Emami Limited (531162) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Emami Limited Q1 FY '21 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Percy Panthaki from IIFL Securities Limited. Thank you. And over to you, sir.

Hi. Good afternoon, everyone. It is my pleasure to host the management of Emami Limited. I have with me Mr. Mohan Goenka, Director; and Mr. Rajesh Sharma, VP, Finance, to take you through this quarter the results and the outlook going forward. So without further ado, over to you, Mr. Goenka.

Yes. Thank you, Percy. Very good afternoon, friends. I welcome you all to this conference call on Emami results for the first quarter ended June 30, 2020. I hope all of you and your loved ones are safe and healthy. I am pleased to inform you that Emami has posted a resilient performance with improved margins in this quarter, defying the challenging times that the COVID-19 presented. This is despite the severe impact of the unprecedented nationwide lockdown on the offtakes in April, which led to disruptions in the supply chain. I am pleased to inform you that our team faced the challenges head on to ensure that the sales improved considerably in May, followed by a high single-digit growth over previous year in June '20. Our July performance has been even better, wherein we have registered a double-digit growth. During the quarter, the company's domestic business declined by 26% as offtakes of our summer portfolios were significantly impacted due to the lockdown, coupled with a weak discretionary consumption environment. However, secondary sales, they grew by just 15%, which is much lower than the primary sales decline. Our health care and hygiene portfolio contributing to 43% of our domestic business grew strongly by 29% during the quarter. However, Navratna declined by 41%, Kesh King declined by 33% and Male Grooming Range declined by 70%. While traditional sales channel and modern trade were impacted due to lockdown and social distancing norms, e-com channel grew strongly during the quarter by 108%, more than doubling its contribution to the domestic business. The pandemic highlighted the necessity and importance of health and hygiene in our lives. The consumer preference for products in the health and hygiene segment became the focus. Emami today is well positioned to take cognizance of the changing consumer needs and has a range of innovative products basket in the pipeline. Accordingly, we introduced many new products in the health and hygiene category in this quarter. BoroPlus, with its nationwide strong brand equity for its antiseptic and germ protection properties, introduced a personal hygiene range consisting of hand sanitizers, antiseptic soap, which received a very encouraging market response. Under the Zandu Healthcare range, we introduced Zandu Ayurvedic Sanitizer, Zandu Ayush Kwath powder and single herbs range, which includes [ deloy ], Neem, Tulsi and Ashwagandha among others. We also launched e-com channel-specific products under the health care range. Apart from these new launches, in the health and hygiene category, we launched BoroPlus Aloe Vera gel. All these launches perform well in the current environment, and the overall contribution to the domestic revenue during the quarter by these new launches were at 5%. Further, the company has already lined up a slew of new launches in the health and hygiene category over the next few days. I'm also very excited to share with you that we are on the verge of introducing a new brand, which will signify our foray into a category that is completely new for us. We have been exploring the possibility of our entry into home hygiene segment for some time. But the pandemic highlighted its importance more than ever to prompt us to finally take the plunge. We have plans to introduce the brand enriched range of products very soon, and we are confident that the brand and its exciting propositions and products would win consumer hearts. During the quarter, international business declined by 19% due to COVID-led challenges in key geographies. We also introduced a hygiene range for international business as well, which was well received by the consumers. The CSD business declined by 38% during this quarter. Although consolidated revenue at INR 481 crore declined by 26%, tight cost control measures and benign raw material prices helped improve gross margin by 230 basis points at 66.5% and EBITDA margins increased by 490 basis points at 25.5%. Profits after tax increased by 1%. And PAT margins increased by 220 basis points. As you might be aware, that we have completed the sale of our Cement business which has led to a significant reduction in the promoter's pledge to 55% currently. This will further reduce to around 50% in the next few days. We also concluded the buyback process in July 20, acquiring 94.20 lakh shares for INR 192 crores. Post buyback, the promoter stake now stands at 53.86%. The beginning of the new financial year was not on a good note due to the unprecedented nationwide lockdown. It is a phase that we, along with the whole industry, struggled to understand its impact on our businesses as well as our personal lives and tried our best to absorb the sudden and unexpected impact. We did analyze internally as well as studied the environment to identify the right strategy to overcome the negative impact of COVID-19 and to come out unscratched as much as possible under these difficult circumstances. Our strategy, involving management of supply chain opting for newer revenues to reach out to our customers, introducing effective health and hygiene product, will help us to tackle the situation as the market starts stabilizing and demand consumption picks up. We have surely witnessed the green shoots starting May, which has since been growing steadily. Going forward, we expect the growth momentum to continue and look to end the year with positive growth note, provided COVID pandemic does not heighten. With this brief, I now open the Q&A. Thank you so much.

[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss. As there is no response from the current participant, I unmuted the line. We'll take the next question from the line of Arnab Mitra from Crédit Suisse.

An encouraging recovery in June and July. So I think for the full quarter, as you mentioned, secondary sales has been lower than primary. So there's no restocking through the quarter. But in the month of June and July, when your growth had been positive and in July double-digit, any sense of how much of this would be restocking versus actual optics in the market in the channel, if you could give us some broad sense on that?

So Arnab, actually, what has happened is in the month of June and July, see, our distributor stock has also further reduced. At the beginning of June, our distributors’ holding stock was almost 27 to 28 days. Okay. And now by end of July, that stock has also come down to 19 to 20 days. So we were very cognizant. We never wanted to increase our distributors’ pipeline because earlier, the stocks were higher. We have corrected on 2, 3 things. One is we have brought down the distributor stocks now to the reasonable level of 18, 19 days? Okay.

Right. And in the -- when you ended March 31, were the stock levels in that approximately 27, 28 days at that stage also versus -- which is now 18, 19 days?

Yes. At that point of time, the distributors’ stock was almost 29 to 30 days.

Okay. Okay, got it. My second question was you’ve seen very good growth in the pain management business. So on the health business...

Sorry, also -- I'm barging in. Also, one more advantage we got because at the beginning of this thing, we had a credit of almost -- in the domestic business, credit of almost 13, 14 days but now our credit in the domestic business is hardly 4 to 5 days. We have really corrected over the last 2 months in June and July, these 2 factors.

Okay. Understood. Understood. And the second thing was on the health care business. I can understand because of the environment, growth has been good. But any reason you would ascribe for the high growth in pain management? Because it doesn't seem very directly linked to the health care situation right now. Is it market share gain? Is it some lack of market share gain or unorganized to organized share gain or anything of that sort?

So there were 2, 3 things. One, what we found out with the quick research that the stress levels had increased significantly, okay? So people had a lot of sleepless nights, people were getting less sleep. That was also one of the reasons. Also, in these times, what we also got to hear from the research that people were not taking too many pain killers because of fear. So they moved to these Ayurvedic products. So balm was, of course, one of the main products, what they use for any pain relieving listing. So these were 2 key factors why suddenly we saw a jump in our pain portfolio.

Right. Right. And my last question was in the month of July in the recovery that you've seen, there are parts of the business which are going very badly, which is personal care or, let's say, the main part of the business or even Kesh King. Have they seen a better recovery and that's why July is better than June? Or is it the health care part of the business itself which is doing even better than July, which is why the growth has further improved?

So this growth is still led by 2 brands. One is Zandu overall health care and also the Pain portfolio. Of course, the Male Grooming has also improved significantly, it is now like 70%. So both the Kesh King and Male Grooming has also improved significantly in July compared to May and June. But the growth is led by mostly Zandu and Pain.

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

Yes. I had 2 or 3 questions. Some of the new launches, which you mentioned in the PPT, look very interesting, like the Zandu Papaya leaf extract. Is there anything like this in the market? And the other launches, the antiviral, the joint pain, the digestive stimulant, how are you now creating awareness for these products? Is it digital medium? Because I would guess most of them would be OTC consumer products. So how is the awareness being created? And secondly, on the health care side, how is Chyawanprash and Honey doing? Is it time to refocus on Honey as a segment now?

So yes, Prakash, I think we have launched all these products only on the e-commerce side, okay? So our focus, because these products are very expensive, so we have launched in one specific area. And it will be mostly digital advertising. It will not be mass media advertising. And secondly, as far as Chyawanprash is concerned, of course, our base is very low. But just to give a number, on Chyawanprash, we have almost done 8x. Yes, almost 7x of what we did last year in this quarter.

And on Honey, are we seeing that as an opportunity and focusing on that as a segment? Because that also seems very promising.

So we have a overall focus on the Zandu brand, where Honey is also a part of it. Chyawanprash, of course, is leading this thing. So overall, because of this COVID, there has been an overall uptick both in Pancharishta and every Zandu products have some significant growth, I would say. As I told Chyawanprash, we hardly used to sell. Our sales have gone up by 7x. Even Honey, specifically, our sales has gone up by 5x, so.

And lastly, given some of the commentary which you said about the new pipeline entering a new category and the NPD, which looks like ad spend, how do you now bounce back? Because this kind of cut in ad spends can't sustain with growth and recovery, which seems all the way. Right.

So see, honestly, not that -- we are not increasing much of our ads for this year because we have cut from some other brands, and we are putting into the new brands. So overall, the rate of ads have also come down. So I'm not seeing a big jump on our advertising expense, to be very honest. It is just a rejigging in the portfolios. Because last year, significantly, we had spent good amount of money on HE so this year, we have taken out money from HE and putting that money on some other brands.

The next question is from the line of Percy Panthaki from IIFL Securities.

My question is on the distributor days that you spoke about earlier. So if I got you right, the distributor days as of March end was 29, as of June end was 26. And as of July end, it is 19.

Right. 18, 19. Yes, absolutely.

So sir, my question is, between June and July, it has fallen by about 7 days. In a matter of 1 month, it has fallen by 7 days. So basically, it means that despite this, if your primary sales is sort of double digit, it means that the secondary sales would be like 30%, 35% for the month of July. Is that correct?

So yes, secondary sales is higher in the month of July. Very specific secondary numbers I don't have for the month of July.

Okay. Okay. And similarly, I just wanted to cross-check again for Q1 also. So the number of days between March and June have fallen by 3 days. But the difference in the primary versus secondary is 26% versus 15%. So that difference is much higher than the movement in the pipeline inventory. So can you just sort of explain what is the reason behind that?

So, you can understand it from Rajesh because it's a slightly technical one.

Sure. Sure. I'll talk to Rajesh after the call. And one more question I had in this quarter. What would be the contribution of new products?

I told 5%.

5%. Okay.

Overall, the perspective is that there were 2, 3 things we wanted to correct. One was the distributor's pipeline at the beginning of the year that we have corrected now, which has come to our regular levels of 18%, 19%. Our credit levels had gone up significantly from 14, 15 days. Now it has come down to 3, 4, that is now solved. It was also an issue that I just wanted to highlight that point. It doesn't matter which month, which quarter what it was. Okay.

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

After a long time, I'm seeing there is a lot of focus on Zandu Health Care business. So is that -- is our mainstay or going forward, we will focus more energies on Zandu platform and health care range?

Yes, absolutely, Shirish. I think this pandemic has helped us to increase our focus on the Zandu -- this thing. Of course, our focus was always there, but we are putting significant resources, both in terms of money and time. As far as the new launches are concerned, a new channel of e-com is concerned. And so a lot of focus is going on in this health care. I also mentioned last time, we have got a new health care head who has joined from Dabur. Mr. Gul Raj Bhatia. He has joined about last month. So we have a very good team, and I think there is a huge opportunity in the health care. Also, one of, I think, BoroPlus also because of its antiseptic germ killing properties, also has very good opportunities for these times. So there also, we are coming out with a lot of new launches.

If I understand correctly, Mohanji, we've had a separate sales force for Zandu health care range. Is that correct?

Yes, absolutely. We have a separate team altogether.

And how big is that team now on the ground?

I think at about 350 people.

Okay. My next question is on the gross margin. I mean we have seen a significant gross margin expansion, almost 300 basis points, 230 basis point. Could you help us to understand what are the levers which we have tried? And if these gross margin expansion, what we have seen in this quarter is sustainable?

I think these are sustainable numbers. Of course, menthol is very benign. Plus we have also put in a lot of R&D efforts in cost cutting, identifying new vendors. I had mentioned last time, we had appointed [ ABK ] to reduce our costs across the board. So due to the focus of -- in cost reduction, this has helped us in increasing our margins. And I think margins are not under pressure. I think there are further chances of improving further because we have still identified a lot of areas where we can reduce costs.

So if you remember, last quarter, you gave a guidance that it can be able to add a significant number of 80 to...

INR 50 crores to 60 crores. INR 50 crores to INR 60 crores for this year, yes.

Correct. So is there any change that you will work to revise it upwards? Or it remains at INR 60 crore?

No, I won't change it because now -- annualize that exit could be still higher, but yes, for the year, I don't think we would cross over INR 50 crores.

Okay. My last question is on the new product. You just guided that in quarter 1, this 5% contribution, which has come in which is significantly much higher. So just now you said that you're entering into the new category. If you can give me some color on how this full year looks like from the NPD, what kind of contribution you are looking at, what kind of spend one can build in?

So Shirish, our estimate is that with new products, we should be able to do about 5%, 5.5% contribution from new products. Again, it would all depend how the offtakes are because during launch, the momentums are always high. We have already launched some products. The home hygiene is going to be launched by this month end. So then it would all depend on the offtakes. But if you ask on the budgets, we have taken a 5% contribution.

Okay. And in terms of spends, what kind of additional spend or you're saying that within the budget, what you have seen is you will manage?

Yes, yes, there would not be any additional spend, honestly. We have just rejigged our portfolios.

The next question is from the line of [ Krishna Parasuranka from CaseNetwork ].

You had mentioned in your opening statement that you have successfully completed the sale of your Cement business. So my question was what role does Emami Limited have with the cement undertaking?

Emami Limited doesn't have any role in cement.

So then, I mean because the company has been disclosing to the exchange about that a transaction is in order and in place. So if you could just shed some light over it.

That is only because of the pledge.

Okay. Okay. And my second question was that on July 14, the company has disclosed that the deal was completed. But then again on July 21, the company has said that more shares have been placed in favor of Nuvoco. So is the share -- is the deal completed in the all aspects or are other formalities left?

So this is -- because I had told in earlier remarks also that there is about 10% to 12% share pledged to Nuvoco because of some mining lease. There is some contingent liability. So for which these shares have been pledged with Nuvoco.

The next question is from the line of Gaurav Jogani from Axis Capital.

Congratulation on the good set of results. Sir, my first question is, again, with regards to the ad spend. So like last year, we have done approximately 15% of sales in ad strength. So are we now looking for a lower number and any number that you can guide for this year?

So last year, our actually ad spends were 17%, if I can say, 17.7%. So yes, overall was 17.7%. This year also, we have kept a budget of almost about 17%, 18% only.

Okay. So the fact that we are expecting a significant ad spend increase in the coming years -- coming quarters because of the fact that it was quite lower in this particular quarter?

Yes, because of this -- some of the new launches, the ads, you would see some increase in the coming quarters.

Sure. And sir, my next question is with regards to the amortization spend. This quarter, it was less at around INR 55 odd crores. So how should one build up for this going ahead? I mean is it because of the closure in the operations per that it was lower this quarter? Or how should we build it going ahead?

So going ahead, our amortization would come down to roughly INR 25 crores per quarter.

Okay. And sir, can you help us, how long has it been that we keep with advertising? I mean 5 years?

5 years. The Kesh King amortization is till June ‘25.

Sure. Sure. And sir, one last question is on the tax rate also. This quarter, the tax rate was also end over end. So what will be tax guidance for FY '21 and '22?

So for the full year, you can take around 19% to 20% kind of tax rate.

That sort of consolidated level, sir?

Yes.

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

Sir, the first question is on home hygiene. What will be the plan here because already [ Nestle ] completely dominates and Unilever? And then you have players like ITC, Dabur, GCPL, and every player is entering. So in the past, your success in cluttered category has been mixed, for example, in HE and many other segments. For example, Honey and Chyawanprash, you tried a lot, but there is a strong player. What will change here?

No. We have identified some area where we think we have some opportunity, Abneesh. The market size is very large. So no presence also doesn't make any sense. So I think we must try it out. The market is really, really expanding. Going forward, the market would almost double or triple in the next few years. So there, I think we can play a good role.

In Honey, you have seen such a strong growth now, Marico has entered through Saffola. How do you see more players entering? And would you now give good advertising support and maybe channel push also here? And even on pricing, some correction can happen because your pricing is not exactly of value.

So we have corrected the prices, Abneesh. And Zandu is a significant player, I think, in the health care space, okay? So definitely, the focus has multiplied, I would say, over the last 2 months on all the Zandu brands. So Honey is part of that, Chyawanprash is, of course, part of that. We have increased our spends both on Chyawanprash and Honey and all the other Zandu brands. So I think the momentum is good, Pancharishta is also absolutely growing at double digits now. So let us hope the momentum continues.

Good to see you continue to attract good talent from competing companies. So what will be the brief for the person from Dabur who has come, will it be to kind of replicate systems and maybe even some of the gaps in product portfolio? Or will it be to focus in your strength areas, not necessarily replicate what is there in, say, in the other company?

So it's not about replicating whatever -- because we also believe that we also have good enough systems in place. Wherever, of course, there are gaps, they need to fill it up and we have got him only because, as I said, health care is an extremely focused area for us, and he has extremely good knowledge on what areas we want to expand. So we want to be very aggressive going forward. Promoters' focus is now completely back on this because of the pledge concerns are lower now. So we have a very stable sales head. We have a stable now health care head. We have an international head. So I think the team is in place. We have learned to work from homes. We have launched many, many products over the last 2 months. And there are about 20, 30 launches going forward. So I think everyone is working what they're supposed to do.

Sir, last question, Fair and Handsome, what is the way forward? Because of the work from home, further application area on pace, that I think has further become advance, because shaving, et cetera, much lesser. And second, now the market leader has come out with a very similar sounding brand soon they will be coming. So what is the way forward here? Already last 2 years has been very, very tough for this.

So that is the only brand in our entire basket which I would say is still under stress. And you are right. So because of this lockdown, people are using less of these products. We would have to wait and watch -- can't do much in these times for Male Grooming, Abneesh. So you will still see some stress in Male Grooming.

And on the brand and competitor?

Brand name is [ Fair and Lovely ]. So we have the quarters to decide the brand will have to.

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

I had just a few questions. Firstly, was on the rural side. I just wanted to get your sense on rural versus urban trend. And within that, I just wanted to understand how you're managing the whole wholesale scenario, have you kind of changed up into more superstock if that stock is? And how are we just managing -- given the fact that rural is a large part of the portfolio, just wanted some sense on distribution.

That's a good one. So I think because Emami, we have always relied on rural, and rural is a good play because of migration from urban to rural market. Rural has actually grown double digits in this last quarter. Retail where we declined significantly, but it was only because of rural, we could pull up these numbers.

Okay. Okay. And sir, on the distribution side, I understand wholesale is a bit stressed. So how are we kind of substituting that in the current context? I know you have a new sales head also. So any strategy that you can talk of there?

No. Honestly, wholesale was not so much stress for us because we also grew in wholesale in this quarter. And also in the month of July, we could see some growth coming in the wholesale. Still, there is some pressure only at the retail level. Retail is still declining. But rural and wholesale retail and modern trade is declining, but wholesale and rural is growing.

Got it.

Yes. We have also listed ourselves in almost every e-com site now, and we have tied up with a lot of these delivery channels so that we ensure that there is no loss of sales.

Got it. Got it, sir. My second thing was on the margin front. Now first, one point on that was on the advertising spend. You said that you want to maintain it at a certain rate. We are hearing about media rates being more attractive. So are we to understand that you will be buying more media in terms of you're going to get more aggressive there, while maintaining the same absolute spend? Is that the right way to look at it?

So we have -- yes, we have almost tied up with some of the media channels. We have got some better deals for the year. So I think even at maintaining at the same levels, we can do some good GRPs.

Right. I was just trying to understand from the context of even when you maintain that same intensity, you can -- your absolute cost might be lower. So just from that context.

Yes. But we -- because of some new launches, we will also spend some little more.

Okay. Fair, fair point. The last thing was on the other expenses side. And you mentioned that INR 50 crores, INR 60-odd crores of savings. So if your ad spends are going to be in a similar ballpark, do we expect that the bulk of this other expense number would see savings through at, et cetera, will come -- flow down to the EBITDA line for the year?

Yes. Harit, so we had some savings in other expenses this quarter. So these savings will be retained. And going ahead also, as we said, we are working on cost to control through decade and we see good amount of benefits flowing in from all quarters apart from advertisements. So -- so looking at that, I think our EBITDA margins should improve this year.

The next question is from the line of Prasad Deshmukh from Bank of America.

So 2 questions I have. One is Pancharishta has struggled for some time in the past 2 years, as the proposition for the consumer was getting confused or questioned. Now with this pandemic on, do you see a possibility that now it comes back on track in terms of the growth trajectory for at least, say, a couple of years?

No, definitely, I think the brand has come back to growth in the month of July. Of course, in the first quarter, it still de-grew by about, I think, 11%. Okay. But July has been a good double-digit growth for Pancharishta. I can't say for how many years, but yes, what it looks like, we had also done a lot of changes in terms of our communication in terms of what it is.

Yes. And that was pre-COVID?

Yes. Absolutely.

I think the brand was a bit -- it was struggling a bit. So I mean the question basically is, has the consumer realized that, okay, even if the impact is not immediate, this is something which is important to have from a health perspective? Or maintaining health?

Absolutely, absolutely. I think a lot of new consumers have tried it out because June was, again, a very good double-digit growth, and July is also same momentum. So as many new consumers try, it is good for us only. Because the product delivers.

Got it. So Mohanji, second question, in the quarter, was there any reduction in distributor incentives? Typically, there are this quantity or cash discounts that are there. Was there any reduction in those kind of incentives? And if so, then what was the impact on margins?

There wasn't much change as far as incentives were concerned. That is hardly even if it was, it won't be even 0.1%, 0.2%.

The next question is from the line of Amnish Aggarwal from Prabhudas Liladher.

A couple of questions from my side. First being, if we look at our ad spends during the quarter, so they have actually come down. And last year also, they were a bit, I would say, static only. Now if you look at FY '21, what sort of an ad spend are you budgeting? Because in the first quarter, they have come down by nearly 54%, and you have got many launches which are lined up.

As I said, we would maintain our percentages to about 17%, 18%. So whatever number it comes to. Yes.

Okay. And second is that in terms of, say, new launches, so a lot of launches have actually happened in the BoroPlus brand. And these launches are, I would say, they are all across the Hygiene segment, like toilet soap is there and hand sanitizers, et cetera, there. So if we have to segregate 5% incremental, which has come in the quarter, so how much of it has come from, say, product like sanitizer, et cetera? And how much of it is sustainable in the long term? And what has been the response, particularly to toilet soap, et cetera?

Toilet soap was only launched in June. In fact, third week of June. So there's hardly any number of products sold. And if we see sanitizer, it was about 3% and 2% was from other products.

Okay. So 3% was from sanitizer?

Yes.

Okay. And sir, finally, just one thing incremental. As you said in your opening remarks that now the promoter price is down to 55 and soon it will be down to 50. So what is the exact amount of borrowing, if you can share against the shares? And...

That amount is about INR 1,130 crores.

INR 1,130 crores. And what is the time line you are looking at now for further reduction of that? And what could be, you can say, what sort of benchmarks we should look for that?

So see, I have maintained that we would try to get rid of this by end of March. Once the deal concludes for any of our lands or other assets, then you would see the pledges coming down.

Okay. And sir, there was one number which was shared just right now on the amortizations for the coming few years. So it will be INR 25 crores per quarter?

Yes, INR 25 crores per quarter.

Okay. But earlier, it used to be around INR 50 crores, INR 60 crores. So why so much of a change?

Yes, Amnish. The Kesh King intangibles which we acquired had different intangible assets. So some of them had life of 5 years, and some of them we are amortizing over 10 years. So we have just completed 5 years of acquisition of Kesh King on June 20. So the complete amortization have happened for those assets.

Okay. So incrementally, now it will be approximately INR 100 crore per year.

Yes. So that also includes some [ 1021 ] acquisition. On account of Kesh King it is roughly INR 92 crores or INR 93 crores per annum.

The next question is from the line of Kunal Vora from BNP Paribas.

In BoroPlus, what explains the very high-growth and almost doubling of sales in June? What will be the contribution from new products like sanitizers? And what will be the growth of existing products?

So Kunal, the growth is led by the new launches, sanitizer in particular, so.

Okay. So excluding that, the organic growth would not have been much, is it?

Right, right, right.

Okay. Okay. Okay. And second, you had appointed a consultant for Fair and Handsome, what happened -- you were supposed to do a relaunch. Are those solutions still relevant or COVID changes everything and you're back to the drawing board for Fair and Handsome? [ Don’t forget ] that [indiscernible] also has come up with its own strategy?

I see, every suggestion is still relevant. Of course, the markets are very tough for male grooming or for any discretionary product. So if you see results of every company, I think skincare has been a challenging area. When the right time comes, then we would bring in the focus in the Male Grooming segment. For the time being, we have enough other areas to focus on.

Okay. Okay. Okay. And lastly, you touched a little bit about rural, but just like regarding the strong growth which you've seen in June, July, is it being driven by it, higher like rural lives and contribution? Are they increasing? Like how it -- if you can throw some more insight?

Yes, yes. So I told you that the growth is led by wholesale and rural channels.

And facials, are you seeing an increase in consumption of facial? What will be the contribution there?

Sorry, come again?

Sachets.

Sachets. Sachets contribution has not gone up. It is primarily the same. It is in the range of 32% to 33% only.

The next question is from the line of Ankit Babel from Subhkam Ventures.

So my first question is, since you expect to close the year on a positive note, this means we need to show at least that kind of a growth for the remaining 3 quarters. And unfortunately, we have not refreshed that in the last few years. Also, we see your last few years' performance, the company has gained market share across other categories. But still it didn't witness a good growth in absolute terms, which means there was no growth in the category itself. So for you to grow at double digits, I feel that the category also has to grow at that rate. And you being the leader in almost all categories, how do you make sure that there is a growth in the categories and in which we have not seen in last 2 years? This is my first question, sir.

Yes, yes. So Ankit, we never said that we are expecting a double-digit growth, okay? We said it would be -- we could achieve our last year numbers. Of course, there is a 25% decline in first quarter, which we have to make up in the 3 quarters, okay. And we have estimated a 5% contribution from new products. Okay. Which is roughly about INR 130 crores to INR 150 crores. International, also, Creme 21 is showing good signs of growth. Zandu health care is showing good signs of growth. If the momentum continues, then we are very, very confident that we would end the year with a positive note I said, okay? So you make up this 25%, 26% of our decline, which has happened in the first quarter, which is almost INR 150 crores of loss on our top line, that we will be able to make up going forward.

Okay. So what I need to understand from you, sir, what is your view on your power brands like BoroPlus, Navratna and Kesh King? And where do you see the growth of these product categories as well in the next 2 years point of view, which is highly dependent on the season?

Yes, yes, absolutely. So I can predict the season for BoroPlus. So if the season is good, then, of course, we would see a good number for BoroPlus. Navratna season is unfortunately gone, okay, we can't do much on that. So we are launching a lot of products which are mostly unseasonal, whether it is on the health care range, whether it is on the home hygiene range, whether it is BoroPlus under BoroPlus brands also. So June, July has been good for both Kesh King for all the other brands, other than just the Male Grooming. So if this momentum continues, then why would we even think that we would not grow?

Yes. Okay. And sir, second question is on your margin. Now as discussed earlier, I mean are you expecting a INR 50 crores, INR 60 crores of cost savings in your other expenditures, thus your raw material prices are also in favor of -- in your favor? So we used to do a 29%, 30% kind of margin historically. So can we be back to those levels, say, in the next couple of years?

So what looks like that margins are favorable in last year -- last year was 26%. Okay. Yes. Yes. So let us see, yes, I think all parameters are favorable, whether COGS, whether cost, okay? We are very confident of, of course, achieving 26%, but you are right, if this momentum of June, July -- sorry, June-July continues, then there would be an expansion in margin, for sure.

So is it possible to quantify that, sir, because?

It is very difficult for me to quantify right now. But what looks like that there would be expansion in margin.

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

Only after many quarters, Zandu seems to be in on the limelight. So just wanted to understand what is the current size of Zandu Healthcare range, x of Chyawanprash and Honey?

Ex of Chyawanprash and Honey?

Yes.

Chyawanprash and Honey is actually quite small in our total portfolio.

And Pancharishta, ex of Pancharishta?

Even ex of Pancharishta. So overall, if you see, Zandu, total size would be about INR 250 crores cash. And Pancharishta and Chyawanprash would be about INR 100 crores.

Sure. Sir, just wanted to understand Amanzi here, that is this an outcome. So you said that it was always in the plan, but thankfully for -- because of COVID, it has been -- the plan has been accelerated. Now is this -- are we seeing a long addressable opportunity here? And if you have to take a size to that opportunity, what that would be -- what that number would be? And in past also, we have mentioned and you actually spoke at length 2 years back that how we are creating feet on Street to actually create aggregated through I rating doctors and all. So this is what to push drilling products. So what is the strategy there to help that -- well, I look at your influences also?

Tejash, it is very difficult for me to discuss the strategy on the con call. So we can, of course, have a separate call. But the motor point is that Zandu is growing significantly in the last 3, 4 months. And we have renewed our focus back on Zandu. Just to give a number, if you were doing a INR 15 crores, INR 16 crores of business, now we are doing almost INR 23 crores, INR 24 crores of business per month in Zandu. So it is almost a 27% -- 20%, 30% growth in Zandu. So if -- I think the momentum should continue because Zandu is still quite an underleveraged brand, we would also increase our spend under Zandu. So what clicks, what doesn't click? These are very difficult for me to say.

Fair point. On the second, I just wanted to understand that since group has actually scaled on group's footprint locations from many other vectors to focus on Emami. So has any more family members going to strengthen the team here?

No, not really.

Okay. And lastly one bookkeeping...

[indiscernible]

Okay. And lastly, CapEx plan for this year and next?

It is about INR 80 crores.

And this will be largely maintenance or?

Mostly malls, yes, mostly malls.

The next question is from the line of Pritesh Chheda from Lucky Investment.

Just on Zandu. So what should -- so internally, what are we looking at over next 3 years a share of our revenues from the health care range? And what differential gross or EBITDA margin does this portfolio bring in? And since we always thought that Zandu is a piece which was a fairly strong piece within our portfolio, but was not getting its due share, do you think that some other piece of your business should actually be relooked and probably reorganized or given away?

So no, you're right. So there has been quite an increased focus on 2 brand set. One is Zandu. And also, we think BoroPlus, in these times, have a very good opportunity because of its antiseptic and germ kill properties. Okay. As I said that Zandu Healthcare, which normally we clocked about INR 15 crores, INR 16 crores per month, is now at almost INR 23 crores, INR 24 crores per month. So if this momentum continues, then at least 2% or 1%, 1.5% contribution would increase from this range.

On a 3-year period, this 8%, 10% of our revenue, have we put a target that is -- or a thought process that is 8%, 10% should be what number?

No, no, we haven't put any number as of now, okay? Because we have to see how this momentum continues. There are a lot of new launches also. I think we have identified about 20, 30 new launches under Zandu going forward. So let us see. I think the contribution should be more than 10%, for sure.

And what is the differential gross or EBITDA margin versus the company level margin in this portfolio?

It is slightly higher, but not much of a difference.

Okay. And any other piece of the portfolio which needs to be redo?

I said our focus has increased significantly on BoroPlus.

Okay. From the cutting size, I mean?

What do you mean cutting size?

Insights from defocusing it or not allocating resource or from that angle?

No, there is no question of defocusing from any of our categories, but there is increased focus on Zandu and BoroPlus.

[Operator Instructions] We'll take the next question from the line of Shirish Pardeshi from Centrum Broking.

Mohanji, on Slide 8, on the international business, I was -- I was happy to see that you have planned third-party manufacturing in new geography. Could you please elaborate which geographies we are looking at? Is it that driven by Creme 21? Or is it that new launches or the current portfolio we are manufacturing outside India?

It is mostly for Creme 21, Shirish, and it is mostly in Middle East and Sri Lanka.

So does that mean that what you have guided in quarter 4 con call that you will try and best maintain or exceed the international business? So -- but right now, if I look at quarter 1, there was a decline of 18%. So do you think that international business also has a lot of room to exceed the '21 revenues?

Yes. So international also has performed well in July. And now the business is well on track. As I said, Creme 21 is showing significant growth. We are lucky to have that brand. And we have launched quite a number of brands under Creme 21 in different geographies, mostly through 3P. These are sanitizer wipes, and these are sprays, gels, turmeric gel, all those products under Creme 21. So these are all 3P manufacturing. And if we get good traction from consumers, then yes, international could also grow for the whole year -- for the full year.

We'll take the next question from the line of Vishal Punmiya from Nirmal Bang Institutional Equities.

Just one question. In terms of the recovery that you have seen in domestic business, if you can just highlight how has the recovery been across regions, East, West, North, South in June and July?

Yes. Yes, Vishal. It is mostly throughout the country, not only region specific. So mostly across, but the various lockdowns, which is happening now sporadically here and there, those are impacting some of the towns and cities where we are seeing disturbances due to this.

So West should be slightly lower compared to the other regions?

Right.

The next question is from the line of Sonaal Kohli from Bowhead Investment.

Sir, I just wanted to understand that, say, compared to 6 months back or 12 months back, what are the factors which is leading to much more [ interim ] for the company in terms of relative outlook to other companies? Is my understanding correct? The timing is revival of agriculture and the fact that leveraging is over? Or is it something else, if you could elaborate a bit on those factors? The key ones.

So because of this COVID, I think the increased focus has been on the health care, okay? And so that is one of the reasons why we've seen this growth under Zandu and also in month of June and July. Pain management has also grown significantly because of this pandemic. So -- and also, of course, as I said, the promoters' focus is now completely back on the business. All of us are completely identifying 3Ps, launching new brands further, international, domestic, health care, everywhere coming up with a new health and hygiene range. So it is a complete 360. Very difficult to say whether it is only agriculture or care. There's migration from cities to towns, our base was always rural whether consumers lived in urban cities also. But our consumers were always mass, so.

The next question is from the line of Gaurav Jogani from Axis Capital.

Sir, I just wanted to know what's the volume decline this quarter, overall basis.

The volume decline is about 28%.

So, that would be like 2% on pricing?

Yes, about 2%. 1.5%, yes, to be precise.

And sir, are you planning any price increases going ahead, to be seeing the good traction across product that [indiscernible]?

This year, we aren't taking much of price increase because of these tough times. I don't think price increase should be more than 4.5% or so.

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

Yes, just one question. Yes, just one question was on -- given that the current -- we've been very opportunistic over the last few years in terms of acquisitions in India, do you think that the current context of the market is a bit stressed, there are opportunities out there? Or do you think this is not a good time to kind of look at things in market?

Yes, it's never a good time or bad time, but we presently, we are not looking for any opportunities at this point of time. We have had opportunity handed to us to be very honest. We have enough branch to be launched ourselves internally. Okay. Let us focus on them. So can we end this call? Or there are any other questions?

Sir, we have one more question from the line of Percy Panthaki from IIFL Securities.

I just wanted to ask on your dividend payout. Is there any plan to increase the same?

So for last year, Percy, we have already paid 2 interim dividends, and those were that for last year. So currently, we would decide. I think we would be maintaining last year kind of payout only.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you all the participants for joining us for today's call. Thank you, Percy, thank you IIFL, for organizing the call for us. Thank you. Have a good day.

Thank you.

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