Emami Limited (531162) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Emami Limited Q4 FY '21 Conference Call hosted by IIFL Capital Limited. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Percy Panthaki from IIFL Capital Limited. Thank you, and over to you, sir.

Hi. Good afternoon, everyone. It is my pleasure to host the Q4 FY '21 Results Call for Emami. Emami is represented by Rajesh Sharma, VP, Finance; and Mr. Mohan Goenka, Director. So without further ado, I'll give over the call to Mohanji.

Thank you, Percy. A very good evening, friends. I welcome you all to this conference call on Emami's results for the fourth quarter and year ended 31st March '21. I hope all of you and your loved ones are safe and keep in good health in the midst of the second wave of the pandemic. I really don't need to tell you about the second wave of the pandemic, severity of which has caught the nation off guard. While the entire country may not be in lockdown, parts of it are. And the spiraling effect of the spread of COVID-19 is practically affecting every family today. As a result, the momentum of industry recovery has somewhat been affected for obvious reasons. Being better prepared this time around to handle the dynamic situation, we are working on various strategies to overcome the sudden roadblocks that we are facing. Like last year, this second wave of the pandemic has hit the peak summer months, which is likely to have some impact on our summer portfolio. With the graph of COVID-19 at this moment have started a slight downward trend, we are confident of all our brands performing strongly in the coming quarters. Coming to our quarter 4 results. I am very happy to share that we have continued with our growth momentum and consistently delivered broad-based growth across brands, channels and businesses. Our sales and profitability have continued to improve quarter-on-quarter basis. During the quarter, our domestic business grew by 44%, and the international business also posted a strong growth of 28%. Institutional business, despite posting a sequential recovery, declined by 3%. On a consolidated level, our revenue at INR 731 crores grew by 37% over previous year. Since the base quarter was impacted due to COVID-19 and lockdown, our performance, if compared with the best quarter of last to last year also, you will observe that we have delivered a double-digit growth of 14% over Q4 FY '19, which we believe is healthy considering the challenges we faced during the period. All our major brands grew by more than 30% during the quarter. If we compare our growth against quarter 4 FY '19, the Healthcare range grew by 48%, pain management grew by 33%, Navratna by 13%, Kesh King by 7%, BoroPlus by 5% and 7 Oils in One by 45%. As you all know, the pandemic has put consumers' focus more on health and wellness and is today a necessary lifestyle requirement, which is a strong focus -- with a strong focus on Ayurveda. Our Healthcare business with its basket of Ayurveda-based innovative products as well as digital-first products have been doing quite well. Our own e-commerce portal, Zandu Care, has been doing much better than what we had envisaged. It is today the #1 portal in India with the health and alternative health and remedy category, which offers free doctor consultation for consumers as well. Further, we have added new consumers to many of the Zandu -- for many of the Zandu Healthcare products, such as Chyawanprash, Kesari Jivan, Pancharishta honey cough syrup and juices and single-herb tablets with our continuously working on other NPDs across brands and categories and plans to launch differentiated products offering in the generic and ethical segment where we see high market growth potential and where we have gaps in our current portfolio. The Healthcare category offers good headroom for growth, and we are working towards relevant and meaningful proposition and products for consumers to achieve this and are very optimistic about the business. We keep our innovation wheels churning during the quarter and introduced a jaggery-based variant of Zandu Chyawanprash for the first time in India. We also launched Kesh King Ayurvedic onion range and Navratna Gold Ayurvedic Cool Oil in the e-commerce channel. Overall, our new launches contributed to nearly 3% of our domestic sales in quarter 4 and 4% in FY '21. During this quarter, both the urban and rural markets performed well. Retail channel also picked up momentum while modern trade grew by 46% and e-commerce continued its robust run, growing by almost 3x. In quarter 4 FY '21, our e-commerce business increased its contribution by 200 basis points to 3.7% of domestic revenues. We also completed digitization of rural sales force successfully during the quarter. Additionally, we have also embarked on a focused rural expansion drive under Project Khoj by increasing our rural footprint in the top 4 potential rural contributing states. We have been consistently taking steps to strengthen our existing team across functions, focusing especially on sales and distribution to bring an increased professionalism and result-oriented approach. As I had mentioned in our earlier call, we are creating a separate organization structure and activation program to leverage the opportunity of stand-alone modern trade, in other words, independent modern trade stores that are growing very well post-COVID. This will help us drive offtakes of NPDs as well as higher-margin large packs. On international -- our international business grew by 28% aided by robust performance in markets of SAARC, GCC and Africa during the quarter while the performance of Kesh King in new geographies has been encouraging and 7 Oils in One continues to exceed our -- and outperform our expectations. Creme 21, the German brand that we acquired in 2019, has since then consolidated its position to become the leading brand contributing significantly to our international business. In this quarter, our input cost pressures increased due to inflation in key commodities, which led to a gross margin decline of 250 basis points. However, EBITDA at INR 163 crores grew by 65% and PAT at INR 88 crores grew by nearly 4x. Cash profit at INR 171 crores also grew by 57%. As we look back at the year gone by, I strongly believe that Emami has performed exceptionally well by delivering broad-based growth amidst difficult circumstances. Despite the first quarter being a complete washout due to the nationwide lockdown, we bounced back strongly and consistently by delivering double-digit growth every quarter-on-quarter basis to close the year with revenue of INR 2,881 crores, which grew by almost 8%. Our gross margins for the full year at 67.7% increased by 70 basis points on account of benign raw material prices in the earlier parts of the year, coupled with stringent cost control measure. EBITDA at INR 883 crores grew by 28%. EBITDA margins, which are at an all-time high of 30.7%, grew by 460 basis points. PAT at INR 455 crores, grew by 50% with a margin at 15.8%, increasing by 440 basis points. And cash profit at INR 822 crores also grew by 29% with margins at 28.5%, increasing by 440 basis points. Emami also rewarded its shareholders handsomely during the year with 2 interim dividends of INR 4 each, cumulatively amounting to INR 356 crores. That is a payout of 43% on cash profits, and also completed buyback of its shares amounting to INR 221 crores including taxes. Despite these outflows, we closed the year with a net cash surplus of INR 357 crores. With our renewed focus on digitization and future-ready business strategies, we are confident of all our brands performing strongly in the coming years. Our summer brands, despite the surprise and renewed onslaught of the pandemic, are performing better than the last season. We will continue to tweak our business strategy to keep up with the fast-changing dynamic environment. We are satisfied that all our commitments on various initiatives have delivered good results. With this brief, I now open the floor for Q&A.

[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.

Congrats on good volume growth. My first question is on the immunity products, so Chyawanprash and other immunity products. If I see Q2 and Q3, you and industry and market leader, all did really well. And Q4, it came off. So if you could discuss some color on how was Q4 versus the Q2, Q3 run rate for Chyawanprash and immunity. And a related question is so whenever COVID cases go up, the consumption of these products goes up and vice versa. So what can you do proactively to really inculcate a more regular consumption of these products in the longer term? So that is the first question.

So Abneesh, you would appreciate that immunity still is a small pie in our total sales. So the growth has to be led by the leader. But still, Q4 is relatively a very small sales of immunity products despite of high COVID numbers, though the COVID numbers were small in the fourth quarter. Even in the second wave, what we have seen -- noticed, Abneesh, is that the immunity, what it was in the first wave, we have not seen that kind of a momentum in the second wave for immunity range. So it would take its own time for these range to be built. But as I said, we still are relatively very small.

And what could you attribute wave to a different trend? Is it because of the rural impact, so it's more of a shock to the consumer in terms of either sentiment and his own personal, whatever cases happening and maybe some level of the shops being closed? Or is it consumer behavior, which has been this time?

So what we have seen, one, is very, very clear like last time how sanitizer business took off, this time almost it is negligible. That is definitely a trend. As I said, immunity also, the way people had jumped on immunity products, whatever they were getting, this time, we haven't seen that kind of a momentum. So people also have, I think, found a lot of home care remedies this time and they are doing that than jumping on some of the branded goods.

Sure. That's useful. One second related question to immunity is honey portfolio. I understand here, again, it's a launch which has happened in the past 2 years and you are a relatively small player versus the market leader. My question is when you see the other new launch, they are now claiming a INR 100 crore run rate for next year for just the honey portfolio. So if you could discuss what -- how has been your honey portfolio growth? And is there any learnings you can take from the new launch, which happened this year in honey in the industry?

Again, it's the same point, Abneesh. For honey, we are very small compared to the size [Technical Difficulty] our numbers from last year. But on an overall basis, we are not even 1% of our total sales. We are much smaller.

And last question. Kesh King, any comment how do you see the outlook there? When I see 2-year number, the growth is a bit more moderate and -- for this quarter. And how do you see the outlook for FY '22 in Kesh King?

So Abneesh, on a 2-year basis, you would see we have grown at almost 7% as far as Kesh King is concerned. So -- and as I said, unfortunately, the second wave has taken a toll on some of these brands. We were doing exceedingly well in the month of April. But as we set in, in May, we saw a slight fall in these brands, particularly the summer products and Kesh King and Fair and Handsome per se. But still, I think as we go under unlocking, I'm very, very confident of achieving a double-digit growth in almost every portfolio. Because we have -- because in the last 9 months post-lockdown, we have seen a lot of new consumers coming into the Kesh King portfolio and also in some of the other brands. We are very confident post 1st June or maybe 10th of June, we are confident that we will run with the same strategy what we had done last time and confident of achieving a double-digit growth.

But are you able to track, sir, new customers? How do you track that? You said lot of new customers have come. So is it for the different product or Kesh King?

Yes. We get the data, so how many new consumers have tried the product, of course.

The next question is from the line of Arnab Mitra from Credit Suisse.

Mohanji, my first question was on Healthcare again. So while your portfolio is not immunity driven in a sense you had a very strong Healthcare year in FY '21. So on that strong year, do you expect to grow in FY '22 given the high base that you have? And if that is to happen, would it be through the core categories of balms itself or it's driven by a lot of NPD plan that you may have had -- may have in the -- for FY '22 for Healthcare?

So Arnab, when we say Healthcare, we exclude the balm, okay? So excluding the balm also, we are very confident of at least achieving a 20% to 22% growth, even on a higher base. So it would, of course, be with new launches, with Zandu Care, the portal that we have launched, with our expansion on distribution only for the Healthcare range. So it's quite an aggressive plan we have taken for HCD business for FY '22.

And specifically, on pain management also where you've had a very strong year, any sense of how sequentially that business is trending? Is it holding on to the strong numbers that you have been doing last 2 quarters? Or are you sensing some moderation in the pain management business?

Interestingly, Arnab, pain, we have seen in the second wave it is much more stronger than what we had seen in the first wave. That's the only portfolio, which is really holding on and which is growing much aggressive than what we had envisaged. So these are trends, which are very difficult for me to understand. Suddenly pain management has really taken off in the second wave and not so much of immunity.

Right's. Right. My second question is on...

The only reason what we sense is because of the stress levels that have gone up would be one of the reasons.

Okay. Okay. Mohanji, just on the 1Q, June quarter, I know we are still like in very, very volatile times and there's still a month to go. And last year, of course, you have a low base. But if you similarly had to compare the 2-year-old June quarter, which is 1Q of FY '20, how would you -- how do you think the quarter could -- are you looking at definitely a decline, which could happen on the 2-year-old number given the impact? Or given that some parts of your portfolio are doing well, you could actually see some growth on the 2-year-old first quarter also?

Arnab, we would -- let us see if luck happens, when does it happen. If it happens this 1st June or maybe 10th of June or 15th of June, then we are definitely confident of doing much better. But as of now, I think we would be able to touch our FY '20 numbers, what it looks like, maybe a slight growth from those numbers.

And Mohanji, my last question is on margin. So if you could just articulate which are the key commodities where you're seeing very high inflation. At an overall level, how much is inflation for your RM basket and also the pricing that you have taken? And generally, given that you do have high ad spends, do you feel that at an EBITDA level, there is any risk to margins for FY '22? Or it is within the range where you -- between pricing and other cost lines you would be able to broadly manage your full year EBITDA margins?

Arnab, that's a good one because when we started the year with our budgets, we have taken an aggressive number. In last con call also, I think I had mentioned that we will go aggressive on advertising. But as I said, we have to rework on our strategies. In the first quarter, we have, of course, cut our advertising depending on the sales numbers and due to lockdowns. So I don't see there should be much impact as far as EBITDA margins are concerned, what we had planned. Of course, we would have to see how the numbers go in the second, third and fourth quarter. But first quarter advertising would be low compared to last to last year. Last year was a washout. We did not advertise at all, okay? So I don't see much pressure on the margins. Even on the gross margins, we have taken aggressive price increase for a lot of our portfolio, almost, I think, about a 4% price increase we have passed on because of increased inflation on raw materials. So I don't see any pressure as far as gross margin or the EBITDA margins are concerned.

And then just one last follow-up to that. So other than the crude derivatives like packaging LLP, is there also inflation in menthol or menthol prices are reasonably steady right now?

So the menthol are very steady. There is no pressure on menthol. Only on RBO, rice bran oil, edible oils are at an all-time high. So that is also a little worrisome. But as I said, Arnab, I don't see any pressure on the gross margins because we have been aggressively taking price increases.

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

Congrats on good numbers. Firstly, on Fair and Handsome, despite the relaunch, the sales has not recovered fully. So what's the issue there? Is it an industry-wide issue? Or is it like competitive issue? Or is it like male grooming is still like not really coming back? If you can share your thoughts on that first.

So Kunal, if you would have seen our fourth quarter number, we had grown handsomely in Fair and Handsome, okay, sequentially. But unfortunately, as I said that because of the lockdown and most men are staying indoors and there are not much social events, so this category is badly hit, okay? So it is to do with the category, nothing to do much regarding Fair and Handsome.

Okay. Okay. Secondly, you mentioned that Zandu portal is doing well. Would it be possible to provide some numbers, how many downloads or users you are seeing, sales contribution? Like how do you like plan to leverage it? Like will there be more products available there? If you can share your thoughts on that.

So every month-on-month, I think I had mentioned it last time, we are doing almost a business of INR 2 crores, INR 2.5 crores every month. And every month, almost about 55,000 to 60,000 consumers are buying products directly from only Zandu portal now. So since the time we have launched, we have almost got a database of 42 lakh consumers on this portal. So I think it's a quite remarkable achievement, I would say, we have done over the last 7, 8 months. And we are continuously strengthening this portal to see how consumers benefit directly. We would launch a lot of products only for this portal -- only on this portal going forward.

And are you looking to leverage this into other brands? Like are there opportunities available for other brands as well from the learnings which you had on the Zandu portal?

So of course, it is too early for me to say. As I said, Zandu itself has a lot of potential. We would first leverage the entire Zandu product portfolio plus a lot of new launches, which only we will do on this portal. And then we would see whether we can do it for other brands. But as of now, the entire focus is on Healthcare.

Sure. And just one last question. Will it be possible to provide revenue split by brand or category for FY '21? You've given the growth numbers, but the contribution mix, if you can provide for FY '21.

Those numbers we're not discussing right now, Kunal.

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

A couple of questions from my end. On Navratna, you mentioned summer season demand could get affected. Is it because rural and green belts are affected in the second wave? It's alone? Or is it well before the second wave started channel pipeline was lower in terms of billing?

So Prakashji, I think we have done exceedingly well in the fourth quarter to fill in the pipeline because none of us expected this kind of second wave coming in the month of April, May. But because the migrant laborers, they started leaving, the factories started closing down, most of the sales come from rural, which goes through the wholesale. And you know almost 80% to 90% of the wholesale market is shut now. So -- and this time, the wave has been badly impacted in the rural areas, which we all know. And Navratna being a rural brand, so definitely, that's had an impact. People are not moving out. They are not stepping out of their houses. So the sales is, of course, impacted, both for Navratna cooling oil and for Navratna cooling talc. But we still have 1 month to go. Let us see how, if God willingly, from 1st of June, if markets start opening up, then we would be able to make up some bit of it.

So Zandu website has almost 55 kind of products. So are these OTC products only where consumers can buy for your health and hygiene? You mentioned in your opening remarks about some doctor support program or consultation. Can you talk some more about that program?

No. So not that every product is OTC. Some of it are ethical and generic, which are prescribed by the doctors. But the large proportion of sales, of course, comes from the OTC range.

The larger part, is it?

Yes, yes.

So if somebody has a doubt, he calls in at a particular call center number to ask for -- convey a doubt and say, I want this product, how will you this help me? That was the kind of support system we're trying over here?

Yes, absolutely. They have to go to the portal and then you have to, of course, give all the data and that. Then they will guide you. If you want to order, you can order. If you want consultancy of the doctors, they will guide you and take you to a doctor.

And lastly, on Almond cooling oil, we have tried earlier and have not worked. So is there some new formulation or specific target for the women segment or a specific age group we are again trying this month?

We have only launched it in the e-comm platform, the Zandu Gold Oil -- Navratna Gold. We are trying it out again, as we said, in the e-commerce platform.

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

Sir, I just wanted to understand a little bit more about this Zandu portal. A few questions on that. So firstly, how does the delivery happen? Does it go from a centralized warehouse of your own -- I mean, your own warehouse using some delivery partners? Or does the order just direct to some nearby retail kirana and he delivers it?

So we have 2 centers, Percy, in India. It is done through us. We have, of course, tied up with delivery partners, but the orders comes to us, and we deliver it.

So basically, you will require intra-city transport for this.

So as I said, we have 2 centers, 1 in Delhi and 1 in Calcutta. From there, we distribute it across India.

Okay. But wouldn't the cost be prohibitive for someone in Bombay ordering it? Maybe he would get it from -- it would get shipped all the way from Delhi. So wouldn't the entire cost of this business model be too high?

It is at this point of time, Percy, of course, the costs are a little higher. As the businesses grow, we would, of course, we can easily open centers in almost 27 locations because we have depots everywhere. But we ourselves did not know that how this portal would work out. We are learning every day. We are implementing strategies there. As I said, we have almost, today data, have almost 42 lakh consumers with their phone numbers and detail. So let us see, I don't think it is difficult to open. We are strengthening the team there almost on a daily basis. And of course, we have plans to open more centers, that's what I can say.

But any thoughts about whether a hyperlocal kind of model will work? So in my pincode only if some retailer who is having that stock, if that order is just directed to him, is that something that you would consider? Or you think this centralized system would work better?

No. I told, Percy, that it has to be centralized because there are a lot of products, which are not being serviced by the local retailers. These are exclusively only sourced through the Zandu portal.

Okay, okay. Understood. Secondly, I just wanted to know that since you have the data of so many customers, are you planning to sort of popularize more of a subscription model that every month you would get so and so list of products, whatever you subscribe for. And if you subscribe on an annual basis, you get x amount of discount rather than buying piecemeal?

Percy, you would appreciate I wouldn't be able to share the entire strategy what we will do with the Zandu portal here. As I said, we have intensive plans. We are investing aggressively behind this portal. We have got the benefit out of it. So every quarter, you will get some data from there from us.

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

Hearty congratulations for solid growth of 39% volume growth. Mohanji, I've got a few questions. I think you have done the right things in the pandemic time, and I think there's a rethinking of strategy on Healthcare. And of course, you have also strengthened the senior management team working around that. What I wanted to understand, now what is the Healthcare product gaps which you are thinking which can fill in the new product team. And also, if you can give some color what is the penetration which has gone up in the last 1 year, maybe in terms of touch point, what are the team -- you have said that you have reorganized the strategy. So maybe some more color what this Healthcare look like maybe a year from now.

So Shirish, unfortunately, I won't be able to discuss what are the new product launches we have planned for under Healthcare. As I said, there would be exclusive products for the portal. And of course, there are a new range, which is coming under Zandu Healthcare. But most of it would come in the juices, squash, single herbs or cough syrup. So these are some of the categories where we have increased our focus in the last 6 months, and we would continue to focus on these products other than Chyawanprash and Pancharishta and Nityam. So -- and all the products, whether it is juices, cough syrup, single herb or even honey, on a small base, we have almost either doubled or tripled in almost every category. So we are strengthening it, as I said, and we would keep on launching new products also.

Mohanji, one related question I had is that is this a penetration-led growth or is it a offtake growth? And the reason why I'm asking, if you can split whether OTC, which is driven by penetration/distribution and ethical, which is more of offtake driven, I think I'm looking for some more understanding what this Healthcare means for us now.

You would appreciate, Shirish, that still we are very, very small in the total size of the Healthcare market. Our total business is not even INR 200 crores, okay, which includes even Chyawanprash and other products. So we have a long way to go. I can hardly say that we have even penetrated 1% of the total market. So much of diversion in this total Healthcare business. So as I said, we have started getting aggressive. Due to pandemic, of course, we got the benefit. And we are strengthening our team in the Healthcare very aggressively. And there is a lot of room to grow what you call offtake, or I don't know, inorganic or penetration-led. The only focus is to grow.

Okay, okay, okay. My next question is on international business. So in this quarter, we have shown that international contribution is around 17%. Would you tell what's this contribution for FY '21? And what is the international growth? And one follow-up on that. This Creme 21, how much this business is contributing to overall international business now?

So in FY '21 only, our contribution from international is 17%. And going forward, we have slightly aggressive plans in international business growth. So it might touch about 17.5% to 18% by FY '24. And Creme 21, of the total international business, is about 19% or so.

Okay, okay. And will you talk something about on the profitability part in the international business or any further acquisition you are planning to do now?

Right now, of course, we don't have plans for acquisition in the international market. And international profitability is much lower compared to the domestic business.

So is it safe to assume that it is -- it will have about 40-odd percent-plus gross margin?

No, gross margins are similar to the domestic, but there are higher costs. Yes. There is huge infrastructure plus even the advertising that we are doing now in some of the markets, which is much higher.

Okay. My last question is you, if I...

But if you see last 3 years, Shirish, the profitability has increased tremendously in the international business also. I think 3 years back, our EBITDA was -- but I don't have the numbers right now. We can discuss it off-line.

Okay. My last question, if I hear correctly, you said 4% price increase you have already taken. Is that right?

Yes. For a year, it would be -- because we will take some price increase in the month of June end. So yes, it would be about 4% for the year.

Okay. No, what I'm more interested after the 1st of April, you have taken any price increase so far?

Post 1st of April, yes, we have taken some price increase in the pain portfolio and in the -- even in the summer brands portfolio, yes.

The next question is from the line of Shantanu Basu from SMIFS Limited.

I would like to know about your Emasol range. So how has Emasol as a category done and which category -- which subcategory did the highest sales? So that's my first question. And the second question, maybe I think I missed it, so I would like to clarify [indiscernible] traction. So how was the e-commerce channel grown in Q4 and FY '21? And what is the contribution of e-commerce through FY '21 sales -- FY '21 domestic sales?

So e-comm contribution is roughly 3.7% of the domestic sales, which has almost increased 3x in the fourth quarter.

Okay. And this is for the full year, 3.7%?

Yes. 3.7% is for the full year, yes. And as far as Emasol brand is concerned, of course, 2 brands are showing some promise. One is the toilet cleaner and one is the dish wash. Though we are reworking on the strategy because it's a challenging market, we would have to consolidate. We can't run across India. We are seeing which markets are showing some signs, and we would only focus on certain markets instead of focusing it all India.

Okay. And what are those markets?

It is difficult for me to -- yes.

Okay. And any idea, any ballpark number on the quantum of sales generated by Emasol in Q4?

It is very, very small. It's not even 1%. Much smaller.

Okay. Not even 1% of total sales -- total domestic sales?

Yes. Yes.

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

My first question was on the distribution expansion plan, Project Khoj, that you spoke of. So if you can just talk about little bit, Mohanji, on how FY '21 has gone on the distribution side, and what kind of expansion plans you're looking for in FY '22.

So Harit, I think in my last con call also we had mentioned that there are 4 areas which we had identified. Unfortunately, the plans got a little delayed because of the second wave. And -- but still, the plan remains intact. The 4-point was, of course, strengthening further on e-commerce, which you are seeing the numbers what we are getting. Even in this quarter, we are doing well as far as e-commerce is concerned. We have strengthened our team at the head office for e-commerce. Second is on the stand-alone modern trade. I said in my con call -- in my opening remarks also that is one area where we are tied up with a lot of single stand-alone stores, and we are seeing significant growth there. There also, we have hired a new team who would look up to this. Third is on the chemist outlet expansion. We have identified almost 20,000 chemist outlets with high potential chemists, which will be covered by exclusive team. And fourth is on the rural expansion, which is Project Khoj. We have identified 13 states where we would go very deep into 3,000 population villages. But we would start with only 4 high potential states as of now. This is the only project, which has got a little delayed, unfortunately, because of the second wave. I think most likely, we would start by 15th of June or 30th of June.

Would you say that of these 4, probably the #4 one, which is the 13-state plan could probably be the largest in terms of impact on sales for the business over a 2-year period?

It would strengthen. See, it is very -- because you know that distribution is part of our overall strategy and strengthening distribution is key for the size of our business, particularly where rural plays a significant role. And it has always been our endeavor to reduce the wholesale contribution and reach directly to the selling points, right? So I don't know how much it could come out of wholesale. But the only benefit we will get if the business stabilizes, we don't have to really depend on the wholesale channel. That is very, very important. And we have seen the benefits coming in, in the last 3 quarters. You would have also seen our numbers. Because of such large distribution base, we could grow what we grew, right? And now it is high time for us to invest behind distribution, advertising and other stuff.

One bookkeeping question was we've seen a sharp increase in other income this quarter. So anything one-off there to kind of just point out?

Yes. Harit, I think that there were a couple of one-offs. So there are 2 investments which we have, where we got valuation gains of roughly INR 11 crores each.

Okay. Okay. So that's a INR 22 crore one-off there.

Yes. Yes, Harit.

Okay. And third is just one request. You could just add probably -- you used to give market share data every quarter, but it's just that's not -- if that's not something you'd like to do. At the end of your presentation, if you could just add market share data, that would be very helpful.

Yes. So from this year, on quarter end, you will get the market share because, unfortunately, last year, we did not subscribe to Nielsen data. Okay. Now we have subscribed, from this quarter, you will get.

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

Sir, 2 questions. First is you've professionalized the company in the last 2 years and wanted to understand on that if you could give an update. Second is also on tech. We see other companies talk about SAP 4HANA (sic) [ SAP S/4HANA ], continuous replenishment system and many other initiatives. Would we also discuss what are the plans? What have you done in the last 2 years, tech side?

Abneesh, your voice was not very clear on the second part. First part, I understood is...

Yes. So to repeat the second part, so essentially, on the tech part, if you could tell us other companies speak about SAP 4HANA (sic) [ SAP S/4HANA ], they speak about continuous replenishment system. Could you also say what are the plans for the next 2, 3 years? And what have you done on the tech side of distribution and production and overall forecasting and all those stuff, what have you done?

So Abneesh, as far as IT is concerned, I -- we'll have to [indiscernible] into detail, but what I know is that most of it is now technology-driven. We have also moved to HANA. And though I'm not an expert, I can talk much on this. But working from home last time, post that we had really implemented our IT infrastructure and which is working beautifully now. So almost every data is on live data we have today. And as far as professional management is concerned, you are right that the aggression that you are seeing today and the numbers what we have been able to deliver, it would not had have been possible if we did not get right people at the right place. So I would say that at the top level, whether it is CEO of the International, CEO of the Healthcare division or even our sales head or every HOD who is today, even the e-comm new head, everything has contributed to this growth. And the aggression what we are going for next year also is basis discussion with these people only.

Sure. My second and last question is on Zandu portal. I'll not ask the questions, which were asked till now on that part. But my question is why do exclusive products for Zandu portal? For example, every other company is doing e-commerce-only products. So why don't you offer those Zandu portfolio -- portal products on the e-commerce companies also because customer footfall will be far, far higher there. And unit economics will also be much, much easier for the customer and you also because he will be ordering across the board from all companies and all categories while for Zandu, it will be a very limited subset.

So Abneesh, you are right. We would have to think over it. But we also want to popularize the Zandu portal. So if there is some exclusivity, people -- you want people to come to this portal, right? So depending on the demand and if you see that there is a lot of opportunity going outside, we would, of course, we can take any product outside any time when we want. But let us first grow the portal to a significant size and then we can decide on the strategies. But right now, we want to popularize this.

So you will spend on the advertising based on the portal also, right? Otherwise, how do you get footfall?

Yes. Surely, we have, as I said, we have taken aggressive numbers for the Zandu portal for this year, FY '22.

The next question is from the line of Gaurang from Haitong Securities.

Yes, sir. Congrats on a very good volume number. Sir, my question is on the Dubai subsidiary, last year, we've taken some provision impairment of around INR 58 crores. And this year also, there is an addition of another INR 8-odd crores to that number. So can you throw some light on what is this issue? Is this some receivables issue or what is this about?

Sorry, Gaurang. Can you come again?

Yes. On the Dubai wholly owned subsidiary, there was impairment of INR 58 crores last year in other expenses and another INR 8 crores this year, roughly. So can you like throw some light on what would be these issues? Is there some receivables that are being written off?

Well, yes. So because of one of our subsidiaries, the Dubai subsidiary in particular was not earning profits, so we have taken some provision of the receivables last year. But this year since it has earned profit, this year, we have written back the provision by INR 8 crores. We have not provided further.

Okay. Because the Notes 2 statement says that company has further created provisions of around INR 7.73 crores. And some amount is coming back in the other income also, which is around INR 6 crores.

Yes. So INR 6 crores is written back of the provision which we did last year.

Okay. Okay. So are we expecting anything more or this is largely done?

No, this is largely done.

Okay. Okay. Okay. And just one more thing. On the tax rate, what will be the effective tax rate for FY '22 and '23?

This would safely take around 20%.

20%? Okay. Yes.

Thank you.

The next question is from the line of Aditya Gupta from Goldman Sachs.

If you could give us some more color on what happened with gross margins. I think you mentioned menthol oil prices were largely stable. So -- but the swing even on Q-on-Q or Y-o-Y basis is fairly significant. So if you could share some more color? Is the product mix in play over here? Or was it just raw materials?

So Aditya, as I said, we have taken, because seeing at the increase in inflation in some of the raw materials, we have taken price increases. So if the same continues like this, then we are confident we should be able to do a gross margin of about 66.5% or 67% only.

That's for the next year?

Yes. That's for the next year. Yes.

Okay. And second question, just on the promoter pledge again. So going by the March filing, it's around 1/3 of the shareholding. So any further progress we have made since then? Or what is the plan over the next year or so?

So Aditya, as of now, I think the pledge is about 30%. We have reduced in the last 1.5 or 2 months. And as I've been continuously saying, we are absolutely committed to reduce it further. And hopefully, in the next few quarters, you will see a significant reduction.

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

I just wanted to have some clarification. During the cement sale, we had created our pledge cover for Nuvoco, 8%. Is that -- is going to get released because now the transaction is quite old?

So Shirish, of course, it would be reduced. But as there is some mining, there is some case going on, once that is only sorted, then only they would release these shares.

Okay. Do you think it will happen very soon or it will take us longer time?

At current level, it is about 5%, not 8%. We had given 6%. So they have released 1% shares.

Okay. Okay. And the second question is on now we have generated a lot of cash. And I think but natural there is expectation. Are we going to have a stable, steady, growing dividend policy? Or is there any thought that the board has taken? Or is there any such policies in place?

Shirish, I think what dividends we have given this year, we would expect these kinds of dividends for next year also.

The next question is from the line of Abul Fateh from Baroda Mutual Fund.

Congratulations for decent recovery and good set of numbers. I had a question on the pledge. You mentioned that the current pledge is 30%. And you have reduced some pledge in the last 1.5 months. So this is because of the repayment of the promoter debt or is because of the share price moving up?

It's a mix of both, but primarily because of the share prices going up.

That was the last question. I would now like to hand the conference over to Mr. Rajesh Sharma for closing comments.

Thank you, Percy. Thank you, IIFL, and thank you all the participants for joining us on our con call on Q4 results. Thank you again.

Thank you, everyone. Please stay safe. Thank you. Bye-bye.

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