So therefore gradually, slowly we will be inching up our international business. We are in the process of regulatory conforming our portfolio to go to markets like U.S. and U.K. as the regulatory conformance is in place, and we have GMP practices. We will start exporting. And the demand is there, but we are not able to export there. Then the fourth vector is our gaps in our pack-price architecture. We have gaps in our portfolio in terms of INR 5, INR 10 pack. I think that has to be plugged also. And then the fifth vector is advertising and demand generation. We've barely done advertising on Western and regional channel. Actually, we've not even started advertising the product. So huge growth potential, and we see the category is very big. Our market shares are in the range of around 2% to 3%. So I think there's huge headroom to grow there.

The next question is from the line of Arnab Mitra from Goldman Sachs.

Great to see improving growth rate for you. I read the comment in your release, which talks about rural growing ahead of urban by 200 bps. This is kind of, obviously, a bit contrary to what we've heard from other companies. If you could just help us understand, is it specific to you because of initiatives? Or there are certain categories where you're seeing rural grow ahead of urban? And how do you see this pan out?

I think Arnab, this is specific to us. So our rural growth is in the range of around 6%, 6.5% as compared to urban, which is around 3.8% which consolidates to around 5% growth. Rural is growing on back of our initiatives that we've taken on back of building infrastructure in rural. Our reach in terms of villages have moved up from 1 lakh villages to 1,17,000 villages. We have added around 7,000 Yoddhas in past quarter. Overall, our Yoddha network goes up to around 18,700 kind of Yoddhas. So I think the playbook for seeding our infrastructure investment in the rural is well on place. As far as direct reach is also concerned, our direct reach has moved up by 2 lakh. It's the highest in the FMCG sector, direct versus indirect as well as reach is concerned. So around 2 lakh outlet reach has increased. So that's tremendous. I think a lot of execution has been done. And then now to leverage this infrastructure that we've build, we've also curated a rural portfolio, which is an accessible price points in all our power brands. So basically -- which is like a portfolio for people to carry in the rural. And that has also helped rural growth to surpass the urban growth for our case. But it may sound -- urban growth is muted, both our urban and rural growth is ahead of the category growth. Even in the urban, we've actually increased market shares and our growths are higher than the FMCG growth in urban in our respective category. There, it is up by 100 basis points. In rural, it is up by 400 basis points from our subscribe category growth rates. So that's where we are.

And just a follow-up on that. So this rural expansion that you have done, do you see this as a continuum that you continue to expand over the next few years? Or with this expansion, you would now take a pause and try to get more throughput and use this infrastructure better?

So not really. I think we are on a path to only expand this rural distributions. There's a huge headroom. And a lot of FMCG big boys are actually paving the way and showing us the best-in-class examples, and we have to just follow those examples. There's not much brainwork happening here. So there are 6 lakh villages. We are barely reaching out to 1.17 lakh villages. We've targeted ourselves to go up to around 1.2 lakh villages going forward. Next year, it will be 1.3 lakh. So we'll keep adding the number of villages here. And the Yoddha network and the playbook like you were saying is already in place for us. Portfolio has been curated. So we will be adding the price points of the portfolio to leverage because INR 5 now INR 10, INR 10 now INR 20. So the pricing ladder has to be perfect for the rural, and that is what we are looking at, which helps us increase the penetration. So this journey will continue having the rural growth. And no question of taking a pause in consolidating rural. I think expansion will be the name the game in India. And across geographies whether south, east, west, I think there's a huge potential to grow.

And my last question is on margins. So in the last 2 years, we have seen the fourth quarter margins suddenly be much lower than the first 9 months because of probably some phasing in other expenses. So just wanted to understand, as we -- like your first 9 months, EBITDA margin has been 20% despite the legal costs being there. Is there any reason to believe this margin would be much lower in the fourth quarter because of phasing or the last 2 years were aberrations? Because this change wasn't there in the previous pre-COVID period as we have seen.

Yes. So Arnab, I think, first of all, you can't see sequentially our margins. The margins are, in our business, pretty seasonal. So last quarter is heavier in certain product mix and hence it is lower. So it can't be 20% lower in Q4. And if you see our 3-, 4-years trajectory, that has been the case. So Q4 margins are the least while Q3 are the highest because of Health Care portfolio and so on. So -- and also some bit of expense phasing might happen, but I would see we will -- I would summarize by saying that the expansion in margins will continue, albeit at a slightly faster pace in Q4.

Yes. One of the reasons what Ankush alluded to is what because of seasonality, I think our Foods business becomes more salient in the summer because summer loading happens, where the consumption of food, beverages happens there. So that's why there's a little bit of margin. But upside on margins will continue the way you see it in quarter 3 because the raw material prices continue to be benign. So that -- we've already given you a guidance of around 19.5 margin and any upside in gross margins to be deployed into media. We'll continue to do the same and make all out efforts to reach to [ 9.5% ] margin, despite the legal cost hitting us of around $10 million is what was the legal cost that hit the business, YTD. So it might go up to around $10 million, $12 million as fees. So despite the legal cost, we are making all out attempts to reach to around 19.5.

Yes, closer to that.

The next question is from the line of Harit Kapoor from Investec.

I just have 2 questions. I just wanted to get your sense on what's your prognosis and we were -- given almost 46% of India portfolio is there. Yourself are doing well, but the market as a whole has continued to be challenging. In the last 1 year, most of the comments of the FMCG companies have suggested that a recovery is likely, it may be near to medium term, but it hasn't really come about. Where do you think are there -- maybe top 2 or 3 key indicators there that can turn to -- to make this slightly more full-fledged recovery in the rural market? Just wanted to get your thought on that. That's my first question.

Harit, your voice was not very clear. We couldn't decipher what -- pertaining to rural recovery?

Yes, my question is on rural. It was really -- over the last -- just a second, please.

So I'll try to answer what I've understood about your questions. So please interrupt me in case I don't answer your question. I think rural -- if you look at rural, it's got impacted. And if you look at FMCG growth, urban and rural, rural actually has gone down in the past 2 quarters now. And I think my hypothesis or my prognosis is that this has gone up because food inflation has started once again or has not abated. So if you look at fruits, vegetables, spices, cereals, et cetera, we have seen inflation pick up in the range of around double-digit now. And when it's rural, where per capita incomes are lower, the incomes are skewed towards consumption of essentials and therefore discretionaries get impacted, and that's why it's got impacted. We have given a very gradient sort of results because of the initiatives that I spoke to Abneesh's question, because of village expansion, outlet expansion, portfolio creation. That's why it could be throughout the market the same. But that said, there is a year-on-year growth as far as rural is concerned. That's I think a positive sign. If you look at the sentiment -- consumer sentiment in the market, where rural plays a very big part, that is improving. That's in the range of around 90% odd, and elections are approaching. So I think there'll be a lot of government investments, which will happen on infrastructure, which will help rural. And also some dole outs will be given by the government to the rural, which would only increase the disposable income for the rural pickup to happen. But the gap, one very positive sign that I see is, it's my again prognosis is, the gap between urban and rural is reducing for the past 3 quarters. We saw a gap between urban and rural of 800 basis points, which were reduced to 600 to 400 to now it's only 200 basis points, if you see. That's the difference. So as the gap narrows between urban and rural with price going off, I think rural recovery is imminent to happen in the country. So I think, but for 1 or 2 quarters, we will see -- I think the rural recovery is on the way. An election, I think, will only help the rural recovery and also help Dabur.

Very helpful. And one short question. You've dealt with this legal issue for the last few quarters -- last 2 quarters, at least a few months now. Just wanted to get your sense on where we are here. And any visibility on how long you may have to kind of deal with this 3 quarters, 6 quarters, 8 quarters? Any sense on that?

So maybe, Harit, yes, I think there -- over last 2, 3 quarters, while our teams have been in engagement with the lawyers. They have been several bit of discovery phases, discussions with plaintiffs et cetera. But 1 or 2 positive news I can share, the courts have decided on the corporate separateness, which means that the case is now restricted only to products sold in the U.S. by Namaste Legal Entity. So any of the Dabur affiliate or Dabur products are out of the scope of this case, which means that it impacts one way is, let's say, 1% of our turnover any which way, and it is only restricted to U.S. as of now and not for products sold anywhere else.

And even Namaste products sold outside of U.S. are outside the purview of the legal cases.

That's a positive development, while we are still in discussion and there's some bit of discovery need to happen and the matter remains...

[Operator Instructions] The next question is from the line of Sheela Rathi from Morgan Stanley.

Just extending to the previous question on the litigation-related issue. Just want to be sure that with respect to the legal cost, is there any change in terms of how we should see the impact on the P&L, at least for the next 3, 4 quarters?

We have, in the recent past, changed our lawyers. Earlier we have the one of the lawyers whose fees was much higher than the present lawyers, whereas the effectiveness of the new lawyers they are as competitive as the earlier ones. And the cost effective from, let's say, October onwards has already reduced. And we do not see the same cost will be there in the financial year '24, '25. It will be lower than what has been in this current financial year '23, '24.

If you could just give us some idea as to how much that would be?

Yes. So Sheela, roughly, we are spending roughly around INR 20 crores is the cost that we people are incurring. And -- so that cost will remain for till the time the case actually is lasting, but we already have a product liability insurance in place. The cost is pertaining -- that we're incurring is pertaining to the lawyer fees, which is what we are incurring from our pocket. But any cost that comes in as outcome of the final judgment of the case, just in case it comes, that should be covered by the insurance. And we have a product liability insurance in place for that.

And even on that, I will add to what Mr. Malhotra said. The legal costs are also covered under the insurance policy. Currently, to be on the conservative side, we have provided the full legal costs. And whatever recovery we will have from the insurance company, that will be as a profit for us.

My second question, again, it's a repeat on rural trends. But Mohit, I just want to understand, are there specific markets for us? I believe, particularly North India, which have been doing well for us, is it any particular -- is there any particular insight you could give us for us to believe that this trend will continue even going ahead? I understand the distribution expansion, which we are talking about and rural portfolio, which we have created. But is there anything more detail which you can help us to understand that this quarter, we have seen 6% growth? And this is the gap we should continue to believe that it will continue even going into the ongoing quarter as well as the next?

As far as the geographical mix, Sheela, is concerned, I think our stronghold remains North India and East India. So in East India and North India, which is also a rural salient kind of geographies. There, we have made substantial progress in terms of our tentacles expanded and our footprint expanding in the rural. And that has actually given us a good growth. That said, even on the back of Badshah distribution, and now Badshah and Dabur is going to rural West, I think on back of that, we are seeing rural actually reach the people in West. South was a little, not so great for Dabur because we don't have that kind of a brands for being a strength in South. So that apart -- but the major part of the business, South only contributes to approximately 20% of our business. 80% of the business comes from the other parts, where our rural distribution, coupled with our brand equity and coupled with our portfolio creation, has really worked well for us. And also advertising, that we have increased by around 30% in India helped the offtakes to happen, in the PAN India Hindi belt so we say. So I think it's more UP, MP, Bihar, Rajasthan, Maharashtra, I think that entire belt is pretty salient for us now there. I hope I've been able to address this.

Absolutely. And just the third question and the final one is with respect to us gaining a very strong market share, with respect to the Odomos and Odonil portfolio? And if you could also touch upon, Mohit, it would be very helpful.

Sorry, Odomos, Odonil, and then last part of your question, I couldn't gather.

Mohit, I saw the brand name on the presentation. I think that's your liquid vaporizer.

LVP. Okay, okay, I get you. So the earlier strategy for the business was to keep us restricted to Odomos, personal application product cream, which was the product application, dermatology application cream. And we have changed our strategy from not just restricting to a small market of [ PAP ] creams, which is personal application to increasing the addressable market to the larger market. That's where we've extended Odomos from a personal application cream to oils now, to gels now, to also know LVP stuff. So as far as Odomos is concerned, it's a mosquito repellant for us. And that's the market that we are addressing. So it is like HI market for us that we are expanding as a group. On back of that strategy, I think premiumization is working on Odomos for us and also format extensions. On back of that, there's been a huge growth, 1,000 bps gain in the personal application category, because all these extensions are adding back to the mother brand, and the mother brand is adding back to the extensions also, so it's working very virtuously for us. As far as Odonil is concerned, we are, again, doing the same thing, air freshener category, extending ourselves to all the formats. Earlier, Dabur was only restricted to PDCB blocks, which is what you know, it's basically a toilet air fresheners. Now we've extended ourselves to air fresheners for rooms. We have extended ourselves to gels. We very recently added a gel pocket in it, which has done exceedingly well. And zipper pouches have done well. So all our innovations are actually firing. We are looking at driving solutions also here. So on the back of all that, I think the business is really trending well. Our NPD in overall home care will be in the range of around 3% to 4%. But under the power brand architecture, which doesn't require additional investment. So when we advertise a new variant like LVP, we've just taken Kajol on the brand. And I will request the investor team to share the creative of Kajol with you on LVP also to the entire community. That is really adding back to our Odomos. We've generated -- it's just been around 3 months that we launched it and we generated a business of around INR 7.5 crores to INR 8 crores on LVP. And that's our strategy, which is firing in the Home Care for us, yes. And in Odonil, by the way, for premiumization to happen, we've also introduced diffusers. So if you can go to Amazon, you will find Odonil diffusers now. They have got listed on Amazon, and that's the news that we got today. So that will be very premium in adding to gross margin. Likewise, all our key power brands in our premiumization as we speak by value-added products being introduced in them.

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

On Slide 9, your comment is a newly set up therapeutic division has reported double-digit growth. So I think last time when we met, it was a lot of excitement we have seen around. So maybe if you can give more color of what is the depth? What is the distribution? What are the products which are firing? And maybe more color on that what is more needed to do in that newly carved out division?

Yes. Okay. So Shirish, there's still a lot of excitement around it. As you know, Philipe has joined us, who was the Chief Executive of Himalaya. I think the news becomes old, but the excitement still remains. So I think there's no lack of excitement in here. So Philipe is still driving the business very well. So we've created this advocacy vertical, in which we are actually creating a bridge from Dabur to the allopathic doctor. Till now, our connect used to be the Ayurvedic doctor. The change of strategy is that we will now do advocacy to allopathic doctor. It's going to be a slow burn, but surely a good return business in long term. In 1 or 2, 3 years, we will be able to bridge the gap that we have between the doctor and Dabur. And Dabur will not to be considered only as Ayurvedic but as a scientific Ayurvedic organization, selling and doing advocacy and providing science of efficacy to the allopathic doctors, which is one of the reasons why they don't prescribe complementary or supplementary medications to allopathic medicines. So that was the whole logic of the strategy of building this advocacy vertical. We merged our Fem Pharma division with our branded ethical business and also our Baby Care business. So all the 3 have been plugged together. So we are selling therapeutic dermatology products here. We are selling Baby Care products, and we are selling our branded ethical products in addition to single herbs and nutraceuticals through this portfolio. This portfolio is doing very well. We've got a growth of around 14%, 15% on that, whereas the division has just come in place. And we are looking at incremental turnover coming from the two.

So I think, Shirish, almost INR 95 crores we have done so far in 9 months, INR 30 crores, INR 35 crores on average. And YTD growth is almost 21% from the -- while quarter three 14%, but YTD growth is 21%.

Wonderful. Ankush, on the margin front, though Mohit has said that we will maintain between 19.5%, 20%, but at this point of time, if I need to check, which are the raw materials looking inflationary? Or maybe if you can say that, how much is the deflation which you are seeing?

So in the current quarter, in India, we are almost 4-odd percent of deflation, while global level we had 2% deflation. Going forward, while -- the mix of inflation is changing. It's moving inflation -- inflationary trend is more in foods and imported concentrates, et cetera, and spices. While we see that this should remain broadly in this range at least in this quarter. And the gross margin expansion, which was around 200 bps in India, possibly should also remain slightly in this range. Thought it may moderate given that price increases overlaps have broadly happened.

And deflation will start coming into base.

And deflation will start coming into base. And most of the HPC categories, like mustard oil, oils, et cetera, LLP, most of the deflationary benefits have come so far and some bit of it will remain in Q4 as well. By next year's budget we are still in the process of making, so it will be too early to comment.

Yes, that's helpful, Ankush. But I was just trying to understand if this is the stability which you are seeing. Is there any room for price inflation next year we have budgeted?

Price inflation. Price increase. Again, as I said, too early -- sorry? Yes, too early to comment on this point. Price increases definitely will come. We continuously benchmark our products with competition. Also wherever, we are market leaders, we increase our prices. Plus, as Mr. Mohit said there will be premiumization opportunities as well. So a combination of that will lead to some price increases. But yes, it will moderate. We have also taken roughly, in this quarter, including the overlap around 2.5% of MRP-led price increases. Part of it will also flow in next year -- in the next quarter.

We also -- Shirish, this is like, so what Ankush mentioned in addition to that, we've just taken a price increase on our foods portfolio, which is inflationary. So in Juice portfolio, we've just taken a price increase, a fresh price increase. So I think price increase going forward in the year will depend upon how the inflation is actually trending. If the inflation goes up in the food business then that portfolio will have a price increase. But as of now, but for foods portfolio and spices portfolio, the rest of the raw material, packaging material is benign for us as of now. So we will see expansion of gross margins on back of the benign raw material prices.

The next question is from the line of Vishal Punmiya from YES Securities.

Just 2 small questions. Firstly, on the e-commerce business, what has been the growth in 1H for the business? And what is the contribution?

Yes. E-commerce business in the current quarter, the contribution was around 8.5%. And the growth is around 20% in e-commerce. And YTD -- 20%. 20%. This was a muted quarter as far as quarter is concerned, but otherwise, YTD, you'll see a growth contribution of about 9% to 9.5% coming from e-commerce, for us. And the growth will be higher in the range of around 30%.

Understood. Understood. And secondly, there have been a lot of media news regarding FMCG companies becoming slightly aggressive in terms of activations in the region of Ayodhya. And we have also launched special edition impacts. But apart from 4Q benefit, do you see a sustainable benefit in FY '25 in this region?

Hindi heartland is the core for Dabur. And this is like -- we invest behind power brands. These are our power markets. So we will continue to invest behind the power markets, and they give us the maximum bang for the buck in these markets. And entire UP belt, East UP and West UP and East UP more. East UP and Bihar, more, have a very high salience of Dabur. So we will continue to invest in our core markets. They are absolutely core for us. And we feel that these activations will only give us a long-term enduring gain going forward.

And this would be across the portfolio? Or is there any particular portfolio, which is slightly more biased in this region?

So we are basically taking up power brands only, within power brands, Red toothpaste and Dabur Amla are the most salient. Because Chyawanprash and honey becomes seasonal for us. In the power brand, this is more salient and juice saliency is also low in this region. So it's basically the HPC portfolio, which is more salient here.

Understood. Understood. And lastly, just one clarification on the margins comment that you made earlier. So last year, base obviously was a very low base quarter in terms of EBITDA margin in the region of around 15%. So while I do understand that seasonally, it's a lower margin quarter, but there would be a sharp increase in margin for you even if you build 19.5% margin in FY '24.

Vishal, if the question is on Q4, as I said earlier, you can't see our margin sequentially. Q4 obviously is a different product profile and hence it is slightly lower than the overall first 9 months margins. Having said that, our assessment at this point of time is that the expansion in margins will definitely be higher than what it has been in the past 9 months. So if our expansion in margins, including the legal cost is 50 bps as of now, in quarter 4, it will be higher than that.

The next question is from the line of Priyank Chheda from Vallum Capital.

Sir, my question is on the Ayurvedic, sorry, the therapeutic strategy that we had discussed while we met in the Investor annual meet? And I just want you to touch base upon the incremental sales that we were targeting. So from INR 2,500 crores to INR 5,000 crores, we see the incremental sales of INR 2,500 crores over 5 years. How will this be divided across the existing categories? And also the new categories, like baby care, tea and the therapeutic, allopathic side. If you can help me on that, what has been the progress in terms of any numeric data that you would like to share that you would want us to track?

I think NPD contribution is innovation contribution, rest of the growth will actually come from the power brands that are there, we've already listed out 4, 5 power brands that you already have in the health care portfolio, which you have like Honitus will drive the cough and cold. Hajmola will drive the digestive. Hajmola is there, Chyawanprash is there, honey is there, these are power brands and most of the growth will be centered around these power brands. NPD contribution will be in the range of around 3% to 4% coming in, which will be driven by more Baby Care. Baby Care, we've already notched up a turnover of INR 27-odd crores which is almost double of what we've done last year this time. So that's done well for us. There's branded ethical which should contribute to the growth services there. Then we have introduced Chai Tea. Tea has the registered turnover of around -- Vedic tea has introduced turnover of around INR 10-odd crores, and that is doing well, showed a good traction in the marketplace. MFD is what we've introduced, that should also come in and help us in the growth. The nutraceutical vertical that we rolled out, therapeutic division is selling that, and that should notch up in terms of sales and pretty much. So I think around 3.5% to 4% should come in from the NPD and rest will be the power brands in the health care portfolio. Should contribute to that growth in the health care.

Got it. And if I heard correctly, the therapeutics division is right now contributing INR 95 crores over the last 9 months, which means that we are at a run rate of INR 25 crores, INR 30 crores per quarter. Am I correct?

Around INR 30 crores, INR 35 crores.

INR 35 crores per quarter. Correct.

INR 35 crores per quarter. And we had a team, which was working with Philipe Haydon and the team, which was going to target the doctors. What is the count, if you can help me with that, we had 500 people recruited for that? And what has been the increase in the doctor coverage? Any numbers on that, if you want to highlight?

I think the numbers not have changed significantly right now, but we are on the track of slowly increasing our coverage. We are right now consolidating the processes of the system. And by end of the year, we'll be able to give you a better update on where we stand on the coverage.

Got it. Does this mean that FY '25 will have a significant development done on this whole of the therapeutic segment linked to the power brands? Should we see more developments happening and more action happening in FY '25?

Yes, certainly, there will be new product launches. There will be ramp up of the therapeutics division. And of course, a lot of investment behind power brands, which will help us move towards our objectives for health care.

And just a clarification again on the INR 35 crores per quarter run rate or INR 100 crore sales via therapeutic segment is something which was not there in the previous years before we activated this new category or new segment, correct?

No, Priyank, it was in the base as well. But because of the enhanced focus, the growth has been around 20%, 21%.

Accelerated.

Yes, it has accelerated our growth. So it was in the base, and the growth has accelerated.

Sorry, the voice was not clear. The sales were there in the base, but because it's growing at 30%, so we should consider that it was earlier INR 70 crores, INR 80 crores, which is now INR 100 crores?

Yes, correct. So it was in that range.

To give a flavor, we are reaching out to pediatricians, GPs, dermatologists and gynecologists. So in the quarter, the number -- if you want to know, 22,000 is pediatrists we reached to and around 12,000 dermatologists and 22,000 gynecologists that we reached out to as the -- that's what -- so around 60,000, around...

70,000.

70,000, 75,000 doctors broadly total is what we are reaching out to. And the universe is obviously very huge. So we're just scratching the surface. And this, we are reaching out with some additional recruitment and with the existing team. We'll keep adding personnel as the portfolio keeps expanding and regionally we keep expanding. So that's broadly -- exact numbers, I think as we were preparing the budget, we can share with you in the next con call.

Thank you. As there are no further questions, I would now like to hand the conference over to Ms. Gagan Ahluwalia for closing comments. Over to you, ma'am.

Thank you, everyone, for your participation in today's earnings call. Webcast, audio recording, and transcript of this call will be available soon on our website. Thank you, and have a nice evening.

Thank you. On behalf of Dabur India Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.