Godrej Consumer Products Limited (GODREJCP) Earnings Call Transcript & Summary

It's great again to meet and interact with all of you after such a long time. From the management today we have with us Nisa Godrej, Executive Chairperson; Sudhir Sitapati, Managing Director and CEO; and Sameer Shah, CFO. We'll start with a very short note from Nisa followed by presentations from Sudhir and Sameer. Post that, we can take Q&A. All right. With that, I'll not take much time, and I'll hand it over to Nisa.

Thank you. I just wanted to say a big welcome to everyone. To our office, I think it's been a long time since we had this in person. And we're very excited to have you here. It's always nicer to have analysts when the quarter has gone well. So a big, big welcome. Actually, I just wanted to take 2 minutes of your time. And we're always talking about the quarter and what's happened recently, and a lot has happened for us in the last couple of weeks recently. So I just actually just wanted to share, sorry, from the past. If we can -- so this is a WhatsApp message between Sudhir's wife and me, and this is almost 2 years ago. And I invited Sudhir and his wife over for dinner. This was before Sudhir joined. I don't know if you all do this when you join new firms, but normally senior people who are joining, to convince them, we also have to meet their partners to make sure that they know that we're not the devil. So this is -- we've had the dinner. And this is a sort of bag of -- similar to one of these bags that I've sent to her the next day. And this bag is really on the conversation. And when consumer people get together, you won't believe what we talk about. Correct? We talk about products. We talk about consumers. I mean, was it yesterday or day before, I was having a chat with Sudhir, and he said about a new product he had a bath with and how the product works very well when he was not sweaty. But then he went and played tennis, and he was very sweaty, and the lather was not enough. Just a note to you, we're not having these discussions with Kamasutra, but soap is okay. I can do soap. But -- so this actually -- so she's -- it is the first time I'm meeting her. She's -- [ Katie ] is an amazing consumer market research person. She still works for that other amazing FMCG company, continue to get them all over. But we got one partner over. And I was telling her about the Goodknight story, and then we had another discussion. So I'll tell you both those stories that we talked about. So if we can just go to the next slide. And yes, I'm making a picture a little bit of why M&A is good. But I think story I just wanted to share because sometimes our perspectives in the past can also give you some thoughts for the future. And this is a story that we're very proud of. And I don't know how many of you know this. And I have actually heard this story from [ K K Dadiseth ], from [ Uday Kotha ] and [ Vindi Banga ]. Being like a young kid, do you know how awesome your dad was? I hope someday, maybe when I'm 80, someone, [ who is this ] someone, my child will say your mother didn't screw everything up. So in 1994, actually that other FMCG company, HUL, Hindustan Unilever, was trying to buy the Goodknight brand. And lucky for us, things get stuck in London. And [ Uday Kotha ] is the banker on the deal. [ K K Dadiseth ] is doing the deal. That's why I've heard this story from both sides. And they come to my father, Adi -- [ Uday ] comes to my father, Adi Godrej, saying more than the owner of this business wants to go into the movie business. So we can talk about that separately, but he wants to go the movie business, and he wants this money. And he wants it quickly. And you have 1 week. This is now in London in Unilever. And I was still at this boarding school at that time, and I remember going for a walk outside my house. I still remember, you know my father is very passionate about killing mosquitoes. And at that age, it didn't sound that cool, but I'm glad he didn't go by my emotions on that. And so no time to do due diligence. So what did he do, he tells [ Uday ], you buy 10% of the business, you're the banker. And the CEO at the time, he says, you buy 5% of the business. I'll loan you the money. So that is due diligence. A year later, he flipped this -- did not flip, but he go into a joint venture, and Godrej did a lot of joint ventures at one point. Now we prefer not to now. But they sell the 51% stake to Sara Lee, and we have a joint venture with Sara Lee for many years. And Godrej really develops this category. We have management control, but this business has nothing to do with GCPL. Even the shareholding is completely separate. And there is 2010. And actually, the thinking then was -- we have been talking to Sara Lee for them to get out of this business. And so finally, they agreed. And at that time, we said we must put this -- buy this business and put this business into GCPL. So we did a share swap for the 49% we own and the 51% we bought from Sara Lee. HI hasn't been our strongest story in the last few years, and Sudhir has been sort of working on it. But I think the value creation that we've got from Goodknight, the innovation we've done -- and it's not always been a smooth story. Actually, just before we acquired in 2010, All Out were the first ones to innovate the liquid vaporizer. We were a mass business. And -- but then we came up with a much better product. And I was trying to get that chart, but I couldn't find it, about how our market share sort of really takes off. And I think what happened also with Goodknight in 2010, we had a few years in that period of 20%-plus growth was the distribution because Goodknight was very strong in the South. So even the North saw this trend, really well done. So it was just a small story I wanted to share from the past, something that we are very, very proud of. And then coming back to the picture, if you can switch back. So I was in a boarding school in England when I was around 15. And both my parents never used deodorant. They used that. And so I -- we were having this discussion of what are the categories of the future, what is abroad, why is this not in India. And I figure out [ K K ] is a talc user. I think Sudhir is also a talc user. He might have converted by now. And I was like, oh my God, don't come close to me. How can you be using talc? But this was the discussion we've only had in terms of what is future categories, why don't people apply deodorant in the underarm. So I sent her the talc, and I sent her the -- I think you can guess from the brand which one I use as an antiperspirant. And I sent her that, and I said use it, then tell me your feedback. No, I'm not going to tell you what her feedback is because I think Sudhir is going to prove to us over the next few years how this happens. So that's just the story I wanted to share with you. I wanted to say a big thank you to all of you. We, at least I, don't get to meet you much, but I feel that I'm very familiar with all of you because we read your reports very closely. It keeps us on our toes, and we take it very seriously. So thank you. Keep pushing us. Keep raising the bar on us. And thank you for being here with us today. Thank you.

Hi. Do I have to click on or I'll just tell you? I'll tell you which one? Great. A very warm welcome to all of you. It's very nice to have a physical analyst meet, at least for me, after 4 or 5 years actually since I did one. So we've been all in touch through calls and presentations. And we last did an analyst meet in December '21, which was a virtual meet, so I'd start off -- next slide, please, with -- yes, next slide. I'd start off with a chart that we had put up in December '21, and I don't want to -- I just keep that chart, I hope, for many years to come, which is we set our aspiration, this is slightly different from target but it's still aspiration, was double-digit volume growth because kind of our belief is that once the engine or volume growth kicks and providing gross margins are good, and Sameer will talk to you about these double engines of FMCG, which is the base is high gross margins, and then you get volume growth, everything kind of fits into place. And we said our strategy was category development, which required a lot of investments. And we said we have to fund the category development by simplifying our organization. There are a lot of costs that consumers don't see in our organization. We've got to remove that and put that back into what consumers say. This is what roughly was the key chart of December '21. And as I said, what does it mean in the short term? And around about January '21 -- or January '22, we took our plans or AOP for FY '23. Next chart. Yes, that strategy led to a plan for FY '23, and I'm going to talk a little bit about FY '23. What we said is we were -- even prior to what happened in February '22, we are on a pretty high inflationary wicket, and we said, let's get this business back to at least moderate volume growth. Reasonable price growth. We, at that time itself, thought that there would be 5%, 6% price growth. Good GM improvement because, while prices were high, they have had one round of stabilization by January '22. So we said good GM but increase our investments and get moderate EBITDA growth. This is what we have set for ourselves as a target for FY '23 in January '22. Then in February '22, the Ukraine crisis happened. The truth is it was a black swan event. Black swan event is not just volatility, it's also you don't know how to respond to it. So a major war has not been seen for a long time and impact on commodities, how long it would last. And certainly, the impact of it lasted in terms of costs, primarily in terms of palm oil cost, but also shipping costs and lots of disruptions for 6, 7 months. Some of us at that time thought this was a 3-day war. We didn't know the cost. So in any case, it was, I would say, in a classic sense, a black swan event. And I guess the question that was in our mind was, while we didn't know, I must say, in February that this is a black swan event, we didn't know what it was, by the time it was March, it was appearing to be a more serious event. And I guess the question is, once you made a plan and you have what looks like a black swan event, you don't even know what's going to happen at the end of it, how do you respond to it is the question that our management team asked ourselves, right? How do we respond to Ukraine? What could happen? We didn't anticipate that this goes on for 6 months. PFAD touches -- which is palm oil derivative that we all use, goes to 1,500 or 1,600 . How will we respond to it? And our answer actually was a relatively simple answer, which is you stick to the strategy because the strategy is not a 6-month or a 1-year strategy, right? Category development for us is, frankly, a 20-year strategy -- yes, probably a 20-year strategy. But I said -- one of the things we said is that when you have high volatility, what I have learned in various volatility and various crises, is you have to really look at the metrics because often businesses run with the lens of metrics, not with the lens of strategy. So we have to run with the lens of strategy, not the lens of metrics, and it has consequences in terms of many things. So what we did was, I think interestingly, and all of you will recognize that in a year of hyperinflation, we increased our investments in media and in Africa, in physical distribution significantly. A 40% increase was what we put into media. We took very, very hard calls on simplifying the business. Again, it was a -- when you simplify a business, and I've only taken one dimension of simplification of business, which is inventory, but there are many dimensions of simplification of the business. It could be NPDs, it could be people, et cetera, et cetera. So everywhere we said simplification in a time of volatility has consequences because when you reduce inventory, for example, in a channel like we did in Indonesia or -- some of you may ask me, and I'll give you a texture of the India results, stand-alone results this quarter versus branded. When you take a hit on channel inventory, it has an immediate impact on volume growth, right? So we said this is what we've committed to simplify our business. We'll continue doing it. But I think the metric that mentally we changed was we said it's going to be very difficult to get margins with this kind of cost, and we can't price for this kind of cost because we knew, whether it's 2 months or 6 months, cost has to come down. These are unnatural costs. Similarly, when you have -- when you double the price of oil and even to cover some of the costs, you take up prices by 20%, 25%, from experience, we know that volume shrink, right? So volumes is strategy, but we said okay. For the time being, what we will do in crises -- I mean, I've not specifically dealt with a Ukraine-like crisis, but we've dealt with various crises in the past, COVID; '08, we had a big crisis, which is to focus on cash. So we said let's get the metric of focus back on to cash. And certainly, one of the things that FY '23 looks good in terms of Q4, but actually, it's been in the making for 3, 4 quarters, which is it has been a record year for us in terms of operating cash. And it's been a breakout year. So GCPL has roughly been in operating cash INR 1,700 crore kind of range for 4, 5 years, some years better, some years worse. And this year, we delivered INR 2,150 crores of cash. So we've stuck to strategy but changed the metrics of success in the short term to protecting and conserving of cash. So I guess that was the -- really the year in summary. I think the good thing is -- next chart, please. I think the next thing is that having now done this, we said, okay, things progressively get better. So Q1 and Q2 are terrible certainly optically in terms of volumes, margins, et cetera, better in terms of cash. And I do think that our performance has got progressively better. Q3 was better than H1, and Q4 is better than Q3. I think Q4 has been a little bit of an exception in the India business. I don't know whether it will sustain. This has been a really good year. I think for example, if you take India branded, India branded is about 95% of India stand-alone. And one of the things we do in India stand-alone, India stand-alone results are slightly worse than this, even though they're only 5%. For example, in Q4, we stopped any invoicing to Nepal because we felt that Nepal was sitting on way too much inventory and way too much accounts receivable. So when you just stop sales -- I said, okay, stop sales for Q4. We've got enough stock for Q4. We'll come back in Q1. So that has a consequence in terms of volume growth and et cetera. It doesn't have any consequence in terms of cash. In fact, it's cash better because you're taking our receivables back in. But if you take our India branded business, which is the core of this company in some ways, we had 16% value growth spread over both home care and personal care. Household insecticide had a good quarter, albeit I must say, I think, part of it is I'm seeing some green shoots, but part of it is last year's same quarter was a little poor in terms of seasonality. This quarter, it's probably a little better in terms of seasonality. So I think there's a combination of 2. I wouldn't call this a victory yet but good signs. I think what was really happening was that this came largely from volume growth. So 13% underlying volume growth in some of our categories like hair color and hair care have had explosive growth. And profitability increase despite a 50% increase in working media, we don't share it in our reports, but we look at working media, which is a component of ATL, which is what consumers see because ATL has some things which -- like advertising fees or production costs that consumers don't see. So gross margins in India went back to 56%, which are historic numbers. EBITDA margins have gone to 27%. And we actually feel in the business of soaps, we have actually been aggressive in terms of price drops. So we do not feel that this has come at the cost as volume growth are a good testament to that, right? So it's not come because we have priced up more than what we should. So certainly, India performance in Q4 we feel is good and a bit of an outlier certainly from our own past. But even Indonesia, we now feel much, much more confident. Indonesia grew overall last quarter at 8%. If you remove the hygiene business, it was 11%. The EBITDA margin, which was a slight worry to a lot of analysts because it had gone below 20%, has come back to 21.5%. And we will progressively take it up because that portfolio again deserves pretty high margins. Africa had a slightly slower growth than it's been having for the last several quarters. That was largely on account of demonetization in Nigeria, which basically wiped out February and half of March for us. I don't think it's a longer-term thing. So yes, so I think a good Q4 and a progressively good Q4 driven by some of the decisions we actually took in Q1. Next chart, please. And this, I think, all of you have seen it, but this was our consolidated results as a consequence of largely the strong performance in India. Next chart, please. So that was really kind of FY '23, give you just some flavor of Q4 and what was our thinking in running FY '23 the way we kind of managed it. I think I just want to talk about the strategy for '24 and going forward. It's a refresh. I don't think there's anything fundamentally different in what we're saying in December '21 or what we are seeing now and what we say. But I think the real truth and I think a lot of how we're thinking about life comes, I think this is a really interesting chart, which is the markets that we operate in are at the cusp of explosive HPC growth. What tends to happen is we've taken this data from Euromonitor, which is we plotted HPC per capita consumption on the y-axis and GDP per capita on the x-axis. And what we see is, and I've rounded off these numbers for effect, around about 1.3 to 1.4x of GDP is what HPC grows until a country hits $10,000 per capita income. And within that, there are some categories. Deodorants is one of them, by the way. And actually, sexual wellness constantly is the other one that grows significantly faster if one just looks at it conceptually in terms of what happens in $10,000. And bulk of the countries that we operate in, India, of course, being the lynchpin, but Indonesia is actually also a very, very attractive country, very stable macros, large population. But Indonesia also is very much in this $4,000 per capita income. Nigeria, another large country. [indiscernible] is a little out of macroeconomic stability, but it's again an important country. And then around about $10,000 to $20,000 HPC grows at the rate of GDP. And then once you cross $20,000, HPC grows slower than GDP. One of the categories that actually beats the strengths for many, many -- in fact, all the way to $40,000 in HPC is deodorants and fragrance. So just strategically, one of the conversations that we signed and we have been having about the potential of this category since the time I joined, but this is one of those long, long runway categories is deodorants and fragrances. But there are several others which also grow even when GDP growth is half of -- or HPC growth is half of GDP. So I think this is the essential thing. And we have certainly a very long way before India goes to $10,000. And this is really the kind of chart that drives our thinking in the way we run our business. The next chart. And I think what we've done is we put a strategy on a page, and there's a small video, I'll take you through it, which really captures essentially what we said in December '21. But it's a response to the fact that there are many, many categories in India which are underdeveloped. And one of the things about FMCG is development is partly driven by income, but it's partly driven by what the companies do. And there are many cases where they beat the line, they go slower than the line, and our strategy of category developing existing portfolio, radical simplification and people and planet alongside profit forms the lynchpin. And maybe I thought I'd show you a bit of a video that focuses on some of the other elements of our one-page strategy deck. This is sort of on everyone's computer. And everyone in the organization now and every presentation I start with within the organization, all actually -- even the MC starts with is this one slide on GCPL's strategy. So maybe we'll have the strategy video. [Presentation]

Thanks. So that was just kind of a brief video on our strategy. I think I just want to now focus on 2 of them, which we didn't actually have videos on because I thought I'd speak a lot about it. I think our strategy fundamentally remains unchanged as we enter FY '24. I think the thinking broadly for us is, given the size of opportunity in India and our capabilities in India, certainly, the texture to this is invest in India and simplify our International business. So that is the -- so while category development requires investment, we definitely feel that India is the real source, and the rest of our business we should simplify. And I hope I'd give you some examples of simplification. And to continue putting people and planet, both these are Godrej values well beyond GCPL, and continue to focus on people and planet alongside profits. So let me first talk a little bit about category development, what we did in FY '23 and a little of what we'll do in FY '24. I think the first thing on category development is driving relevance, which is people need to know why they should adopt the category because it's very different from market share winning, which you're better than somebody else. You're not actually marketing the brand, you're marketing the category. One of the categories we've had a lot of success in, it's a category that actually we didn't aim for it but, as a consequence, we've taken market share and really grown penetration of this category was in air care. And our insight in the air care category when we met consumers was that people adopt this category the first time when guests come home. That is the time in which they adopt our air freshener session because it's a bit of an embarrassment. And we had this sort of real interesting insight on air, which is that guests come home, they have your tea, they have your samosa. The moment your back is turned, they're b******* about you. So they gossip. So guests' gossip was the advertising insight. It gives it -- and we had this advertising idea of talking rooms, the campaign that we've run in India and Indonesia. But this is a good example of how to drive relevance for the category. We can play the ad. [Presentation]

So that was really an example of building relevance and why you need to put things. The second thing is investing in our brands. You saw already the kind of physical increase at a time in which actually a lot of people reduced investments. As a consequence, over 3 years, our share -- or weighted share of voice, we weighted it by categories, has gone up 1,400 bps over 2 years in our business. The third thing really -- so one, you've got to have relevance. You've got to then commit to putting money because unless you invest in market development, it doesn't happen. The third thing is creating access. I think the biggest success we had last year was only INR 15 creme sachet, which is certainly given a new [ flip ] to a category that was growing in the past but had sort of moved to a canter from a gallop. And I think this category is galloping again. But another intervention that came in, in Q4, in February -- but certainly, we are very, very optimistic of what it will do for us this year, has been 2 innovations in household insecticides on creating access, so -- which is a third lever of market development. So maybe we can show the 2 adds on household insecticide. [Presentation]

So both sort of are very exciting things. The other thing that one does is improving distribution. Our FMCG business in Africa has now become a reasonably sizable contribution to our business. It's growing really fast, I mean our new FMCG. We have some legacy FMCG businesses like soap. But our new FMCG business is growing 30-odd percent. And a lot of it has happened because of Dharnesh's great work in increasing direct coverage. I'll speak about one of the new initiatives we've done a little later in the day. But direct distribution and the direct distribution lever we really see in a big way are in Africa. We see it in Indonesia. We see it in [indiscernible] in India. So one of the things about distribution is it's not a blunt tool. You have to use it when there is a general lacuna and distribute -- distribution can't solve for lack of relevance or lack of access. But if you have relevance and access, distribution certainly gets you explosive growth as it has done in Africa for us. And the other thing that we have built is very, very high internal capability in India last year and I hope this year in Indonesia on sampling. So one of the things I've seen is what categories get built with sampling, and it is not free sampling we should get -- all of us, when we get a sample in a newspaper, it just lies in our pantry. You don't really use it. So sampling has to be educated. So this is home to home, people going. So last year, we sampled 3 million households, which means you typically have to go to 10 million households. This year, we plan to sample 6 million. In Indonesia, we plan to sample 3 million. So that requires a full army, a full team of guys dedicated because there can be a lot of leaks in this into the market; controls, so it needs back checking. It needs a lot of work. And this is as -- very, very as important, the marketing development capability of distribution, which is field marketing. So 2 capabilities we've developed, one is on household sampling. The second big capability we're developing is rural wall paintings. And it sounds boring, but a large number of consumers in India are still media dark. And even some consumers who are media light are getting increasingly hard to reach them through some traditional medium. So we put another dedicated bunch of teams, if you guys ever travel to rural UP or Bihar, you will see, I hope, a lot more Godrej wall paintings the way you see some of the cement companies, the telecom companies. 1 or 2 FMCG companies also do a great job on wall painting. So these are kind of category development capabilities or the tool book of -- 5 tool books of category development and really what we are doing to develop these 5. I think we -- if those are the 5 tools of capability development -- of category development, there are 2 capabilities. One of the capabilities is a company like us needs to have a really world-class market development self, guys who are really, really top of the line working on it and international quality. So I think Tom already spoke about it, but it's probably worth showing this communication because it tells you that the same relevance insight, which is the insight on Goodknight, has been tagged moms are afraid of mosquitoes disturbing children's sleep, but they're also afraid of the safety of coils. And Goodknight was really born with this insight of meeting this safety on Goodknight dose, to sleep really well with babies. It's a universal relevance insight. And what we did, which was unheard of for a company like us, was to test the same creative across 3 different markets. And all 3 markets, it is both tested and working really well. Maybe we can show -- yes, we can show all the 3, actually. [Presentation]

Thanks. So that sort of gives you a sense of -- just go back to the earlier slide. It gives you a sense of one of some capabilities which are high-value, deep-understanding capabilities which are global, we need to kind of centralize. But equally, the other thing, which is the yang of the capabilities, the yin is sort of centralizing this high-value, insight-led capabilities with high-quality talent, is to have a lighter global market structure. So forget about new markets, even in existing market, what we've now created something called Godrej International, which is consolidated a lot of our small country operations across the world, many of whom -- some of whom were flagged, some of whom were actually distribute a model and consolidating it across the world. One of the things we're realizing is that when you move a small flag operation to a distributor model, there's an immediate increase in EBITDA. And a real example is Uruguay, where we had a $5 million business, a tiny business, [indiscernible] office. It had like a country manager. It wasn't making money. The moment we moved it to a distributor model running under Godrej International, it's moved to a 30% EBITDA business. And it's basically a hair color business. A 30% EBITDA is unheard of in hair color. That just leverage it. So one of the things we want to do as we grow and go further, without getting into too much specifics, is to ask the hard question on which country needs flag operations. And if not, can we just integrate it to Godrej International, where we have these world-class mixes, great products which are manufactured in different parts of the world. And then we spread them out into the already-wide network that we have even before widening our network. So that's really the second part of global capabilities. So centralized R&D, centralized product development, marketing and have a light global operation that distributes our products across the world. So I think our market development strategy is broadly working. I mean, apart from our results this quarter, one can always argue with results how much is weather, how much is macro. So many things are there, and so how much is this, some of it is this. All that is true. This is a chart that Nielsen released. I think some of you may have seen Nielsen's Q4 results. One of the charts that they showed us, a really interesting chart, which is nonfood growth in volumes across 4 quarters. So Q1, it was -- or January, February, March of '22, this calendar year, was minus 10%. And broadly, nonfood, which is 90% HPC, has come back to flat volume growth. They have classified HPC or nonfood into 4 different categories, which is essential PC, essential home care, other PC and other home care. We have a presence in essential PC in toilets, but we're not the drivers of that category. We have a very minor presence in essential HC in laundry liquids. We have a relatively minor presence in essential PC, other PC, which is hair color. But we have a pretty major presence in other home care, which are 3 categories, mosquito repellents, batteries, home insecticides. So our reckoning is we must be having 40% -- 35%, 40% share of what Nielsen calls other home care. And what is really interesting is the other wound care trajectory has been significantly better than the overall trajectory, starting off at the same base. So starting off with about minus 10%, which was Q1, but then it was minus 6.4%. This went to minus 3.7%, 4.2%, then it kind of went to 0, and this was minus 4.6%. But this quarter, this category is having -- this subsection has had an inflection point, which it has now moved to 9% volume growth according to Nielsen. And for us in market development, this is only a swallow, so I don't think we should take this too seriously. It's only 1 quarter results. But this is the kind of results that we want to see, which is growth that is decoupled from macro growth. If macro growth is there, good, we'll get the tailwind. But if the macro growth is not there because if 0.2% volume growth is still not good, macro growth for -- is not. But 9% volume growth certainly for the categories that we are driving is good. So this is the kind of chart that we would like to see more of. I think it's only 1 or 2 quarters where we have outperformed -- our set of categories have outperformed. So I would say that some areas of progress still, I would still say household insecticide. And market development, we've got another step. I think some green shoot for another step. But broadly speaking, we feel that our market development strategy is working or that's what we feel over the last 2, 3 quarters. I think one of the things we thought we do now is somebody some time ago, this is [ Edward Sean Gogarty ], who I think very highly of, used to -- kind of a marketing mentor, he had come for a marketing cost with our team. And he asked me, put me on the spot and said, Sudhir, who's your boss? So I said Nisa. He said, no, she's not your boss. He said the boss is the consumer. So for all of us, the real boss is the consumers. So what we thought we'd do for you guys this time is get you a couple of consumers here. They have -- we have -- we do consumer research all the time, and we have selected them for criteria of people who responded to our marketing development. So to give you a sense of the journey that some of these consumers -- it's an unfiltered thing, so we're not -- they don't know what we're going to ask them. So we've got a moderator who will ask them some questions on market development. And then before asking Sameer and me questions, you can ask our bosses the questions. Thanks.

Hello. Hi, everyone. So we've got a few people over here. I don't like to call them consumers. I like to call them people because they could be using our brands, not using our brands. Our job is to finally convert them to like what Godrej has to offer to them. So we are going to hear stories from them, and we'll see how we can impact or influence the like. [Foreign Language]

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Hi. My name is [ Ramesh ]. Same, joint family.

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Right. [Foreign Language]

[Foreign Language] So then all of a sudden, slowly, slowly, they -- labor-wise, they started to shut to down. [Foreign Language] So you start to think [Foreign Language]. You start to gain weight. Lifestyle totally changed. It was like I'm in cage.

You felt that you were in a cage.

Yes. [Foreign Language]

[Foreign Language]

I love to travel or a kind of extroverted person. [Foreign Language]

[Foreign Language]

[Foreign Language]

Right. Right. [Foreign Language]

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Right. Right. [Foreign Language]

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Right. Right. [Foreign Language]

Yes, like health related. [Foreign Language]

[Foreign Language]

I would say protein bars. Then I would say personal hygiene products [Foreign Language].

[Foreign Language]

[Foreign Language]

What about you? [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Right. Right. [Foreign Language] So how do you travel? What's your -- how do you commute?

[Foreign Language]

[Foreign Language]

Hectic.

Hectic. [Foreign Language]

Crowd. Pollution.

Crowd. Pollution. [Foreign Language]

Summer.

Summer. [Foreign Language] Tell me, how does it feel when you're commuting by bus, yes, [Foreign Language].

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Right. Right. [Foreign Language]

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Right. Right. [Foreign Language]

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[Foreign Language]

Closing the doors. [Foreign Language]

Okay. Okay. [Foreign Language]

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Right. Right. [Foreign Language]

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[Foreign Language]

Yes, but not much. [Foreign Language]

[Foreign Language]

Yes, you can say. [Foreign Language]

Right. [Foreign Language]

[Foreign Language]

[Foreign Language]

Yes. Yes.

[Foreign Language]

Face wash, deo. [Foreign Language]

[Foreign Language]

[Foreign Language]

Okay. [Foreign Language]

[Foreign Language] because it's all sweaty, messed up. [Foreign Language]

Okay. [Foreign Language]

[Foreign Language]

[Foreign Language]

Yes. Yes.

[Foreign Language]

You look so lazy.

Okay. Okay. How does it impact us? How do we feel? [Foreign Language] Comment like you look lazy or you look like you just woke up [Foreign Language].

[Foreign Language] The kind of impression because I'm a senior [Foreign Language].

[Foreign Language]

I'm frank with them. I'm frank with them. [Foreign Language]

And so they have that relationship where they can give comments.

Yes. Yes. We work like a team. [Foreign Language]

Okay. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Okay. Okay. [Foreign Language]

I would say same thing, office mate [Foreign Language], especially from the girls, yes. [Foreign Language]

[Foreign Language]

It's positive. It's gentle. A bit of musk.

A bit of musk.

Yes. Yes. [Foreign Language]

[Foreign Language]

Yes, kind of. Even some of the seniors or some of the colleagues were also impressed. You smell good. You feel, you look positive. You're smiling. [Foreign Language]

[Foreign Language]

It was something different for me. Positive feeling, definitely.

[Foreign Language]

[Foreign Language] because all other deos are very strong. [Foreign Language]

[Foreign Language]

It irritates me, also the other person. Yes. Yes. [Foreign Language]

[Foreign Language]

[Foreign Language] I was smelling good. [Foreign Language]

Right. [Foreign Language]

She said its good.

[Foreign Language]

[Foreign Language] If I'm smelling good, then I feel good. [Foreign Language]

Okay. Okay. [Foreign Language]

[Foreign Language] So until lunch or 2, 3, yes.

Right. So it lasts longer.

Yes. Yes. [Foreign Language] It doesn't last. [Foreign Language] You're working on a car and sweating [Foreign Language].

Right. Right. Okay. Thank you. Thank you, [ Ramesh ]. [Foreign Language]

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Right. Right. [Foreign Language]

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[Foreign Language] smooth and softer, right? [Foreign Language] brown, burgundy, natural brown.

[Foreign Language]

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Okay. [Foreign Language]

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Okay. [Foreign Language]

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Okay. [Foreign Language]

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Right. Right. Thank you. Thank you. [Foreign Language]

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Okay. Okay. [Foreign Language]

Yes, this is a must.

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Yes. [Foreign Language]

Okay. [Foreign Language]

[Foreign Language]

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[Foreign Language]

Glossy hair. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Thank you. Thank you so much.

[Foreign Language]

INR 220. INR 210, INR 220, it depends, yes. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Just the gentle fragrance [Foreign Language].

But they are local. I don't trust local. [Foreign Language]

[Foreign Language]

[Foreign Language] when you are upgrading to grooming attire [Foreign Language]

[Foreign Language]

[Foreign Language] because it's strong. [Foreign Language] That's why.

[Foreign Language]

Deo local.

[Foreign Language]

[Foreign Language]

[Foreign Language]

It's best for me, I guess. [Foreign Language] because I need something which would stay long term.

[Foreign Language]

[Foreign Language] when I'm wearing that deo, memories attached [Foreign Language] that confidence you get, that comfortness. [Foreign Language] That's all. That's why.

[Foreign Language]

Supermarket.

[Foreign Language]

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Yes, either [indiscernible] or [indiscernible] can answer this question. [Foreign Language]

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2 times.

2 times? Okay.

[Foreign Language]

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Yes. Yes.

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INR 75.

INR 75. Okay.

Just on Goodknight [Foreign Language].

[Foreign Language]

Anybody else who has a question?

Thank you very much. Thanks a lot, Arun. Thanks. Great. Yes, I think it gives you a good sense what kind of a day job, at least mine, for the last 20 years, this the kind of thing I do. You can see in like a short period of time what market development is triggered. These were consumers obviously chosen to make a point, but you can see, especially things like sampling or what he was saying was one of the things we noticed when we did our due diligence on [indiscernible], you all said it's got a loyal user base. And it's got a strong equity, which is significantly ahead of its distribution, so many, many triggers. aer matic, which she was talking about, has been a real blockbuster. Like Nielsen yesterday was sharing with us that they think it's on of the big blockbusters of last year and, I think, this kind of mobility and continuous thing that aer matic does. And really interesting insight on the INR 15 sachet, which is a lot of us tell that is there a use case downgradation. Actually, the use case, because lots of consumers use it on when they have just the first gray hair and they don't need a full INR 30 pack, so they don't want to buy INR 30. They buy a cheap INR 10 powder or a color creme. And at INR 15, they're able to upgrade. So you could see all the relevance triggers here. So that was really the first section, which was on the importance of category development and the journey that we are on and what we hope to be. I think I'm now going to talk a little bit about the funding because category development is expensive. It needs high investments in sampling, media, distribution, et cetera. So it has to be funded through some fuel, and the fuel that we have found has really been simplifying our operations and investing in things that matter to consumers. Next chart. The principle that we have set for ourselves and including in our KPIs is we look at costs in 2 ways. One is the costs that consumers see, which is they see the material costs, and they see the media costs, they see the brand. This is -- and they see a component of the distribution costs as well. So we call it -- they don't see the schemes we give. They certainly see our sales distribution. I think the cost that consumers don't see are some of the fixed selling and distribution costs, our employee costs and general and administrative costs. So we bunched up all these costs into a heading called controllable costs. And we have targets on controllable costs. So to give you a perspective, the rough number for controllable cost for us is about 33% of turnover is cost consumers don't see. And I used to have a former boss who used to say that we should keep cutting costs which consumers don't see until it comes to 0. There's never really a point in which you stop cost cutting on things that consumers don't see. These are investments. So that's how we've classified costs in terms of targets. And our game plan is to continuously reduce costs that consumers don't see. I mean, several examples of last year. One of them in terms of simplification and cost reduction is our Indonesian business. About 30% of our sales in Indonesia used to come from a direct distribution, so we used to go to 60,000 outlets in Indonesia collecting cash from them, pretty heavy overheads, finance overheads, IT overheads. It was a high-cost operation. For whatever reason, we've been doing it historically. And I think Rajesh came in at -- I think, in a month or 6 weeks. He said, hey, this is not an area of our expertise. This is not what we should be doing. And this debate has been going on for many years in Indonesia, but he just took the call in a difficult year. And almost in 3 to 4 months, we have moved our entire distribution structure to a 140 distribution structure, which is exactly replicating the Indian structure in FMCG. And this tells you both the speed and the boldness with which we moved on an idea that has been around for a long time. So this is a good example. And what we realized in cost is, once you simplify, a lot of the costs that don't enter the Excel sheet start coming through. So that's another principle of simplification is you cannot see it before. Once you simplify, you see costs coming all over that start getting knocked out and that we are seeing in Indonesia as we are discovering through the process. I mean, equivalent thing that we just did, in fact, 2 weeks ago, that is in Nigeria and in West Africa, we are going to move to a single distribution partner. So we will exit direct distribution today in Nigeria and Ghana. We were selling directly to wholesale. We had appointed small distributors in parts, but our distribution was nowhere near what some of the big distribution partners in Nigeria like FMCL. FMCL was bought over by DP World, so it's now a DP World company. It gives us double the amount of distribution overnight. It increases our warehouse. We had one warehouse in Nigeria. These guys have 23 warehouses. So that reduces the service time to retailers and much better working capital management. So simplification and capital reduction, especially now that we have reduced our inventory and SKUs in Nigeria, this allows us far better access to market. So this is another -- I mean, another example of simplifying our international operations. And in the short run, it may or may not be cost dilutive, but it'll certainly be growth accretive, and it will be margin -- EBITDA growth. But we are reasonably certain that in a year's time, we will be able to make this margin accretive as well because some of the costs that you remove in consequence of simplification takes 6 months to 9 months or a year to come by. The other thing we're constantly thinking of is to simplify our supply chain. So one of the things we are thinking of is we're already having explosive growth in wet hair in Africa, so how can we move more of our base from the U.S. into Africa and Nigeria, where we're already manufacturing those products. Some of the other things in the U.S. we can go to third-party manufacturing and, again, move the U.S. to a simple marketing and distribution model. And I gave you the Uruguay example, $100 million, $80 million in the U.S. is equal to $5 million in Uruguay. In fact, it's probably much less. So that's the kind of second leg. So one is to simplify distribution, to move overheads out of distribution and get experts especially outside India. The second is to simplify supply chain, consolidate manufacturing, fewer manufacturing sites and then to move to a distributor model as far as possible. Next. I think the other things that we're doing are sort of integrating technology and decision-making. I think the several areas, media planning is an area that I'm particularly happy with, where we run media on an algorithmic basis kind of minimizing our cost per reach. So we don't have a point of view on media, this media is better, that media is better. We only know what the cost per reach is and the cost per incremental reach is. And we keep calculating at marginal cost, what's the best media to go with. The other area that we have been doing a lot of work on is on forecasting and demand forecasting and financial forecasting. We were trying to use a top-down financial forecasting model. Today, typically FMCG companies, including global companies, financial forecasting is a bottom-up exercise. Every unit will send its forecast. There are 2 problems with that. Everybody buffers a little bit. The second thing is everyone doesn't have the same visibility to underlying costs. What we're realizing is costs ultimately get driven by with some lag, some commodity. And once you know that lag, you can reasonably forecast what the cost that will hit your P&L is. So we're finding that accuracy of our top-down forecast broken down to the micro is a far more effective way of financial and demand forecasting than the classical bottom-up forecasting that FMCGs do. So these are the kind of areas that we are sort of applying our mind on technology, the less visible part but more rewiring of the back end of technology. And the other one, kind of mirroring this whole principle of a lighter distribution footprint, a lighter manufacturing footprint, is to kind of move our operations to a shared service model. So we've just recruited a Head of Shared Services, Vijay Kannan, who heads business transformation for us. He's got a lot of experience. But under him, someone who is a shared services expert so that we can shared service finance, supply chain, HR and, of course, Godrej International also. So these are the kind of things that we are doing in simplifying our business using technology. And we think it's working as well like in market development. And I think the really simple thing is EBITDA margins were what they were in the first half. And a lot of people have been reading analyst reports saying they were surprised with the growth of the margins in this quarter. The reason is that when the gross margins come back, and they've actually come back faster because we've reduced inventory through this journey, so it can get back, but the fundamental cost savings remain. So we think our controllable costs, we have knocked off 150 bps of this, and very little bit of this is overhead. So I think overheads does have some impact of COVID, travel less, but that's a very small component of where the savings have actually come from. So if you see, most of these savings have come from supply chain, some of it has come from nonworking ATL, which is advertising spend that people don't see production, et cetera, and a lot of it from sales and distribution and reduction in BTL. One of the things about increasing media is velocity increases. If velocity increases, you can gradually reduce the BTL that you spend. And that's a gross margin-accretive thing without consumers seeing it. Again, BTL is one of those things that consumers don't see. He said something really interesting. I don't know if you all noticed. Somebody asked him, you asked him what the price of deodorants is, he said INR 220. Now the thing about deodorants is it's sold in the market at INR 120. Margins are still good for manufacturers. It's quite an anomaly, by the way, in the FMCG category where INR 100 is kept. And there's a consequence, in my view, of not enough distribution, probably not enough market development and media. But it tells you that the end consumer is seeing INR 220, not INR 120. That's the selling prices. And we've seen a lot of consumers -- some consumers also buy it at INR 130, INR 140. But that's really the game to be played in BTL and sales and distribution. And finally, I think the last section before I sort of hand over to Sameer is to talk about people and planet and our thinking on people and planet because I do think both is a beacon, and I think this is increasingly important. On people, I think what we are doing is to build a stronger performance culture. I think GCPL did have a strong performance culture. I feel like actually it's got a very strong performance culture. But I think one of the things is some of our metrics were output metrics. The more you have input metrics down the line, the better the outputs are. So for example, the 3 key metrics for last year, we didn't do well on them, by the way, unfortunately, but we will continue with those metrics this year, is a measure which is UVG, not sales growth because lying back a strategy which is volume growth is important. Secondly, it is a unique metric called EBITDA plus media, which is media in our view is an investment. It's a balance sheet item. It's a budget, we'll give it. You maximize profit without media. So you cannot cut when gross margins go down, costs go up, et cetera. You cannot cut media to manage your P&L and working capital, which is inventory plus AR actually. We are not -- we want to also reduce the payables so -- because we also want to pay fast but reduce receivables and inventory. And I think one of the things is -- we realized is, when you focus on the input, the output happens. If you focus on the output, actually often processes get broken and so on and so forth. So it's better to see how we can get more and more input focused. I think in terms of the rewards, this is really the metrics for the organization as a whole. I think the culture on metrics, we have changed quite a lot. Everybody -- this is the company metric. Everybody carries no more than 3 metrics now in their work plan. And each of those metrics have to have a linkage to these 3 metrics. So it can be you'll do a good job here and all that. So it's very quite especially at reasonably mid- and senior level, so highly quantified, 3 metrics leading to this. Our structure also as we go along is to increase our fixed compensation, to hire top talent from outside, and our internal top talent who we see a lot of velocity, to move them fast and promote them fast, so have a higher -- because one of the things we realized is good talent doesn't work for bonuses. I mean, good talent works because they want to work. But to attract them, you have to get a good fixed pay. Lower the in-year variable pay so that we don't have kind of issues that we've had in some of our international geographies in the past and increase significantly the linkage of longer-term incentives, which is stock price-based. So we have a big and aggressive LTI scheme for everybody on stock-based. So it's a simple philosophy of so that we don't be all in-year focused because if you are in-year focused, you can't take the kind of decisions we took last year. So I think that's really the kind of key of performance culture. In terms of planet alongside profit, I think the company has done a lot of job internally for many years on emissions, on renewables, on plastics. We want to move in FY '26 -- 2035, we want to move to net zero. We'll see how we can -- see what we can do to get this faster, but that's the published target. '26, to move to 60% renewables, 80% recyclables. We also want to be in the DJSI. So our goal for our sustainability team is we have to get on to the DJSI by 2026. I think if DJSI comes, then the other indexes, MSCI, and CDI also, where I think there is scope for us to improve, we'll improve. So at least there should be external recognition of what we are doing. And this is really the goal for us over 2 years. So that's really the kind of summary of FY '23 and give you a flavor of the strategy and what we are doing for FY '24 and beyond actually. It's FY '24 and beyond. And I hope the next time you come, we'll just give you more and more progress and update on the strategy and not a new strategy. I'll now hand over to Sameer to talk to you a little bit without revealing too much about FY '24.

Thanks, Sudhir, and a warm welcome to all of you. Maybe time to switch from Word file to Excel files, so let's see how this goes ahead. So I think to begin with, let's spend some time in terms of what are the building blocks or the assumptions or hypothesis which we have for F '24. At this point in time, we do believe that we'll be able to continue very strong volume growth momentum, something a glimpse of which we saw in the last quarter or the last 6 months of the last fiscal year. We expect minimal price growth at this point in time overall, but it's actually into 2 parts. In India, my sense is we will see a way bit of price decline in FY '24. But internationally, we will see a price-led growth. Combination of that should result in marginally pricing growth. On a full year basis, we remain extremely confident that we'll be able to continue the strong growth momentum which we have seen in different parts of our portfolio, whether it be air fresheners or hair colors in India, whether it be FMCG in Africa market. We expect, I mean, steady year in household insecticide category. And this is not just out of hope. There are a lot of input metrics which have already gone in. We have seen some early green shoots also, so let's see. I mean, hopefully, it will be a steady year in household insecticides in India. Indonesia also is something which we have seen in terms of recovery in the last quarter, again, not just 1 quarter's performance but, again, the input metrics and what we believe, I mean, should be the growth path for Indonesia not just next year but for many more years to come. And gross margins to come back to normative levels. I mean we have seen a slump in gross margins for largely external reasons over the last 2, 3 years. But we do believe, I mean, starting this year, we should see a significant uptick in gross margins for the next few years. So that's the sort of building blocks to what we believe FY '24 can turn out to be. Yes. So I think the aim here is to kind of strike a sustainable volume-led profitable growth and not just for 1 year, and I will talk about a multiyear journey at least which we expect, but at least for F '24 to kind of get to sustainable, volume-led, profitable growth. What is going to be very important is the shape of the P&L, right? I mean, so we do expect higher gross margins. We expect lower controllable costs. We expect continuation of media investments. And cocktail of all of that should result in, at least in terms of guidance if you want to call it, high single-digit volume growth. And I would see a conservative but, yes, I mean, high-teens EBITDA growth. Internally, we are kind of trending for much higher than high-teens EBITDA growth at least at this point in time on a full year basis. But we would be very happy to guide at this point in time at least a conservative high-teens EBITDA growth. We heard quite a lot in terms of cash from operations. I think FY '23 was an exceptional year in terms of cash from operations. Despite actually having a little bit of challenge in profitability in the first half of the year, we had a record cash from operations. That should continue in FY '24 also if -- and it will get more impetus with all the simplification initiatives which we have and also a couple of them Sudhir kind of voiced to earlier. So we expect in FY '24 again the CFO to be higher than the overall EBITDA growth-wise as well as absolute value-wise which we will generate. Of course, then comes an actual question as to what's the capital deployment plan with this cash. So again, let's spend some time in terms of the journey over the last 4, 5 years. March '20 to March '23 was a period we used our cash for locking out most of the loans, which in hindsight was a brilliant decision because that also coincided with the period where interest rates were moving up. We became net cash in March '23. We used the cash for buying out Raymond's brands. We became again net debt. My sense is, with the plans in place, September '23 midyear thereabouts, we should be again net cash. And for sure, I mean, in latter part of the year, we'll evaluate suitable options to return back this cash to investors and shareholders. So that's the thinking at this point in time on capital deployment. Spending a little bit of time in terms of the journey so far and also maybe looking beyond F '24 because that's something which we believe we have not just started on a good note but feel more kind of confident internally. So FY '23, I'll not spend much of time, but it was a story of 2 halves. I mean we did hear again from Sudhir earlier, weak volumes in first half, low gross margins, but we stuck to our strategy, continuous investments, lower controllable costs. Second half did see recovery. Quarter 4 was even better than quarter 3. We saw gross margins moving up and record cash from operations. FY '24 we believe will be the year of strong volumes. High gross margins, I mean, should kind of continue in terms of trend. And momentum is what we feel we will see high media investments. We will see continuation of controllable cost reduction as well as CFO higher than EBITDA growth. Taking it a year ahead, and again, we'll be happy to share, I mean, what are the plans, I mean, of FY '25 at the right point in time. But we do believe FY '25 will be the year where we will see return of pricing-led growth, which should complement very well, hopefully, a strong volumes growth, which in turn becomes a good flywheel in terms of getting a pool for investing back for growth as well as having a sustainable long-term kind of profitability and cash from operation plan. So that's the thinking at least which we have for next 12 to 24 months. So that's it from our end. We'll be very happy to get into Q&As with all of you. Just settle ourselves, and then we kind of get into Q&A. Yes.

Percy, we'll go first with Abneesh.

Thanks, Percy. My first question is on Godrej International. So here, you have spoken on doubling the sales in the next 3 years. Most of the new growth engines or new geographies will be in Africa essentially because you have said number of countries also will increase. Second, are you now becoming more dependent upon the big distributor in this kind of a model? So is there a risk that concentration risk become long term? Is it a risk short term it is good because suddenly you get better margins, better focus also because that distributor is already strong? But long term, your own distribution, your own team, isn't that also important? So how are you calibrating between both the models?

No, I think there are 2 separate questions here. Godrej International really aimed -- we've already got small businesses in many parts of the world with small distributors being run locally by the countries themselves. So Kenya will supply through a distributor in Uganda, et cetera, et cetera. So this is going on. One of the things that we're doing is like the flag operations focus on the country. And there is massive -- and many companies have done this is with massive scale in terms of letting a central group focus on all these small distributors because distributor management, invoicing, taxation, et cetera, is better done centrally. So Godrej International largely looks at consolidating a huge set of countries where there is business going on today because we've got flag operations in 14 countries, I think about 100 countries we sell, maybe a few more will expand. But that's the purpose of Godrej International. So in terms of distribution, I think 2 countries, India and Indonesia, we certainly will continue to keep a tight -- we believe that distribution is not a core competency, but it's a competitive advantage in India and Indonesia. So until it's a competitive advantage, we will continue to keep it. We don't feel it's a competitive advantage in many parts of the world. I mean, Nigeria is a good example where companies, many, many companies are able to get significantly higher distribution by going to consolidated distributors. I mean, as an aggregate, Godrej is not going to depend on any one distributor because our big businesses in India and Indonesia are going to continue to have it. Within countries, yes, but most of these countries together don't form an aggregate risk for GCPL. I mean, in Nigeria, in FMCL, for example, whom we are going as the first partner, and we will also do this -- we won't do this all in 1 year and all this. So we will do this gradually. But FMCL companies like Beiersdorf and P&G and even Unilever, parts of it, Lipton and all of them are going. So they're a $1.3 billion, $1.4 billion company distributing in Nigeria. We have $150 million. We'll still be the largest principal in Nigeria, but they are significantly better in terms of distribution. The experience that we have spoken to the other principals and multinationals has been excellent in these parts of Africa. So I would say that distribution is not an ideal, it's a strategy based on whether we have a competence, if we have a competence that is better than the existing distribution structure, we will do it. If we believe we don't have the competence, either in terms of cost or reach, we will use someone else to do it.

And this will be mostly in Africa over the next 3 years into the expansion?

I mean, I think so. But it is true, I mean, Uruguay was an example, right, where we moved to a distributor model in Uruguay. We have got small operations, Indonesia supplies to Vietnam, Thailand, et cetera, $2 million, $3 million. So -- but Africa will definitely be the mainstay of this, though it's global.

In a lot of smaller markets, Abneesh, something like Sri Lanka, I mean, [indiscernible] in a way, we have been in that market for getting into distribution.

Nepal is an example where we currently have a distributor model.

So my second question is on HI, which has seen a good recovery in India last 2 quarters. One issue last 5, 6 years has been constant pace of disruptive innovation here has been lagging by you and maybe other players differently. The growth which has improved, is it because of the LUPs which you report because, initially, it's very easy to get higher sales? So I wanted to understand that how that innovation funnel will be next 1, 2 years. Will it be similar to what we have seen in the last 5 years? Or will there be marked step-up in terms of disruptive? And second is GCPL also knew that LUP works. So why earlier GCPL has not tried this INR 35 product or the INR 50 aerosol, et cetera, or what you've tried, now you are seeing success? And third is because of El Niño, would we worried that because of warmer conditions, will there be a concern from an HI perspective because, again, mosquito, that will be slightly unfavorable?

See, on the answer to question 1 on HI, it's a complicated answer, and I don't want to say that we have all the answers on HI yet. I feel there are -- and I don't want to fully talk about what we want. It's not proper for me to talk about innovation. But I would say that it is a journey. One of the elements is relevance and increasing brand spend. The second is sampling, and you saw the power of it. The third is access. But there are 1 or 2 more things that need to be done in household insecticide for us to see as confident like hair color or air, we really feel that. So I think HI is a journey that we are on. The context of the previous quarter has been a good result. It has to be seen in a couple of contexts. One is that there has been a small, not a massive impact because, typically, these things don't immediately give you results. They give you results 2, 3 quarters later. So there has been a small impact, however, of the LUPs that we have launched, which is a trade pipelining benefit. There has been some benefit we feel also in terms of seasonality, which is last year, the same quarter was a little worse. This year, we think it's a little better. And we think -- we hope in any case because it's difficult to break all this up into precision, but we think that some of the investments that we have made in media and sampling, et cetera, paying off. But I would not call -- I would say that it is as per my expectations are -- in fact, last quarter was slightly better than expectations. I'm not sure it will continue at this rate. I don't know. I hope it does, but it may or may not. But I feel like there's another 12 to 15 months you'll have to give us for us to come and tell you -- but I must tell you that I'm 100% confident that there is 15 to 20 years of high growth left in HI. I'm absolutely sure of it because there are many things, Abneesh. And I'll tell you, one of the things is in the air cleaner. And we did look at the actives and adjust the actives because different actives have different efficacy. So we did a simple exercise, adjusting actives to a common currency. Active growth in India has been in the mid-single digit volumes, right? So that's the active now. So that is the need. So in fact, the need for mosquitoes is going up, not going down. On that, you have to add the premiumization element because this is a category that has to premiumize. It has to move to aerosols or electrics. That trigger we will get. And typically, India's per capita consumption is less than $0.50. This will go to $2.5.

Sir, last quick question on dividend. If you see last many years, there has been expectation. You became net debt, then became net cash and again net debt. You have said very clearly in the presentation that in the second half, you want to give back to shareholders. You also announced the INR 5,000 crore NCD, which is much bigger than what's required for the current acquisition. So is this a very clear message to the investors that you want to give it back? Or based on acquisition, this can be a moving target, right, because last 5, 6 years, we have seen that it comes down and again net debt comes back?

Whether consciously or unconsciously missed out the word evaluate, but any which ways, no, I think the thinking is, I mean, at least at this point in time, we don't expect any incremental acquisition during the course of the year because we would want to focus all our energies in terms of synergizing. I mean, the Park Avenue and Kamasutra brands acquisition. If we are net cash, and again, the question comes as to what do we do of that net cash, and again, it's a move decision at the end of the day, but the thinking at least is that there will be strong evaluation of how do we use this cash in terms of returns to the shareholders.

Sudhir, Percy here. So during the course of the presentation, I have noted down a few questions. I'll put them all upfront. If there are too many of them, I'm happy to take some of them off-line later on. But I just wanted to put them at once, and then you can decide which ones to answer now. So firstly, on household insecticides market share, so basically, I remember since I've been tracking this since about 2008, 2009, when we acquired this business in 2010, our market share was somewhere in the early 30s. By 2016, we had moved up to early 50s. And after that, I think market shares, and correct me if I'm wrong, more or less have stagnated. So what are your thoughts on -- of course, you're developing the category and you're baking a larger pie, what are your thoughts on increasing market share within the organized segment for yourselves? And what are you doing to sort of action that? That's one. Secondly, your advertising on Goodknight with the infants, that's targeting only a very small population, right? Maybe -- I don't know, maybe only 10% of households have an infant at home. Will this ad resonate with people who don't have infants at home is my concern. Any thoughts on that?

Percy, 2 questions at a time. I don't want to forget the first question.

Sure. Sure. Please go ahead.

Let me go to the first question on market share. See, market share, you see our focus on household insecticide is to premiumize the category and grow the category. If we do it well, we will gain market share. It's a bit like that point on when you focus on outlook, you get the wrong things. When you focus on inputs, you get the outputs. When you focus on market share, you don't get the right inputs. You do -- lots of things happen. I mean, Indonesia is a good case where I think we perhaps on household insecticide move towards focus on market share versus market development, and then there are consequences. So market development always leads to market share because a person who develops the market gets a -- especially if you're a high-share player. If you're a low-share player, you should be careful by way of developing the market, unless you have something really disruptive, because if you're a high-share player, you anyway got a fair share, plus the first mover and person who takes all the benefit gets more of it. So the natural consequence we have seen, for example, in air care, where we have taken the steps to develop the market, very, very significant market share increases. But that's not what we go and talk to our sales team and -- I mean, we feel happy about it, but that's not what we are talking and putting on charts saying we evaluate them on because I don't think, mentally, we're in a game of winning as much as in a game of solving consumer problems. And market development is the right metric for it. I think your question on Goodknight is an interesting one, but it's -- you see the thing is children are the acid test of safety. They're -- you're not selling to children, you're selling children as a metaphor for safety. There are many examples here. Laundry, which is a category I worked in for 10 years, stains occupy only 1% of the laundry loads are stained clothes. But 50% of the profit pool of laundry are from brands talking about stains, and the reason is that if you can clean a tough grease stain, you can do everything else. So if you are safe enough for an -- because you see this concern on safety and even these 2 consumers are talking about it, concern on safety is a universal concern. It is heightened in children and heightened in all people, but nobody likes to sleep with smoke. So if you're able to say that it is so safe that infants sleep in it, what we are seeing and which we've seen this is a common trick with marketing, which is you market the most acid test of that category, and then everything else follows. That's the reason we are doing children, not that we're selling products only to children itself.

Got it. While International has been discussed by Abneesh, just one concern here. We have seen across the last 10, 15 years and across multiple companies like Marico, Dabur, Emami, et cetera, when there is a distributor model in an international geography, the company loses visibility, loses discipline in the supply chain, everything goes hunky-dory for a few quarters. And certainly 1 quarter, you have a huge take-back, write-off, et cetera. There is a change in distributor, sometimes that takes 2, 3 quarters to settle down. So what are you doing to prevent yourself against this kind of risk, which we have seen actually materialize across multiple companies across many years? So that is one more. And just 2 more, I'll just put them across, and then you can decide. Sampling for LV, which you said you are doing for Goodknight LV, how does that really happen? I mean, you can talk about the benefits, but how do you actually demonstrate them because it actually takes a while for the LV to take effect and for the consumer to see that the mosquitoes are not sort of biting or affecting them anymore? So that's one. And last one, maybe for Sameer. As far as India ad spends are concerned, FY '23 full year is still about 300 basis points below the FY '16 to '25 year average. So do you think you need to go all the way and cover the entire 300 basis points? Or do you think because things have moved to digital or because of some other reason, you need to increase but not all the way to 300 basis points? Yes, so that's all from me.

Yes. No, let me answer the first 2, and then I'll hand over to Sameer for the third. I think on the distributors, I don't think it's a function of distributer risk as much as it is a function of company culture and output culture at all costs. So if the company culture is focused on market development, and the company culture is focused on low inventory, and cash becomes a very key metric for people versus USD growth, I think -- I mean, I've seen examples of both, Percy. So I've seen examples of distributor model that have run well. Distributor models run well when the culture of the company is focused on consumers and focused on running a simplified operation. If it is focused on using export markets to get short-term growth, it's a problem. But that's not a problem limited only to distributor model. That problem is also in a domestic model. So companies that have a problem in the distributor model have a problem in the domestic model as well -- or period. I won't say companies because I've seen the same companies go through various periods. So I would say this is a fundamental culture of input-led metrics versus output-led metrics and discipline and IT and technology, which I think is independent of whether it's a distributor or a flag operation because we've seen enough of problems like this in flag operations also. I think to your second question on sampling, what we do on sampling is actually we knock, knock -- we go to 2 kinds of households, those with children less than 5 years and those with adult -- old people greater than 60. And that's simply because there's a heavy cost of sampling, and we are finding that our productivities are much higher because the same need is higher in these 2 cohorts. And we ask them what they do, and we have specific videos that we show them on how the product works. This is different from the advertising, which is more emotive and so on; functionally, what is it, what do coils do, the smoke of coils, et cetera, et cetera. And then what we do is we sell -- as we told you actually, we sell the same Gold Flash [ LMD ] at a discounted price. And then what we have found is, because we do callbacks, is we found a very high repeat rate of the liquid vaporizer once they buy the aer matic. So this is the -- we don't -- in this particular case, some demonstration -- some home-to-home you're able to show physical demonstration. Here, we show an iPad, we show a visual demonstration through iPad. Sameer?

Yes, I'll just add a little bit on the first point, Percy, on the distribution and the risk, right? So what we were doing is we're going calibrated. It's not like across African markets we're going at one go, which theoretically we can, I mean, but we're just taking one market, Nigeria, which is tried and tested by many MNCs. In terms of distribution model, there are a lot of risks which are factored into the ways of working and agreements with the channel partners. It's not like a blanket ways of working and there is no visibility to so-called secondaries and tech and your ARs and stock levels and stuff like that. Someone like Dharnesh has done this day in day out, I mean, in his kind of past experience. I mean, he has, I mean, a very deep-rooted understanding which is very specific to some of these Nigerian markets in terms of how do we operate with a third party or a national kind of distributor. So we'll see as to what are the learnings coming out of it, and then we'll evaluate, I mean, what should be the way of working on distribution front in some of the other markets. I think on your question on ad spend, yes, directionally, they will go up. It's difficult to call out whether they will be kind of going up by 300 bps or 100 or 200. There is also the scale, right, I mean the size, I mean, which we have today. Next year is very different from what it will be, I mean, in the last kind of 5, 6 years in terms of sales. But yes, directionally, the spend will go up. I think the mix of spend also will change. We're discussing [ SCD ]. I think the digital spend today says 15, 16 percentage for us. That will sort of go up. The kind of spends on door-to-door sampling will go up. We have very big plans for wall painting, which we believe also is equally important in terms of driving growth for some of the underpenetrated format. That will go up. So the basket will still kind of overall see increase. But as I mean, I mentioned earlier, it will be kind of coming out of a pool, which largely will be gross margins and controllable costs, to drive growth. And that in turn should give scale to get kind of profitable growth. So that's the game plan over here.

It's Avi here from Macquarie. Just taking up from the slide on International, where your focus is on simplifying operations, could you share your thoughts on the Lat Am business in particular? Are you also -- because that was the only leg that was not covered. You talked about U.S. every year.

I mean, I think it's not proper to talk about like household insecticide plans that have not fructified. But I think the question is what's our thinking, and our thinking is to invest in India and simplify International. Simplification has many dimensions to it. At one end of simplification is divestment. But as I said, simplification of supply chain, simplification of distribution, removing overheads from geographies, culling down SKUs, those are all a gamut of -- so when we have something specific to share, we'll share it. But I think certainly, over the next few years, you'll find a journey of simplification. At any point in time when you take a decision, it has to be financially sensible in what we do, right? So -- but that's the big thought.

No, no, got it. That is what I need. And the second question to you, Sameer. The low-teens EBITDA growth, I genuinely felt it was very, very conservative. I mean given that...

It's at high teens.

High teens. Sorry, high teens. Teens itself is conservative is what I felt, I mean, in the sense that you are looking at the EBITDA margin which has generally done well. Plus you have a volume growth trajectory that is supporting 20% plus is whatever that we have thought. But want to hear your thoughts why the teens number. Or should I -- am I reading too much into teens?

No, it's just kind of putting in pen to the paper in terms of giving a guidance, which, as I said, is a conservative guidance in terms of high-teens EBITDA growth. But we do believe, I mean, it should be 20 percentage plus at least in terms of overall growth with the current set of assumptions in the way we are seeing business shaping up. And I'm sure we'll be happy to share with you how this is progressing every quarter, right? We need to give something for a quarter discussion also.

No, no, fair enough. And lastly, the raise that you have done, the announcement, why the amount is too high?

That was just to kind of buffer it more than anything else. I mean, what we have done is actually to fund PA and KS brands acquisition. We have raised short-term CPs, very short term, 3 to 6 months. Just in case if you want to roll over that, I mean, you will just keep the facility of NCD kind of as an option but absolutely no plans in terms of utilizing that.

So my first question was with -- now with deodorants and sexual wellness, is the plate full for the next few years in terms of potential new things that you would do? Or would you evaluate opportunities like this which may come or good brands which you think have potential? And related to that is, in the presentation, you presented why Cinthol could not do deodorants. That buy-versus-build decision, would it necessarily then mean that most new category entries would have to be through acquisitions? Or do you think your existing brands do have a play in other wide spaces which you don't operate today?

So Arnab, again, the first question we can't answer specifically except as Sameer said that we'll certainly learn our way on payments and digest it this year. And we won't be precipitous on this. But take a broader story, right, which is there's a really great India story in many categories, but HPC has one more, which is it's a high-margin, high-cash-flow business, so it is worth getting good positions in categories of the future. There are many categories in India of the future. They all have different -- it's a very-high-ROCE, very high-cash-flow business. So HPC is attractive. Actually, we are a very good company in India, and I hope to be in a few years really, really top of the line in terms of capabilities. So when you have opportunity and capability, then the question is really one of ambition. So I would say that we can't give you a definitive statement on what we will do and so on and so forth, but I think you're going to read, dare I say, we'll be cautious in the short term, not for any other reason but -- because we'd also -- this is the first time we're doing it after a long time. We have a hypothesis on this. We'll make it come alive. But certainly a combination of opportunity, capability and ambition exists in us, I mean, that much I can tell you. What was your second question?

On buy versus build...

Yes, I think with buy versus build, again, let me answer it in general terms, right? I mean, see, what happens is we -- if the category is big in the mind but small in the market, it is hard to build in the mind. It is better to acquire. If a category is small in the mind, still, let's say, air care was a category that was small in the mind and small in the market, it is better to do organic. But if it is well -- I mean, deodorants is a category that is pretty well developed. Brands are there. Everybody knows it, et cetera, et cetera. To build in the mind is a very, very expensive proposition. It doesn't happen easily. There are some caveats. So it happens if you get a really disruptive product, et cetera, et cetera. So I guess the difference between market and mind is how we will measure whether it is -- so there may be other categories which are still relatively small in the mind, and there are several that are there in HPC. And if we happen to have the capability to participate in those, then we will participate on there.

Okay. My second was again on the acquisition. So you've given the FY '24 guidance, which is flat top line, flat margins on RCCL. So wanted to just get a sense of should we expect significant like initial teething issues in the first 6 months, which we've seen in many other companies' pipeline correction is required, did one-off restructuring costs. Would that be very front-ended? And just so that we have expectations on how this full year will kind of plan out.

Yes. So Arnab, what we've done actually is -- it's a contributive guidance again, but we have baked in, I mean, the worst-case scenario which we have internally. Of course, we have our own kind of realistic, pessimistic and optimistic scenario. But we have baked in, I mean, there is going to be market hedging issues or 6-months teething problems, restructuring costs, whatever one-offs and so on and so forth. After factoring that, right now, we are at the table, in terms of FY '24, more of the same as FY '23. And come FY '25, maybe latter part of FY '24 itself, we should see kind of strong performance. But for now, I mean, this is what we will be happy to guide.

Yes. So that's -- we put it, yes, because I'll give you a simple thing, right? RCCL has -- I mean, its distributed channel has 50 days of stock. We have 10 days of stock. We're not going to keep 50 days of stock in distributed channels. So the 40 days of stock is 1 year or for 1 month of sales there. So those corrections we will take. So there are a couple of corrections. I think the stock is definitely a correction. There's an SKU rationalization which we would like to do because we think that is the right thing to focus on the goal. That again will have a short-term hit, it will come back. Actually, SKU rationalization rarely leads to it. The reasonable amount of damages and so on, that is there, which we've baked into the business case, which we will have to clean up and solve. So I would definitely say that there will be 6 months of -- we mentally planned for it. I hope that some of what we want to do next year we can do by the end of this year is what we are hoping to do. But one of the things, Arnab -- I mean, I'm answering your question, is we've now physically acquired the company on Monday. The business case and the opportunity is, if anything, now better is what we see after going [ and this took place ]. The opportunity, forget the long-term opportunity on deodorants and how to reshape condoms and deodorants. Just the short-term physical synergies that we see on strong brands is pretty good.

Understood. And my last question was on Indonesia. So I think 6 to 8 months back, you had said that you're still reappraising whether -- what is the long-term potential of Indonesia market for you across categories. So have you now formed the opinion on how this market could medium-term grow for GCPL, what are the segments growth or other segments you could participate in?

No, the answer is no. I think we have got much clearer answers for India in terms of what we want to do. And the presentation is India first. After India, definitely the most attractive market, I think, is Indonesia. We're actually quite blessed to have a good presence in Indonesia because the Indonesian macro certainly look good for the next 15, 20 years. What we should do in Indonesia, I think we are first getting the house in order, getting -- see the difference between India and Indonesia is we have a similar-margin business, similar profile, but our capability in India is 2, 3 notches up ahead of our capability in Indonesia. So before engaging on the future, we want to spend the next 18 to 24 months, one is a cleanup which we have done, and we will grow. Two is to -- especially distributor capabilities, see if you go outside Jakarta, you go outside Java, our distributor capability is very, very poor because we were doing it ourselves. So the very first thing is to build -- number one in Indonesia would be to build distributor capability. Number two would be, like in India, order is reversed, to build market development capability in genuinely existing categories. And I would then say we would start thinking about what next. I hope that we can get some synergies between India and Indonesia in terms of category development because they're not a million miles away. South India, for example, is very close to Indonesia. So what works in South India works in Indonesia. Manoj, I think you had a question. So I'll just go to Manoj, and then there are [ a couple ]. I just want to -- a couple said there was some confusion on Godrej International. Godrej International is basically a global aggregation of all our export businesses. Many companies have it. What we are doing in Nigeria is not exiting flag operations in Nigeria. We have manufacturing. We will have marketing. We will have sales guys on the field. We are just going to a big single distributor. I mean, and Nigeria is not part of what we're calling Godrej International. Godrej International is Nepal, Sri Lanka, Uruguay, Zambia, Uganda, Congo, Middle East. These are all $4 million, $5 million market. That becomes Godrej International. Sorry, Manoj.

The first question is few sub-ones actually on insecticides in India, so I'll actually ask that one by one first and then a few other ones. If you could elaborate a bit about the category development activity journey in the non-mosquito part in India.

Yes. No, the non-mosquito part of category development is primarily focused on cockroaches, and we have a very high market share within cockroaches. There are 2 things we're doing within cockroaches. One is to market develop the need for cockroaches. See, unlike in the case of mosquitoes, where there's a higher-order need because it goes into malaria and disease, in cockroach, it is more -- it is a lower-order problem now. Our market development trigger is to move it again, like we're doing on mosquitoes, onto the gastro diseases that cockroaches cause. So we have to raise the stakes in cockroach because it is basically mosquito, cockroach, rat. But let's just focus on cockroach because it is a massive problem in India, massive incidence. The large solution to it is the chappal followed by chalk. I mean this is the solution to cockroach. So we have to move it to aerosol. So I talk less about it, but it is super important. And the only reason we talk less about it is because we still feel like mosquito is still the bulk of the business. And let's get it. And once we get that flywheel moving, we can talk about cockroach. The other thing on cockroach that has worked really well for us is a premiumization journey which is also there, which is we have like with aer matic, the other product that is showing a lot of promise. I think it's in the bag. I think we showed it there. There's ARG, which is this Anti Roach Gel which you just put in various parts, that we are realizing when we communicate is doing really well. So these are the 2 pillars: drive relevance of cockroach and raise the stakes; and then drive the format efficacy of the Anti Roach Gel.

Understood. No, it was -- because we have been trying to, let's say, convince the consumer to move here from the chappal for a long period of time, if I understood the comment appropriately, you're essentially saying that you will raise resources from, let's say, accelerating the mosquito part of it and then invest in category development on the non-mosquitoes eventually.

No, we are actually investing in market development. I'm just not talking enough about it, so maybe that's a feedback for me, which we should talk more about cockroach. We're doing a lot on cockroach. We've always been seeing healthy growth on cockroach. So we are doing the sampling exercise, for example, this year is going on cockroach as well. We are -- but I think the strategic change is we are moving from the idea of disgust to the idea of disease. We are finding that to be a -- so I would say it's our fault probably for not talking enough about cockroach simply because mosquitoes is occupying the mind. It is not sequential. Some other things there we may sequence it perhaps...

Out of home.

Out of home or perhaps rats. We may sequence it, but cockroach is very much a today task.

Moving on to the mosquito part in, let's say, India. One of the reasons, let's say, [indiscernible] segment kind of came into existence and took a fair share from organized players like you, it is presumed that it's largely to do with the product efficacy, which is actually possibly a regulation challenge in terms of what you can use and what, let's say, any legal player can use. Is it a fair hypothesis what I've just made? If yes, how do you address this?

I think it is fair, but I would prefer not to answer it. Give us some time, we'll answer this.

Yes. And Sudhir, one comment about, let's say, the HI growth in India, which you said that it is still a little bit of work in progress. But I would have assumed that given that given you have this INR 50 price point, which is essentially to drive, let's say, new penetration-led growth, and given the electrification which has already happened, I thought your comment was a little conservative.

It is conservative because the root cause of the problem we still have to tackle, which is in the rough area of what you have said that because of regulatory issues, et cetera, these things take a little bit of time. So there is a very large part of it because, look at the big picture, right, the big picture is actives in India are growing at, I think, 4% or 5% adjusted. So there is no problem. And that's an important thing because there's no issue on [ such part ] and all that. That's not the issue in this category right now. The premiumization is not happening at the rate at which it was happening prior to, let's say, '15 or '16. We are doing various steps of premiumization. Some of it, I think, will pay back. I'm quite sure actually that the small LV and the small FIK will work. So I do feel that FY '24 will be better than our historic rates or at least last 4, 5 years trajectory, so I think there will be progress. I think this will become -- my personal view is it can become a blockbuster category if we get a few more things right.

Fair enough. And on the INR 80, INR 50 price point which was launched, let's say, 6 months back, what's your early understanding on, let's say, product cannibalization? For you, obviously, if you are recruiting more consumers, is it the Fair & Lovely model of, let's say, channel as being separate? Or how do you basically ensure that there is no cannibalization?

In India, cannibalization within boundaries of 15% to 20% price difference at a price per ml is not a major issue. It is my own experience. I've had several experiences on this. It has not been one in shampoos where the differences is much larger. And the bottle consumer uses bottle, and sachet consumer uses sachet. There is a clear -- I'm glad she came. There are 2 use cases here. One is powders dry your hair, and therefore, that gives you a role for creme. And the bulk of the market in terms of volume today is still powders. And two is there are cohorts of consumers, both men and women, with just a little bit of silver who want a small sachet, so it increases the consumption outcomes. And our numbers, by the way, also, it is -- we are broadly where we were on the large pack, and all the growth has come from the small pack.

Understood. And one last question. At an overall consol level, when I look at countries and categories and possibly even segments and SKUs, different slices there. Do you still think that there are parts of the portfolio where probably you are, let's say, constraining growth because you're running a little more than what it should be?

No, I don't think that there is any constraint in that. And if there is any opportunity for us to do it, like we have done it, and we've taken bold moves. Let's take hair color, right, we sell INR 35 for 20 ml. We sell INR 15, 12 ml. It is effectively a price drop. So wherever we felt last year -- or you take the liquid vaporizer. As we said, we sell 45 ml for INR 75 and 25 ml for INR 35. So wherever we felt that we needed to do it, we have done it. It is not a constraint for us. So if you find an opportunity -- look, ultimately, our priority is volume growth. These are structurally high-margin categories, hair color, et cetera, et cetera. So what we've also found is, once you start getting volume growth, you don't have to look at margin in SKU level. Even if you look at category or brand level, it sort of takes it up. So that is not a constraint for us. I mean, if we have -- we will prioritize volume growth. See we cannot discount in order to get volume growth and structurally change the margins of a channel, it's a cop-out. But within that, I'll give you a good example, right, on soaps, we've been the fastest to drop prices when it came. So...

[indiscernible] as the last one, most marketers and most companies, including yourself, talks about soaps as, let's say, a low-priority category, right? When I look at the premiumization -- I'm not saying you're saying it's low-priority category but people say it's a highly penetrated category perceived to be low growth, et cetera. That's a general comment. But over the last 10, 15 years, like a couple of the largest growth which we have seen actually, let's say, hair oil and soaps, whenever adjusting for premiumization, I'm talking about volumes. The point to you actually is that you have been gaining, let's say, 100 bps market share, and you are still probably in the low teens or mid-teens in terms of market share. Why don't we hear enough about soaps from you, let's say this is like in the top 3? Because in my perception that it's a good mid-teens sort of, let's say, converting opportunity for you.

No, I think it is. I think soaps is -- we spend a lot of our time thinking about soaps internally. A lot of it is focused on efficiency, on salience, on positioning the brands. But it's a stable and strong ship which has got -- it's got flywheel of its own, and it's moving at a certain pace. It is not one of those things that you can massively accelerate the pace in its current form. There is a very big premiumization opportunity in soaps. I mean, all of you are aware that, I mean, Indonesia, half the market is body wash. So there is a market development and premiumization opportunity for whatever reason, and we're not the market leaders here so that we spend a lot of time thinking about it. But I would say that soaps, I personally spend -- personally, I spend a lot of time on soaps myself because it's a complex thing of pricing, media -- the combination of pricing and media is a complex thing in soaps. So it's just that it is not fair to assume unless something goes radically right in our favor, which can happen, by the way. By the way, one of the things about being steady is suddenly you find somebody else fold up, and then you suddenly see a few years of growth. But you can't see a 10% percent volume growth to soap, obviously to me, in the current structure of the soap market unless we transform it.

A few questions. First, your quick comment on Cinthol as a brand today. What do you think about this brand? Because whenever I have discussion with, let's say, someone who is looking at Godrej [ consumer ] for the first time and the view is, oh, Cinthol is only this small and also in the context of you also getting Park Avenue. So where does Cinthol sits on your agenda?

I mean Cinthol is a super strong brand, and I think it has -- currently, Cinthol is predominantly a southern brand. It sells in Telangana and AP. And it's a big player there, and it's got a presence and a growing presence across the nation. So Cinthol becoming a bigger national brand itself is one of the things we're doing this year, which is kind of making it. Outside categories also Cinthol does have because it's got a strong positioning. It's got a point of view on the world. [ Life ] is awesome, and the spirit of adventure and sort of going out and experiencing the world without being in your comfort zone. So it's got great brands that [ standard ] categories have a point of view. It's got a point of view, probably can be sharpen more. But of all the brands that we have in our portfolio, the one that can certainly stretch -- and again, I can't tell you what we want to do and what we want to sequence it, et cetera -- Cinthol is certainly a brand with a lot of potential. I agree with that.

I know you had done a detailed call on Raymond. I still have one question, which is -- which keeps coming from investors. So there is this target right now in the market capital foods, right? And there are like media talking about so many players interested in this name, and the new store has been doing rounds. Raymond consumer business was around for, what, at least for a couple of years. It's not that much at least for the last 12 months. What is it, Sudhir, that you saw in this business? Is it that your peers have had a bias against, let's say, [ your end ] as an acquisition given what whatever has happened? Why is it that if it is such a great asset, you saw a potential whereas most of your peers did not? Because it was not a closely contested battle, so to speak.

Yes, I don't want to answer what others saw and others didn't see. I can only answer what we saw, and I'll tell you what we saw. Firstly, we saw a very -- just take a big picture, right? We saw a big unsolved consumer problem that has been solved in many parts of the world. That's the first thing we saw. It's far from being a decision that was taken in a hurry or a month. This was right from the day that had joined GCPL, and Nisa [indiscernible] deodorant there. It has been puzzling both Nisa and me [indiscernible] that how can such a large -- like Brazil. Brazil is an exception, but it's a market development. It's a $10 per capita consumption of deodorants. That's the -- and you go there and you see it, right? And I just forget, Brazil -- I just came back 2, 3 weeks ago from [ Lagos. And Lagos ] is behind Indian category development. You see the deodorant side and you see what goes on there. So it's a -- and you could travel in a local [indiscernible] in India you can really see. So to us, primarily, this is a huge unsolved problem with a solution that is not -- it's not an unknown solution, which takes the risk. The second thing is we felt that the brands and the category structure was strong enough. The brands, we felt, surprised us because when this came to us, we said, let's do the diligence, because this was the question in our mind. But like the gentleman who came and spoke about it, we found that, for example, KS Spark is the largest single SKU of fragrances in India. It has usership. But I believe like Park Avenue, people talk about Good Morning and Voyage, and they have [ loyalty like this ]. They say the same thing. [ It's musty, it's alive ], it feels a part of me. So they have not [indiscernible] 1964 brand. Park Avenue was one of the first deodorant brands in India, right? So this company has not played a commodity game, and it has been stable 18%. So what you saw qualitatively, quantitatively, you saw 18% to 19% share through all of the ups and downs in deodorants. Category structure [indiscernible]. But the category structure wasn't as bad as we thought it was. There can be better category today. Everything -- we got a better category structure, right? But to have 5 brands or 5 companies have 60 shares, the market wasn't a no-go in terms of category structure. To us, it could have been a better category structure like [ them ]. So we felt that the brands were strong and the category was good enough for us to enter. The third thing was that we find the economics so good. We felt when we looked at the cost of this business that there is a huge amount of cost that can be saved in this business. It's a stable business, and that would pay for the acquisition quite soon. It will be earnings -- EPS accretive quite soon. The alternative, if deodorant is something that is bothering us, an unsolved problem, which is to start from scratch when already, deodorant brands are there in consumers' mind, was a far more difficult task. So these are the 3 reasons that we saw. I don't know what others saw [ in that ].

And a follow-up, Sudhir. Does that also mean -- or let's say, did you have a thought process that perhaps at some point of time, there will be a consolidation in terms of the brands? Because we have seen -- the starting point, what you see is attractive is the higher gross margin, which is for you, which is for the end customer or end company or player which has entered into the market and which is why the tail is fairly long. In your base case, do you also expect some bit of consolidation?

Again, travel -- one of the advantages of having an international operation is that I end up traveling quite a lot. If deodorants is a consolidated market, fragrance is a fragmented market. In India, we get confused between the 2. A deodorant is you put it under the underarm. It protects you through the day -- as you go through the day. A fragrance, you put on your clothes and go to party. These are 2 -- and here, we conflate the 2 between the 2. Across the world, the deodorants category is a relatively consolidated category. So the answer is [ it builds ] well, and it's still early days. I mean we're still like 10, 15 years of deodorants category building in India, at least 2 decades to build. As a betting man, if you ask me, should the strategy consolidate, probably yes. But the question is even if it doesn't, the gross margins that are there for this existing business, which is already 50 with a product that is being sold in retail for [ 1 20 ] and consumers are buying it at [ 2 20 ]. And the market leader has 60%, 65% gross margins. Certainly, I mean, I think [indiscernible] attractive, it has to result in gross margin, right? If it doesn't consolidate and you have poor gross margins, you have a problem. The gross margins are what they are, and I think we will be able to take it up. That alone is -- even if it doesn't, in other words, consolidate for whatever reason, which I expect it to, I still think it will be a valuable opportunity.

Got it. And last question on HI. You have taken marketing initiatives. You have done, let's say, sampling access packs, and you're also sold under category relevance because you are talking about 15, 20 years. What is -- and you still want, let's say, 12, 15 months to get to the answer. So that leaves probably with the only product efficacy. What are you thinking about that? Is there a need for a formulation change, which is maybe some investors who are speculating? Or is the formulation which is the only piece which is now left for you to do because you have pretty much done everything that you could have probably?

Yes, I mean, again, to answer Manoj's question, this is one of the -- I mean, you guys will appreciate that I'm really quite transparent. But on this particular one, I feel like -- I mean, yes, [ you're surmising ] right, which is everything else but formulation has been done, and formulation has got regulatory barriers. But maybe we'll pass this for some more time.

Got it, Sudhir. You are not only transparent, but you are also quite honest in your approach, I must say.

Sudhir, this is Mihir from Nomura. Sudhir, you mentioned hair care and health care witnessed explosive growth. Can you please talk a bit about what is these categories' reach versus your own current reach, percentage of reach was for these categories versus your own current reach? And what is the true potential?

What do you mean by reach? You mean distribution reach?

Distribution reach, yes. And the true potential of this reach that we can expect. Surely, we don't expect hair care to go to tier 3 and 4. So what is the [ potential reach ]...

I mean, look, let me answer that question not in terms of distribution reach. Distribution reach is a consequence -- for a company like GCPL, our physical distribution reach is way in excess of hair color and hair care. So that is -- it is not -- we can ask the question for reach of the company because that's the capability of a company. The question that is the right question to answer is what is the penetration capability of each of these categories. So let me give you hair color first, right? Hair color, in most countries, peaks out at about 60% penetration because not everybody uses hair color. India is already at 50%, 55%. But the overwhelming number in India is powders. Crème, which is the global format that people use where we are market leaders, is a 20-odd percent penetrated category. So I believe that over a period of time, how fast is really dependent on how well we do it. But over a period of time, the market has to upgrade from powder to crème. That's the journey. This journey will accelerate, I hope, over time, and that is the potential of the crème market. So crème pricing is also about, I think, 2x of powder. And the penetration also will go up [ 2.5x ] over a period of time. Hair care is a huge journey because hair care, what happens is that there is both big penetration gains. So we reckon that toilets and urban, maybe 20% penetration. We're only guessing on this. Rural plus urban, even then, toilets will be sub 10%. Every other format is like sub-5% everywhere. So hair is a blank slate in terms of penetration. It is also a blank state in terms of consumption. As consumers become richer, they move from [ hanging ] something in their bathroom to using sprays and [ matic ] and then the consumption travel. So what we see in hair care is like deodorants, until you get like a $40,000, $50,000 economy, hair care keeps beating GDP. So hair care is a very, very long runway both in terms of penetration and consumption. It has to do with income at the end of the day. So it's not a question of when we can be available. Rural, we can be available in rural tomorrow. I mean the question is a consumer needs to have $4,000, $5,000 of income per capita herself for her to enter this category. So as that happens in India, this category will explode.

Yes, no, that's exactly what is asking, the potential reach versus income levels. Sudhir, second is on the out-of-home HI. Pre-COVID, we had a lot of launches around that. We're not hearing much about out-of-home HI now. So that -- and I have a few more.

I think that answers Manoj's question, which is that we would probably sequence that. We've got mosquitoes in home, which is we're on a journey, and I think we made progress, but we've got to solve it. We've got cockroaches, which is a journey which we don't talk about. We should probably talk more about it. Out-of-home HI, we have solutions that are there in the market today, but we'll probably sequence it [ when we ] 1, 2 and 3 in that order.

Got it. And on the Magic powder to liquid, both on hand wash and body wash, I believe body wash, we have gone back to the drawing board. Is that correct? Do we need to again look into that given body wash is a premium-ly perceived category and maybe folks may not really want to upgrade to -- powder to liquid body wash? And truly, the growth in the Magic hand wash, again, if you can talk about what is the true potential where we can reach with that category.

If I talk about hand wash and body wash, I think in hand wash, Magic has really created -- strong word to use, but it's really kind of disrupted this category. I mean close to 40% by occasions of the hand washing category has now become [ P12 ]. It's not only us. There's also others. But this is the -- broadly, this category is moving quite fast until I saw recently, I did some changes recently, even the advertising was all in the P12 segment. So we have really led the creation of this segment. And the economics of it are so strong that I don't see any reason why this category won't completely transform. Hand wash is, again, one of those categories where the bulk of Indians use soap and [ they move ] to a specialist hand wash. So this is on a journey. We are the market leaders here, and I hope we drive the market development journey. On body wash, definitely, we had a bit of a setback. I think the fact is that we are convinced, to answer Manoj's question, what the journey on soaps is, that the value creation has to happen to liquids. This is one side where we [ fired ]. Probably the results weren't as good as we -- I mean, there are some hypothesis, again, I may not want to share, like reasons for those hypothesis publicly. But we are committed to 2 things. We are committed to body wash, and we are committed to the idea of reconstitution. Both of these, we are committed to maybe the body wash reconstitution mix that we had was kind of didn't fully work. But both of these, we will keep -- it's an unsolved problem, both of them, and we'll keep [ hitting at it ] until we solve it.

Got it. Glad to know about Magic hand wash because I was truly wondering why this product wouldn't really take off or what was really stopping it because [indiscernible] Indian consumer mindset that really...

3 years' time, 40% of the category [indiscernible].

So that's a fantastic thing. Lastly, I wanted to, just 2 more things, check on male grooming. Many years back, we had a plethora of launches in male grooming, and we've stepped back from that. Any thoughts around those come back of any of those male grooming products that we have launched?

[ Park Avenue certainly ]...

Apart from the deos.

No, I think the question that we ask, again, is what is the unusual -- male grooming, like kitchen, becomes a definition of a category which is a bit of a -- it's a kind of an [ Excel sheet ] definition of a category, right? Real question to ask is what's the unsolved problem? So the big unsolved problem is certainly sweat and deodorizing is a big unsolved problem. We're constantly looking at categories in terms of unsolved problems than asking the question, are we the best guys to solve it or someone else can do a better job than us. So in that, I mean, deodorants is a really big play in male grooming. I would say it's a fundamental play. As and when we discover more and more large unsolved problems where we have the right to do it, we'll probably take you guys through it. And I don't want to specifically say what we'll do and what we won't.

No, got it. And last question is probably to Sameer. I think, [ firstly ], highlighted on the point. The ad spends, the industry-wide ad spends, the entire bar has gone down pre- and post-COVID. And a lot of investors keep asking us that can there be a [ road shock ] that with the gross margins coming back sharper than expected, ad spends will also come back because we are not modeling for that kind of a sharp increase in ad spends. Of course, this is a little bit -- there's a lot of hypothesis around it. But -- and we've seen one of the players -- of course, they are not [ drawing first blood ], but they have stepped up meaningful ad spends. They've [ bought out ] at this. In the coming year, they will be stepping up meaningfully. [ Marico's ] called out from 8.5% to 9% ad spend, and they're stepping up. It's a large jump versus what you are expecting. So what are your thoughts around any [ road shock ] that can come if your gross margins are coming back aggressively and we are not thinking about ad spends in the same line?

I think it's integral for us in terms of our strategy, right, to try a new category where we will need higher media investments. And we took up [indiscernible] first half of last year. And we'll continue, I mean, with media investments. Media investments, we evaluate [indiscernible]. There is high competitive intensity. How do we, if any, kind of tackle it. But at this point in time, when we do [ envisage ], the direction is still our ad spends will go up as a percentage of sales. And also just -- you should not be looking at it as a percentage of sales. So it's an absolute increase, which will kind of be quite -- kind of meaningfully big over here, right?

[indiscernible] answer is [indiscernible] ad spends are driven towards category development. So it doesn't matter to us what others spend because we are not spending because others are spending. We are spending because we believe that, that is what is required for someone to try a product. So we are broadly with the exception of one category, which is soap, which is [ we're not developing ] the category. They're everywhere else, and we are dancing to our own beat, right? So it doesn't matter to us what others spend. I mean if others spend, there will be a cost inflation in media. But as I told you, going back to strategy, our strategy is to drive market development first and not gross margins. I mean -- and not EBITDA. Gross margins are there. So we will do what it takes for us to drive trials in the category regardless of what others do. And actually, one of the good things about category development, by the way, is if there is more general category heat, the whole category grows. So there are 2 kinds of categories. Those that are like this, which is a welcome thing. I mean if other people develop it, it becomes an [indiscernible].

Just to wrap [indiscernible] profitability perspective and if we [indiscernible] beyond any which way as our item plan, I mean, there shouldn't be any surprise in the profitability.

Got it. That's comforting.

This is Alok from AMBIT. So I'll keep my question on the efficacy because I think [ broadly ] has been talked about. But I think that even though [indiscernible] there will be a healthy [ time advantage ] to GCPL over the competition. The question is on the HI again, but it's on the manufacturing plan. So considering that now you have a new format in place and the past few years we have not seen a very healthy growth rate in HI per se, how are you positioned in terms of the manufacturing capabilities? Is everything 100% in-house manufactured? Is there a geographic location concentration? What's the plan?

[ If I can just take it, Alok ], so I think in terms of capacities, we are up there. I mean at this point in time, largely everything is announced with different [ models ], but I think it's sort of [ outsourced ]. Directionally, not just for HI but even for some of the other categories within the portfolio, we will kind of revisit our manufacturing footprint and also look at consolidating our play, which is largely right now see northeast, north [indiscernible] I mean for the purposes of getting the tax benefits. But we'll be coming out of it, I mean, sooner than later. But that's still, I would say, kind of 12 to 24 months away.

Got it. My second bit is on the media spend. And [ in totally as an ] outside of what we see is that the players in the HI also increased their ad spends, it really seemed to us, versus what it was previously. So how do you see that from an inside lens? Are you also seeing the others building the category relevance and increasing the pie? Or...

I mean it goes back to the answer there, which is our predominant role in household insecticide is to get an option from burning formats to liquid vaporizer and then to add aerosol to the repertoire. And we are really asking the question what is required for us to do it. It is -- in that category, this is less relevant. The only category in which that question we ask is in soaps. Every other category, we ask an absolute question, not a relative question, [ which is not ] what is bothering us. As I told you, for others to spend, it's not a bad thing also.

Last 2 bits. One is I saw you launched shampoo-based hair color in the south, which to me was sort of the missing piece in the overall hair color strategy. There, if I'm not mistaken, you could be #2 or #3 player. So what's the strategy there? How do you plan to up your share over there? And I'll just -- if you want, I can wrap up the last question. There used to be a brand, Protekt, which was launched sometime in COVID, which could be a technical play back then. But any plans to revise that in home care segment, if at all?

No, I think on the shampoo hair color piece, we were a little late to that party. But what we have done in shampoo hair color is learning from what we've done on crème. We've launched the INR 15 sachet in the south. We are seeing that there is a differential adoption of category in the south and north where south is entering to shampoo hair color directly from powders to shampoo hair color and not them moving to crème for whatever reason. So the action that we have done in the south is to disrupt the market with the INR 15 pack. That is our action there. What was your second question, sorry?

Brand Protekt.

No, I think brand Protekt is predominantly there in the liquid hand wash category where the more we think about it, there was no -- I mean, we were #3 or #4 player in liquid hand wash. And the question, again, asked, what problem are we solving and we'll be doing it differentially. And Magic was doing it. So over a period of time -- it's not that we don't have the ambition to answer [ our last ] question around solving entering new categories. But we can't do it in the way that others have already done it. And there was certainly also during COVID a genuine consumer need for hand wash, and there were supply chain issues and so on. So in that sense, those brands played a role there. But now, that role is more limited, I would say. Protekt -- what we will do with brand Protekt in the future, I don't know. It is certainly one of the brands we have in our arsenal. If we can get an unsolved problem or a new solution, then the brand certainly has some equity for us to use. Sorry, I think he came first [ than you do ]. Sorry, you can go. Yes, go ahead.

I have 3 questions. The first question is starting -- we had a very strong compensation structure based on EVA. And I saw on 2 slides which, Sudhir, you presented on the performance culture which you are trying to bring in. I would assume that in the last 6 months, there are a lot of appointment and reappointment which has happened in the middle management. So the sense which I'm getting, because we have front-ended saying that fixed compensation is going to be higher, that's what I picked up from the slide, in the short term, Sameer, my question is that is the employee cost, will it be higher or will be equal? Or how do you try and ratify this?

Let me just give a little bit of context. I mean we had EVA and delta EVA, right? If you look at the structure, I mean, over the last 18 months and thereabouts, there are 3 metrics now, which is volume growth, EBITDA plus working media in terms of growth and AR plus inventory in terms of production. If you aggregate growth, EBITDA plus working media and AR plus inventory, it's nothing but [indiscernible], right? What does it [indiscernible]. So what we've done is there, we shifted from otherwise only EVA to now EVA plus kind of growth rates. There is absolutely no change on that front. And then other kind of related aspects, I mean, to the cost structure has also been more of the same. So it's really the metric which has changed. The how part of it, more importantly, has changed as, I mean, we called out earlier.

Okay. But it's not employee cost?

Yes, I mean, it's difficult to call out. There will be a variable kind of component in employee costs. There also will be a long term kind of incentive, which will start kicking in at least in terms of provisions, right? But again, the estimates which we shared, I mean, for F '24, F '25 makes all of those in. So my sense -- it depends. I mean our employee cost is a little bit of an open book, right? If the performance is good, employee cost goes up, and other way around. So to that extent, the employee cost also, with this kind of performance, directionally will go up. But it's also self-funding stuff. I mean the profitability [indiscernible] funds for the higher variable revenue ratio and in turn, get [indiscernible]...

I think to answer that more directly is that this cost component called controllable costs, that is the right way to look at it because sometimes, employee can go down. Sometimes you may in-source, you may outsource. There's a lot of -- this controllable cost number must go down every year. I mean like [ UVG ]. That cost synergy we must get across our -- the totality of the line. In certain -- in some years like this year, we got a large number. Some years, we may or may not get such a large number. But that journey, we will -- so the employee cost or the increase in fixed salary cannot come at the expense of controllable costs going -- it has to come -- go down. So that is the only answer to that.

So I was only asking because I have seen a lot of action since the time we have come in across the levels of the management. Will the employee costs will grow higher than the revenue growth, that's the only question.

I mean, look, I'll give you another thing, right, which is we have [indiscernible] less is more. So I mean one of the things is we've become a substantially slimmer organization over the last years. So employee cost is one is what we do. But in India itself, which is -- across the world as we go into distribution, et cetera, et cetera, you will find the number of employees is a journey that we are definitely on a downward trend on. So employee cost is a function of both what we pay and how many we have.

Okay. My second question, I used your metaphor since in the morning you have said for the international business consolidation, what was the problem and what we are trying to solve?

There are 2 problems in the international business. I mean would we -- okay, let me again sort of classify what Nisa said, right, which is there is Godrej International, and there is our international operations. Godrej International is -- are you asking me a question on Godrej International or international operations?

Godrej International.

Godrej International, the problem that we were trying to solve is that there were a lot of costs that were being spent in servicing these small countries, which were duplicated costs. Let me give you an example. In the Caribbean, which is a $7 million business, we were servicing Caribbean both from Lat Am and from the U.S. So there were, firstly, duplicative costs that were running through. There is significant savings we saw in shared services, running a simple Godrej International operation across the place. So the primary synergy that we saw was on cost. The secondary synergy that we saw was that, and I'll give you a good example, which is there are brands that we have in India, in particular, and actually Lat Am, which have potential in markets outside where their export operations were selling. For example, if you go to Dubai today, you will find a lot of Godrej Aer pocket in the supermarkets. So having a global unified structure, apart from reducing costs, allows us to sense demand across the world, not just in the vicinity of the markets that people are operating. These are the 2 reasons.

I think that's kind of bigger pipe. Actually, what we've done is we had experts in each of the markets, right? We just aggregated it under one umbrella, one leadership. Alongside cost synergies, there will be synergies in terms of the overall product portfolio, the brand portfolio. So today, someone exporting from India to any of the markets [ was aware ] of what's happening in, say, Lat Am, right, in terms of brand. Now it's all under one umbrella. So there are synergies of product portfolio [indiscernible].

[indiscernible] global multinational business has been a very high-margin, fast growth driver, which is -- it's a low CapEx. It's nothing -- you're just organizing a few guys and moving excess capacity across the world.

So if I may ask one follow-up here, what will be the saving in terms of gross to net on this account consolidation?

On Godrej International, I think beyond gross, the bigger pie will be in terms of growth, right? I mean as what we kind of understood nearly kind of 2x to 3x in the medium term time period. Because what is happening, again, as I said earlier, there's no visibility with Indian exporter as, I mean, in terms of overall portfolio. Now, I mean, the Indian exporter also has, in a way, what's happening in Lat Am and to the distributor. Can the Lat Am product also be [ in this option ]? That's going to be the single largest growth synergy. And then there will be cost synergies. [indiscernible] market, by the way. It's not we have created a legal entity. It's not a kind of structure. I mean it's sort of internal strategic business kind of unit as what we normally call wherein folks have come together. There is someone holding, I mean, the structure centrally. Sales, marketing -- sales, I would say, and distribution is more local. Marketing is going to be kind of centralized. And in maybe 6 to 12 months of time, the supply chain -- the back-end supply chain also will be synergized. So that's [indiscernible].

[indiscernible] when we move a flag operation to a distributor operation, provided it's a small flag operation, not if it's a big flag operation, we get [ 1,500 bps ] of margins [ to take off ]. [indiscernible] is a good example. I mean, Nepal, we make 20% EBITDA. [ We can probably make more ] EBITDA. In Nepal, we have a distributor model. Sri Lanka, we have flag operation. So we'll just keep moving these -- many of these flag operations, we will trim them down, move them to Godrej International and have less and less presence. And those are the kind of things that will reduce our overall controllable costs.

My last question to you, Sudhir, on [ just got tight ] sampling. There are 2 questions there. What is the conversion rate or what is the achievement the sampling guys are achieving in terms of number of calls? And in terms of conversion per se in terms of repeat, if you could have some number, if you can quantify that share.

I don't think I can share those numbers. I know those numbers is probably not in the domain. But one of the exercises that we do like in any CapEx investment is to see the payback of these projects. Payback of these projects should ideally be a year or less is when we do a sampling project. So we discount these and the fixed cost, and then like there's a proportion of people who will repeat. And then what is the margin and then we know what the repeat -- the repeaters are. So if we calculate these, a good -- so for example, I'll give you a good sort of point is on Good Knight, and we made a lot of sense. But when we did the sampling on Magic handwash and what, we realized we had to pull back because at INR 15 with the economics and work out. So the economics only works out for certain kinds of categories. And therefore, it's not -- the trial is not important magic. It just means that our extensive home to home is not the right way of sampling magic. So that's the way we look at it.

Yes. This is Harit from Investec.

I had 3 questions. First was on hair colors. You spoke about -- in the last 12 months, the growth has been driven by your strategy of the INR 15 sachet, et cetera. I just wanted to get your sense of over the last decade, decade and a half, we always had limited presence even in the premium space, right, in the salon market, et cetera. And that's one space as well, which is large in hair colors. Just wanted to get your sense of whether this is maybe stage 2, stage 3 of how you're thinking of hair colors where the focus right now will be on driving penetration and then maybe look at premium at some point of time? Or that's not really in your purview.

I think there are 2 questions here. One is on premium tools on Salon. See, I think the primary job in India for the foreseeable future is to upgrade powders to creme. And premiumization brand journey is a subsequent journey to that. However, the Salon journey is an important journey that is happening and the democratization of salons is a big trend, which is even [ SECC ] consumers are going to Salon and we have a small -- We don't talk about it because I don't want to talk about it until it reaches a certain size and scale, but we have a small team and a rapidly growing team on Godrej Professional. And that is certainly one of those currently in [ Aecon ]. So I don't want to talk about it gets to a certain size of sales. But that is an area that we feel. And again, it's a democratization opportunity of salons, not a premiumization opportunity.

Fair point. The second question was on -- if you look at the India business and the way you're talking about it in terms of category growths, is it fair to assume that structurally, there is going to be a mix improvement in this space? Because hair colors has historically been a bit up and down, but it looks like you're on the right trajectory in hair color. As you said, air fresheners is going at an extremely fast pace. So we'll do what it will do to whatever extent. So is it fair to assume that from at least gross margin perspective, over a 3- to 5-year piece, this is going to be a mix improvement story in India now very clear, given the way the categories are growing for you.

I mean, look, I think there will, broadly speaking, yes. I think within that, the caveat is that within the fast-growing categories, we are democratizing and getting SKUs at smaller prices, which have lower gross margin. But the broader point is given the shape of our portfolio and the rate of soaps in the portfolio and our expectations, at least on volume growth once we start [ planning ] these and even with deos and condoms coming in, these are structurally high-margin category was already high page. Deos are already high margins, there's no reason why premium condoms won't be. So definitely, gross margin through premiumization, like cost reduction in controllable costs can keep going down. Gross margin providing it comes from mix and keep going up. I mean there's no such thing as the right gross margin providing is coming from mix. And I think our portfolio is well placed for it. So, yes the answer is broadly yes.

Got it. And one question, Sameer. We had spoken about subsidiary simplification also in the past and breaking down subsidiaries and it will have a tax benefit, et cetera. So where are we on that journey? And any color you can give on what's happening there and what could be the implied benefit?

We already -- I mean working on the projects in the last 6 months, my sense is in next 12 to 18 months, the number of subsidiaries, which we have, close to say around 60-plus, should come down to anywhere between 25 to 30. That will drive simplification in its own way. I think the bigger size of the price so there is cash coming in from one of our international markets in the most tax-efficient way. I mean that's -- and that number is really big, especially for market like Indonesia. But that's something which will take its time. I mean it cannot happen overnight in terms of closure and kind of modules and the subsidiary, but very much on track. 12 to 18 months, we should be kind of done with.

Kunal from BNP. Sudhir, you mentioned that $2,000 per capita GDP [indiscernible] we should grow at 1.3, 1.4x compared to GDP growth rate. You're not seeing this happening in India for the last decade. What do you see changing over the next few years?

I mean, I don't want to I mean -- both numbers are variable, both in the [indiscernible] what is FMCG growth now is variable. But the broader point is this is dependent on what companies do. It is not -- this number is not cast in stone. It is dependent on what we as companies promoting because there is a share of wallet. There are many things that go for the share of wallet. So I would broadly say over a long period of time, I mean, you may say 5 years, 6 years, what has happened. But over a broad period of time, this has been a truth in India since I'm saying 1990, actually that has been true. But it is dependent on what we like that chart we showed you the Nielsen chart. It is not just something that to come naturally. It is a combination of what will come naturally and what we do as companies. So the question I would ask is our responsibilities have been done in our market development.

But for you, also FY '24, again, it will not happen. Assuming like you have high single-digit growth rate. I think FY '25, again, you are hinting that there will be benefit of pricing as well as volumes, and you've been in get back to double-digit growth. So I mean, even with all the initiatives by everything in this.

I mean, look, I don't know the GDP for '24. I don't know. I mean the other sense is, I don't know what it is. I think in all categories, except soap. So we have now one of the things with Raymond is coming in as -- there's a number we keep looking at, to look at, which is the weighted category penetration of the company, that weighted category penetration, the lower it comes the parts of the growth would be. Those parts of the portfolio must definitely grow at 1.5x whatever the GDP is and then there is a 35%, 40% maybe for soap. Soap is one of those categories that will grow at GDP in volume terms and maybe a little bit more. So if you take the weights of those 2 and if at the end of the year, we are not 1.2x, 1.3x GDP or then it's a problem.

Last question for Sameer. Sameer last call, you mentioned that tax rate will be close to full taxes starting FY '25 with the acquisition which you've done in which you have some big benefits which come in. How should we look at the [ sec 3 ] progression for the year?

So I think with the Raymond's brands acquisition, we will get the tax rate right? All the cash tax will come down as a result of which the reported tax rate, my sense is will be percentage will too higher starting this year. Honestly, not for a, I mean, Raymond's brands acquisition, the reported tax rate would have been upwards of 30, but that still, I think, remains in early 20s. So I think on a year-over-year basis, with a fully by 200 basis points, which I think is not a big deal. FY '25, FY '26, we will have -- if you remember, somewhere in FY '16, '17, we had booked to INR 600 crores of [ MAT ] credit, which has to be utilized, which has got utilized over the period of time. There will be a little bit of charge-off on that front. My sense is, guesstimate, the range of tax would be in FY '25 to '27, '28 between those 2 years. And effectively, we are actually going to be a 25 percentage tax rate come kind of FY '25.

So that will be step between over the next 2 years.

Not actually, I mean, if I look at India last year, the tax rates the normative tax rate here the is some exceptions here and there, almost in every year is around , 22 percentage. So this is moving from 22 to say, kind of 23, 24 which moves to 25, 26 next year. Maybe for the next couple of years, 1.5 to 2 percentage in India, which is whatever, say 60% is your profitability, for example, overall, blended taxes on that much more experience.

Yes. Just connecting 2 things. One, you said that small in the mind and small in the market. And then the gift hamper gives us this hair serum. So is that also -- I mean, there are too many things that you are trying to achieve in terms of other categories as well. So is the hair nourishment opportunity also you are looking at scale up? Or what.

I mean, the hair serum is an example of a product that we sell in Godrej Professional. It's not a retail product. It's a professional, citing a point we just gave interesting products to you all to try. But the opportunity there is not the hair serum as much as the professional opportunity, which is certainly a big opportunity. And the professional opportunity is led by hair color, but it becomes it's a hair regimen products. And we have businesses in various parts of hair across the world. We have relaxers, we have wet hair in Africa, which is hair treatment and hair maintenance. So I think the point there was less about what we want to do in retail, but more about a professional opportunity.

So I mean, would that be an opportunity coming years later or?

I mean I think on the case of hair serums or hair maintenance we have to -- I think, as I told you, there are 2 axes here. One is the opportunity size and the unsolved consumer problem, two, is our own capability. I think we have the capability as a company globally. We have to assess the size today we see this opportunity in salons and some of these. As we see and we look at -- and we're also comparing sizes versus various other opportunities. So I guess with time we figure out whether the opportunity is large enough for us to do something in retail.

This is Jay from Kotak. In December 2021 strategy presentation, you had called out the aspiration to expand margins by 150, 200 basis points for 3 to 5 years and your margins were 21.5% EBITDA margin back then. So is that still an aspiration? Or you think '23, '24 is out of question.

I don't remember calling that out specifically, unless I'm forgetting?

We did call out, I mean, as aspirations. I mean the way that rates to be understood is 150, 200 for a period of 3 to 5 years, not year after year. I mean, for example, we are more than on that journey. There's a little bit of commodity even also, to be honest, it's not like everything, I mean, on that front is really own by only and only our own internal initiatives, but we do believe we are very much on the journey.

We have a big job we've done in Africa still. I think our Indonesia and India margins are good, but a lot of that will come and hope when we right structure the Africa business.

Just one quick question. On the cash conversion cycle, you've done a lot of good job. I think you've have come a long way what are the incremental benefits that we can get from the cash conversion cycle and if you can elaborate it by different geographies and then if you can just also spend a bit around you expect payable days to come down? And can that create a tailwind for our margins as payables, this data come down, we pay our payables faster.

So your latter point first, I mean, definitely, that's the thinking, right? I mean we reduced on your payable days, I mean, and kind of better boost into the overall gross margins. There is still a lot of headroom in terms of reducing down further the AR as well as inventory, more inventory and less AR, because AR is quite tight. I mean, almost in most of the markets in which we play in, to give you data, I mean, and this is just one data in Africa market last year, we reduced on our inventory by INR 200 crores, and that was like some 30%, 35%-ish plus, which we still believe is relatively on the higher side. And even this year, we will see another meaningful reduction in the inventory over there, right? So some of the principles, which we have just called out publicly like SKU rationalization and revisit your manufacturing footprint and simplify and so on and so forth is going to result in that continuation, I think, for this year as well as next year and the other thing is it's also I mean, part of our KPIs, I mean, it's equally important, I mean, not just from a KPI, but generally, that reduction happens. So yes, I mean I do think so this year, there should be opportunity. And that's where, I think the cash flow from operations growth should be higher than the EBITDA growth. But largely coming in from inventory at this point in time.

Especially in which geography, Africa?

I think Africa, followed by Indonesia and also India always, there will be opportunities, right, I mean, in terms of bringing the inventory levels strong.

And just a small question on trade financing, where are we on that? What percentage of our distributors are covered by trade financing now?

We don't have any distributor on distributor financing. Because in India, we don't give any kind of credits, right? I mean the GT credit is like what -- not even [indiscernible] it's an advance actually. Globally, we don't do distributor financing. We used to do supplier financing at some point in time. But obviously, over the last couple of years in markets like India as well as Indonesia, we have completely unwinded it because it was commercially not making sense. In Africa, we still have supplier financing, which commercially makes sense for us. So that's like $61 million number.

Sheela from Morgan Stanley. My first question was with respect to Africa business. You just alluded to the fact that margins should stabilize. So the question is when should we start expecting margins to get into the double digit levels, say, like 12 months, 24 months?

Yes, I think we are very much on the journey Sheela, right? I mean the margins have grown relatively on the lower side. Having said that range of 9 to 10 percentage on a full year basis. Two things, I think, which will drive margins. One is there will be a bit of commodity kind of tailwind, right? What we have seen some part of FY '23, but continuing in FY '24. So second is out of the simplification initiatives, like the one which we saw which was revisiting the manufacturing footprint, bringing down the U.S. manufacturing to Nigeria, which is low cost, right, compared to a high-cost U.S. manufacturing itself will kind of reduce down the cost and increase the margins. And this is just 1 or 2 what we have shared. There are, I mean, 3, 4 key simplification projects, which we have in place specifically in Africa, which are also all up and running. So that should aggregate. The third is the mix the FMCG portfolio has been doing extremely well in Africa, and that's a relatively high margin portfolio as compared to the hair extension, and the fourth is generally simplification, I mean, should result in lower country level costs. So to answer, we will see delta, I mean, in margins in FY '24, but that's not just for hair. We should continue to see -- my sense is we should reach -- I mean -- I mean go back to our earlier guidance also see mid-teens margins by FY '25. We still hold on to it. I mean, so the next 2 years, we will see a bump up, I mean, in margins from see around 10 percentage to maybe at least around 15 percentage thereabouts in Africa.

Second question was on Indonesia. We started our journey with respect to changing GTM strategy 3 years back, at that point of time, Indonesian economy was not doing well. Now things have changed. The macro is looking much favorable. Is there any rethinking that the GTM could change again with the economic turning growth being much better at the macro level?

No, I don't think we've changed the GTM strategy in Indonesia. We only changed the speed of the GTM execution. I mean our GTM strategy in Indonesia is to increase our direct coverage and reach more outlets. That was partly stop I mean, I would largely say COVID played a big role in not being able to execute the stated strategy. But with the macro is turning and they've been turning for 6 months, we're now seeing the results I anticipate the GTM and the distribution expansion, giving us a multiplier in Indonesia. Still not can't answer specifically Arnab's question on how much and all, but definitely, things are looking good, both internally and externally in Indonesia.

And the final one on India. How are we thinking about bringing down this seasonality of the portfolio? I mean, you sounded very hesitant to talk about the expansion in the personal care category. But are we taking more efforts in terms of densifying our offering on the personal care side or home care side to bring down the seasonality.

I mean I don't know how to answer that because the seasonality is there in household insecticide, it evens out over a period of time, actually has generally been there. So in quarter there is seasonality. Well, I think the answer is that same chart that we showed, right? Just as category development can trump macroeconomic growth, category development can also trump seasonality to that extent. So you can have a not so good season, but if you're growing and people are upgrading to your products, you will still beat the overall market growth by a lot. So I would say the answer to both macros -- macros are generally favorable to India, whatever the short-term issues are on the growth. And seasonality is to focus on upgradation and category development.

Just one follow-up here on the personal care side. You seem to suggest that you don't want to get into a category where already there is high penetration and you want to select categories where you have a right to win. In this particular thought process, are we being a little slow with respect to driving our personal care category growth?

No, penetration is only a measure. The underlying question that we ask is -- is there an unsolved consumer problem. If there's no unserved consumer problem, what are we solving by entering it, right? Often, high penetration is a measure of how it solved the problem is or unsolved the problem is, sometimes you can have a high penetration, but there is dissatisfaction among consumers and there might be a disruptive way. So I would frame it like that. I would frame it by saying, is there a large unsolved problem? And can we solve it better than others? And if we can do either of those 2, then we'll do it.

And hopefully, we could hear something in the coming quarters or something around that.

Yes. I mean as and when, deodorants is a good example, right? You heard it just 2 weeks ago. I know many of you weren't happy with it. But the broad point is it was a simple question, is it just nothing complicated. Everything else is matched. Is it an unsolved problem? The answer is yes. And no one is really doing it. We'll get down to doing it.

[indiscernible] last few years. Now I understand that there is a credit issue and refinancing [indiscernible] we're doing exceptionally something. The question is for market development, in case of [ HIM] healthcare. How do you balance between market development and protecting of if in which case and regionalization [indiscernible].

See, I think there is -- I think we have to be, I think, local in terms of consumers and then act globally. Often, we think consumers are more different than they are and actually they're similar and sometimes they genuinely are different. I mean, just an example I was talking about shampoo, hair color seems to be picking up in the South and not just as a movement from creme but as a movement from powder to shampoo. In the North, creme seems to be the primary, and we have some reasons that, again, it's confidential, so I don't want to share what we think are the reasons. But the answer to that is we've launched a INR 15 shampoo hair color SKU in the South, and a creme 15 SKU in the North. So I don't think the important question is that we need to regionalize. If we find a regional and India as a large enough place, sometimes if there's a local opportunity then on us to again size of price and size it for the complex India is large in a market that when we see an opportunity that is -- most opportunities in India are quite large. So if we genuinely see a difference in a market, we will act on it. So we act on it -- I mean, this is a good example of something we acted on last quarter on digitization.

My next question is like, and sir, when you mentioned our falls down demand. Does that mean that there is the lack of [indiscernible] perspective. And also unless that could we -- you could you could be blind sighted, right, something that happened [indiscernible].

Well, see top-down demand forecasting, the processing top-down demand forecasting and that is only an aspiration that we'll get there. First and foremost for top-down demand forecasting, you have to smoothen the supply chain. If you do not smoothen patterns of sale, no system can predict it. So the first step that we have done reduction of inventory, reduction of BTL smoothens things down. Then what we are realizing is that on aggregate, it is better from models if providing sales is reflective of demand. Centralized powerful models are able to pick up demand changes faster than people putting judgment into this. Once you have top-down demand forecasting and it goes down, it goes down for a consensus plan right down to the last level. So then there will be conversations at various levels in a top-down model saying, oh, this is what I've received as a forecast. No I disagree, I disagree, it gets escalated, et cetera. So top-down forecasting doesn't mean top-down target. It just means that the first level of numbers is comes all the way down based on and I told you, right, it's basically, if you don't have a smooth demand curve, you can't do top-down forecast, you'll go totally wrong, and we've also seen that. So I've actually found that top-down demand forecasting actually gets more accurate things because people are then arguing seeing the pros, cons, they're coming back when something is wildly wrong, they come back and say, hey, your model is -- and our model is a pretty sophisticated model, I hope, which can pick up because there are short-term demand signals, medium-term demand signals, long-term demand signals, demand signals that come from sales, that come from Nielsen, that come from panels. So models are able to build these faster. I mean, I don't want to use that word, but it is certainly using algorithms. I mean what is AI, but an algorithm, right? It's a self-learning algorithm. So you constantly have a self-learning algorithm which improves your forecasting ability. It generally tends to trump a bottom-up forecasting, and it keeps everyone involved because now everyone's targets are coming from the top and everyone says super conscious about it. So something goes totally [indiscernible] you immediately get to know that [indiscernible] is what I said. But actually, there's a problem there and sales are really bad. So -- but look, we're some time away from that, because that's ideal, but that's what we want to move to with algorithms. Sorry, somebody. Yes. That's the current end okay.

Sudhir you've with the company now for the last 1.5 years. The question is around capability building and talent management. We've seen a lot of changes on senior and mid-level management. Are you largely now the organizational structure in line with what you thought about it when you joined the company? Where are you in that journey? Are there any gaps you still see which you would like to address?

I mean I don't know how to answer that again, which is I don't think, by the way, there was any -- I mean, there were some structuring change, especially on categories which was a structural change, which was -- everything was run locally, and we are now running some things globally and some things locally. So you're saying in terms of structure, that is a definitive model. I mean I think we're kind of close to structurally. I think on people, we've got to keep raising the bar, and one of the things that makes us really happy is a lot of our top talent, there was a great resignation period where a lot of people. And it also coincided with my coming into the company and a lot of changes. But some of the top talent that has left GCPL has come back and we've taken them back. So almost at least from my level at senior levels, the ones we really regretted in that period. I think out of 5, 3 of them we've got back we get the other 2 I hope back as well. So I think -- but performance has to be a continuous bar. I mean, it's -- you've got to treat us like a cricket team or something, got to keep getting better. So I don't know. I mean, it's a hard question to ask a team is it a stable team or not, right? You want to keep performing, got to get better. Ultimately, we've got to be objective oriented and say that. But one thing is there a company like ours in a market like ours deserves the best. I mean I feel like we are lucky in FMCG in India still being able to attract the best is growing markets. We're in a pretty unique position in HPC in many countries. So we have to be unrelenting on quality of talent. That -- I mean, that's not compromise because I have seen that if the quality of talent is top notch, then systems take care of themselves for a period of time. So.

Yes, noted. And just one clarification, your high single-digit volume growth target by FY '24. Does that stack up across geographies equally? Or you are anticipating double-digit somewhere.

As I said, we need to keep something for the quarter, right? So no, I think India will see a better volume growth as compared to some of the other markets. I don't know whether it's double digit, high single digits or early double digits. But that's the math. Again, in India, we have taken a [ baseless ] also insecticides. So it's not like we have taken a superlative kind of HI growth. We have just said we'll get this deal like baseless HI growth, and let's see what the non-HI performance is -- but yes, I mean, India is going to kind of lead the volume growth in this high single-digit volume.

Sudhir, you spoke about category development and fight tunes of category development -- in all the 4 tools, you spoke about in the example, but on distribution improvement, it was largely Africa and overseas. So does it mean that India is almost optimum in terms of what we want to achieve in terms of distribution expansion and improvement both?

I mean, broadly speaking, yes, with some exceptions like the Northeast of India and some parts of Eastern India where direct -- I think in GCPL, our direct distribution in India is our physical reach is greater than our mental reach. In Africa, our and Indonesia, our mental reach is greater equal to or greater than our physical reach. So distribution goes hand in hand. There's no point going to lots of outlets if consumers aren't buying you, right? So that is broadly yes. But I think there are some pockets and there are white spaces. So the way we are looking at distribution in India is to focused on efficiency and categories, so to placement of categories. So distribution is getting helped by see, like take the INR 15 creme has really taken up distribution of the creme category. It hasn't taken up distribution of GCPL because GCPL distribution is defined by our soaps distribution, which is very large. So the East I would still say, partly because our market shares in soaps are relatively low. I would still say has scope for direct distribution increase. But the overall narrative in India is demand pull and distribution second, unlike international markets, where it's the other way out.

And just staying with distribution. I was just scanning through some last 5, 7 acquisitions, which would have happened in the country in FMCG sector. One resident point of all acquisition argument if FMCG distribution synergy. And it always looks very mathematically valid at one plus one should equal to two, it's not relevant. But when we follow up in 3, 4 years, that number actually don't add up and you have an academic lens of looking at sector also. So just wanted to know, where does it actually falters in terms of execution? And why that 1 plus 1 is abusive for the sector and acquisition execution side?

I mean, look, we're making an important point in India, which I tend to agree with, by the way. Which is India has an efficient wholesale channel. And what prevents even the acquired company is -- so what direct distribution often gives you is cost efficiency because wholesale is an inefficient way of reaching an expensive way of reaching and it gives you some demand. So it's not that it gives you nothing. But I would agree with you that the bigger levers of growth -- of growth or product, advertising, et cetera, et cetera. Distribution is a lever. I mean, look, there are some categories at certain scale, at below a certain size, distribution is really poor for some companies. I mean, I would argue, by the way, that maybe time will tell. I would argue that in the case of Raymond, for example, it is genuinely one of those cases where the brands are much stronger than their physical presence for a variety of reasons. So I think I've seen this in some other acquisitions where distribution genuinely played a role. Typically, the company has to be kind of smaller than INR 600 crores, INR 700 crores than distribution. But beyond that, there's a wholesale that is there, and I tend to agree with you that one can't overbuild distribution into the growth hypothesis. Raymond, by the way, I still feel that there is.

And the last one, if I may, on market and size and HHI. Now we have, for the last 7 years, we have this such paradigm, which comes and which actually gives you a very good idea of which cities or which areas are actually doing well on such on cleanliness. So has HHI as a category offering, if you know, as a category would have done well in cities which are ranking well or you have seen contraction of industry size or categories [indiscernible].

No. I mean, look, it's an interesting question you asked and I don't have the answer to it. Maybe I'll ask someone to pull out this data to answer it specifically. So I can't answer specifically. But I don't want to say that 2 points, right? The broader question you're asking is does a cleaner India, mean less need for mosquito repels the question that you're asking. For capita in Indonesia and Singapore, Singapore is a much cleaner country than India is. It's a pretty large category in Singapore. Indonesia, we know because we sell there is a much cleaner country than India is and per capita consumption of HI is 2.2 or 2.5x India. And secondly, as I told you, the volume growth of the category is what it is, but the volume growth of actives in India because of incense sticks and the low pricing of actives at a neutralized level is 4%, 5% in India. So just physical actives are growing. We know what it is in cleaner countries. I'll answer the question, maybe I'll ask someone to see whether Swachh Bharat cities, Indore is a clean city. I mean, like has consumption of -- but I doubt it. I mean the answer is I very much doubt that is the correlation for mosquitoes.

Thank you guys. Thank you very much. Thanks.