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

Ladies and gentlemen, good day, and welcome to Godrej Consumer Products Limited Investor and Analyst Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Kedia, Interim CFO. Thank you, and over to you, sir.

Good evening to all. Welcome to the con call for Godrej Consumer Products Limited. We have with us Nisaba Godrej, Executive Chairperson; and Aasif Malbari, MD and CEO. We will start the call with opening remarks from Nisa and Aasif and then open the floor for questions. [Operator Instructions]. Now I will hand over to Nisa for her opening remarks.

Thank you, Vishal. Good evening. Thank you for making the time at such short notice. Yesterday, Sudhir Sitapati resigned as MD and CEO of GCPL. The Board met this afternoon and appointed Aasif Malbari as MD and CEO with immediate effect. We've also appointed Vishal Kedia as Interim CFO. I would like to take this opportunity to thank Sudhir for the bold thinking he has brought to GCPL over the last 5 years and wish him success in what comes next. As I shared with you at our AGM on Friday, we've done a credible job navigating a genuinely hard 5 years for FMCG. We have put real building blocks in place, but there is much more to be done to get from good to great. Our strategic direction is clear and strong. What we need is rigorous execution. Great to us is values and valuation, UVG and profits, core and new categories, India and international, measured by decidedly outperforming the market. As an independent director on the Boards of Mahindra and Airtel, I've had the privilege to see this decisive outperformance very closely over 5 years. I believe GCPL should aim for the same. At our Friday AGM, I shared a framework Aasif introduced. It moves the conversation from did we meet the plan to a harder question. If we put our hands on our hearts, does this really meet our high expectations. I talked about the outstanding success of incense sticks, but how liquid vaporizers has not met our high ambitions post RNF. I also mentioned that we need to move faster on scaling e-commerce, digital marketing and AI. As global CFO, Aasif brings deep command of GCPL's strategic and operating rhythm. He's also led our Africa business from not so good to great. Africa has rapidly grown its margin-accretive FMCG portfolio, headlined by the highly successful launch of our hair care category while strengthening its traditional hair fashion business. This has resulted in EBITDA margins growing significantly from 9% in FY '24 to 15% in FY '26. The Board and I believe this is exactly the kind of ambitious, disciplined execution rigor GCPL needs across all our businesses for our next chapter. Aasif leads with humility and integrity, and we have complete confidence in him to accelerate GCPL's growth alongside our very strong team. I would now like to hand over to Aasif.

Thank you, Nisa. Good evening, everyone. Sudhir has been a colleague and a friend for over 25 years. He leaves GCPL stronger and me wiser, and I'm grateful to him for that. I hope you will join me in wishing him well. GCPL has always stood for trust, innovation and boldness. I'm very grateful that Nisa and the Board have entrusted me to carry that forward. Our fantastic team and I are committed to meeting their high expectations, elevating performance in our core while accelerating new category growth. We have iconic brands and significant category development opportunities ahead of us, and I'm very excited to get started in my new role. Let me start with our FY '27 guidance. The guidance remains unchanged, high single-digit volume growth, double-digit revenue growth, double-digit profit growth. The leaders who ran the country, clusters, categories remain the same. I have worked with them shoulder to shoulder over the past few years, and we will continue to do that. As I mentioned in my remarks on Friday, we are well placed to exceed guidance in select areas. Over my career of 30 years, my time at GCPL has been the most rewarding and refreshing. This group, this company and its promoters are genuinely special. Some of you have heard me share this previously one-on-one in various meetings. At GCPL, I have had an open canvas and the freedom to paint it, be it as CFO, be it overseas strategy or as President of the Africa business. I would also echo this feeling on behalf of my leadership team. We believe that the strategy we shared with you in May continues to be the right one. Our categories are right, our markets are right and our brands are iconic. What I bring in is more agility, faster decisions, shorter distance between seeing something and acting on it. Nisa spoke about good to great. For me, it is almost entirely a question of candor and pace rather than of direction. GCPL has genuinely strong positions in categories with a great deal of headroom. Household insecticides, skin cleansing, hair color, hair care, home care liquids are categories where consumption per household in India remains well below where it should be. The opportunity in penetration and usage. It means our growth does not depend on taking share from someone else. My priorities going forward are clear. First is broad-based volume growth globally, getting more households to use our categories more often. Second, top line growth that converts into profit growth over a reasonable period of time. Nisa spoke about the importance of brand values and valuation, UVG and profits, core and new categories, India and international, measured by decisively outperforming the market. Africa which is close to my heart is a clear evidence of this. We fix the fundamentals, double media investments, grew the business in strong double digits and the margin improvement came with that. That is the model. Third and most importantly is our people, the 13,000 Godrejites across the globe whose deep passion, expertise and commitment make it possible for us to live our purpose and create value for all our stakeholders. I have had the privilege of working closely with several of them, and I'm truly humbled and inspired to lead this journey together. Thank you. With this, we open the call to question and answer.

[Operator Instructions] First call is from line of Abneesh Roy from Nuvama.

Two, three questions. First is, Nisa on your initial comments on better performance needed in e-com, digital and LV. If you could tell us how this will come, you need more M&A in the digital D2C part, and in terms of LV what could have been done differently because technology clearly was supposed to be [ disruptive ], so what else was needed. Our second question related on the talent pool. So clearly the new MD has delivered in terms of Africa transformation, but generally he sees that India MD role is a hardcore sales and marketing kind of a profile. So, will you need more talented, at the same time marketing hardcore India experience. And third bit will be, Nisa you've handled for 2 years MD role at this company, should we expect more involvement in day-to-day in the near term from you also.

Thanks, Abneesh. I was writing down your questions, digital, LV, India talent and what you expect from me. Okay. So, Abneesh, I think on the marketing talent, we have extremely strong marketing talent, both at senior leadership levels and of course, across the company. I think one of the things that we do want to do is go back to a structure where we have a global CEO and an India CEO, you're very familiar, of course, with GCPL. So that is in the next few months, you will see an announcement on that. But just to reassure you, we have very strong marketing talent. I think on digital, I think actually on AI, we've set up a strong product group, a lot of experimentation going on. If you remember, even in my AGM speech or what I wrote in the annual report, I feel like we're in 80th to 90th -- now this is -- I've not done on Excel sheet to come to this number, but having been in FMCG for a very long time, we're probably 90th percentile when it comes to GPM, TVs, that big SKU sort of model. I think -- but there is also FMCG 2.0 going on. This Muuchstac acquisition has been very successful for us, and we're already putting other GCPL brands using that model there. So I feel maybe there we're behind the curve. I obviously meet lots of entrepreneurs, have investments. So I feel we can move faster there. And I actually -- I don't think being late to the curve is ever an issue then you just need to execute faster. So I think that's my expectation on the digital piece. I think on LV, Abneesh, we've done okay. But my expectations post this -- like I mentioned, incense stick has been a huge success, really good for GCPL. I think it's at 85 sort of percent of our normative margins. But my expectations on LV was great. It's been good. So I think -- when I see things like that, especially because I know of the technology change, there are higher expectations. So that's on LV. I think you had a question on what to expect from me. I think expect from me that GCPL always comes first to keep the team accountable and to get us to this market outperformance. I'd like to stay a professional Chairperson and believe in giving teams a lot of trust and empowerment. I think I've done that, whether it's with Vivek, with Sudhir, and I don't see any reason why Aasif would be any different. I'd like to back people up me and the Board, we like to back people up 100%, but also keep people fully accountable to deliver results because that's what we are all here for eventually. Thank you, Abneesh.

Just 1 quick follow up and I'll end there. So essentially when we see leadership change and this was a very silent change. Generally, the question is -- is there a focus going to be more on the core or on the new part of portfolio. So my quick question here is what happens to pet food or dishwash. I think long term, nothing changes. In the near medium term, any plans to focus more on core, get LV right, get maybe soaps market share right or growth right, could you tell us on this specific question.

Since Aasif is going to be handling this mandate, let me ask him to answer this question.

Abneesh, I think we called it out in our press note and also what I spoke about. I think it's going to be a world of and, some of our core brands are iconic and they are really strong and ensuring that the core grows and we do 100% of our effort first on the core is going to be -- if we're growing the core is nonnegotiable, so the iconic core brands LV and getting them back to growth and getting them back to profitable growth to a higher level than what we've been able to deliver to me is nonnegotiable. But that doesn't mean that we are going to kind of support and double down on a new category creation at all. So yes, I think it's definitely a big an and on both, and the strategy remains the same, effort and commitment on both [indiscernible]. If we believe that it needs additional resourcing of whatever kind, be it in terms of people, be it in terms of resources, we will ensure that we double down on those resources and we deploy them. So I think we are a large company, and we can run both agendas together.

And I think, Abneesh, if you want to take anything out, take this idea that the strategic layer is very strong. We want to do and to be able to do core and the new categories to be able to do India and international. My insight is that our execution rigor has to go up seriously. I think one of the things that I've seen in the Africa business, which you all have seen the numbers of many years, it's a challenging -- very challenging operating environment. But I do believe that we have had a transformation, a sustainable transformation, not one category in one country coming off a low base. I think this ability to move to a more -- to firstly keep the hair fashion core strong and stable. And then on top of that, to rapidly take up media investments and strengthen the FMCG portfolio, which is FMCG that was already in Africa, but also bringing new hair care into the market and doing very well with that. So I think that's the rigorous execution I've seen, and I want it across the board and I want it across GCPL.

Next question is from the line of Siddhesh Deshmukh from IIFL Capital.

This is Percy here. Just wanted to understand the sort of contract with Sudhir. I mean his departure is very abrupt. Isn't there generally some kind of a long notice period for a senior position like this?

Yes. Thank you, Percy, for this question. I think we were expecting that there'd be quite a few around this. So I'm just going to give you a holistic reply on this. So on this timing, AGM related to timing, AGM, the reappointment and Board together, Sudhir's reappointment was approved by the GCPL Board on 6th May and intimated to the exchanges the same day. The AGM notice went to shareholders on 15th July. At neither point was the change under consideration. Voting has been open since 3rd August and shareholders were casting their votes. The AGM was held on 7th August and Sudhir resigned on 10th August in the evening as MD and CEO of GCPL. And the Board met this afternoon on 11th August and appointed Aasif as MD and CEO with immediate effect. So this is just -- I just wanted to outline the timing since we did have a Board meeting on Friday. Sudhir wanted this with immediate effect. This was his request. I think my preference is always to take a longer period that we do, but it was his request. And since we had a ready successor plan with Aasif within GCPL, we agreed. The leaders who are running the countries, clusters, categories remain the same. Like Aasif said, he's worked shoulder to shoulder with them. So we see a smooth transition. And I think the strong point here is that Aasif has a really deep command of GCPL's operating rhythm overseeing finance, overseeing strategy. So my assumption and faith is that there won't be a miss in the beat. So we were able to do it immediately.

Sure. Secondly, just a question for Aasif. I know it's early days and all, but any thoughts on where you think you can add value to the India business in terms of either operations or strategy compared to how India business has been progressing over the last few years. Any kind of subtle shifts in priorities or any kind of sort of low-hanging fruits or any thoughts on what you would sort of do different, not necessarily completely sort of 180 degree different, but any kind of subtle shifts in how the business has been running and any subtle shifts in the priorities of the business, especially for the India business?

Thanks, Percy, for the question. I think step one would be to kind of, as you -- yourself called out, not to kind of make any kind of large changes overnight. I think building on what Nisa spoke, I think there is, I would say, a stronger, stronger execution layer which we will kind of build in the business. We will bring in an India CEO and there is a rhythm through kind of running operations. If feeds into all aspects, sales, PSO, marketing, pricing, et cetera. And having a very, very strong rhythm on a day-to-day basis, on a week-to-week basis, on a month-to-month basis makes a significant difference. I think you will see that come through, which will kind of raise the bar. When it comes to, I would say, subtle shifts, I would kind of not do anything overnight. But I think there are significant opportunities where we can kind of, I would say, increase the pace at which we are kind of winning in the market place. But I don't think it would be right for me to kind of talk about it today. You will see some of the actions and we'll talk through some of these as we go along.

Any learnings of the Africa business that you think you can bring to India? And secondly, if there is an India CEO and an international CEO, then how do you look at your role in terms of division of roles and responsibilities between the India, international, and global CEO? These two questions, please. That's all from my side.

So I think learnings are many. I think -- I think one is wherever there has been a challenge, I think what we picked up is that I think it's important to kind of lay down and [indiscernible] we have been kind of practicing this whole framework of solved-unsolved. I mean, business doesn't kind of get built in a day, problems don't get solved in a day. But it is important to kind of firstly define what's solved and unsolved. Secondly, it's actually very, very important to define what is a wildly successful goal. And that wildly successful goals beyond what an annual plan is, it goes beyond what looks like we can achieve in a year. It's about what we want to kind of get if we believe that we want to be wildly successful. And you simply don't give up and you kind of find ways and means of kind of getting there. I mean the business which kind of spans across in Africa again multi-country, multi-categories etc. Some of them were real, genuine business brand issues leading where -- which were related to kind of penetration not increasing, [indiscernible] not coming. I think once you define what you're going after, you find ways of kind of solving it. I think in India, we've had a good momentum building through. I think we know exactly and unfortunately I wouldn't be able to kind of share what we believe is our wildly successful goal or what we believe are unsolved problems. Some of them you've heard us talk about. But there are a few, businesses will always have them. The point is, how do you kind of not give up on them and keep kind of working to get them out. So, yes, I think that's been one kind of learning in terms of theme. I think when it comes to working together with an India CEO, I think that's pretty much similar to how it would work across the world. We have a very, very strong, I would say, innovation backbone, an R&D team, a global marketing team, which does work on coming out with new mixes. Over the last few years, I would say we've actually now built a multiplier effect in terms of what we can do with these mixes, because we've proven that actually mixes can travel fairly wide. And I think that's something which one keeps feeding into each of the businesses to kind of then execute brilliantly on the ground. So I think the roles are very, very different. The operational rigor and the strategic elements are very, very different in both the roles. And the timeline with which you kind of see the business and you kind of look through performance is also very different. So I think at this stage, I would kind of [ pick on both ] and gradually we'll transition into this India CEO, Indonesia CEO, and the various international other clusters and ensure that they are kind of strategically kind of backed.

Okay, thank you. That's all from my side. All the best and congrats on your new role.

Thank you, Percy.

Next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.

Yes, thank you. So Nisa, you mentioned that you like to back people, but also [ hold people accountable ]. So looking back, how do you see the tenure of [indiscernible]? What are the areas in which the team could have done better, especially in the last two-three years?

Yes, I think and I've been commenting on it over the last few years, I think the -- he's brought a lot of good things to the company. One of the smartest people I've worked with. Actually someone I've said I've got my second MBA from, so and I got the first one from Harvard, so it must be pretty good. But so I think this whole 2040 vision he's brought, the TAM increases. So he's brought a lot of value to the company. I think the -- I think the opportunity I see for GCPL really is this execution. Now sometimes we want to [indiscernible] very fancy things on these calls of what we're going to do. But it's basically, can we roll up our sleeves and get things done with more candor and pace? And I feel that that layer in GCPL is not as strong as I would like it. So that is the -- that's what I'm hoping that Aasif will bring with him, while continuing all the good things that were built in the last five years, which I think Sudhir also built on a lot of the good things. One of the biggest successes that GCPL has had over the last five years is our Air Care category, which was built in the previous seven years. So we must build what is successful, change what is not, and do it with our full hearts and minds. And, yes, just get on and get it done, basically, yes.

Understood. Secondly, was there any external search done or were external candidates considered, or was there a clear succession plan in place which you went by?

Yes, it was a clear succession plan. I think we always prefer when we have [ internal ] people to back them, and especially when they've delivered this outperformance. I think Aasif is feeling the pressure already from me, that this is very much what you've delivered in Africa. You better pull it across the whole company and do it quickly.

Understood. And lastly for Aasif. Aasif, can you share your thoughts on what you would have done differently in India over the last two-three years? And also, GCPL has recently laid out speedboat strategy. Your thoughts on the same, would you continue with it or do you think something which should be done differently? Also ad spends have been lower recently, would you change any of that?

I think fair question, Kunal. I think firstly to be absolutely clear, our strategic direction is clear, it's strong. What we shared in May '26, and that has just been a few months back, yes, and I've kind of had the advantage of working very, very closely with Sudhir. And so that nothing of that is really kind of changing, yes. I think fundamentally, we've got a very strong strategy kind of crafted, and we've refined it. We've shared actually what we've shared with you all is only a small, tiny portion of it. Internally, we have a very, very strong plan in terms of 2040. We have a very strong funnel. And that's really not going to kind of -- we don't need to kind of do a, I would say, rethink or a reboot on that. I think the progress is about how do we make whatever actions we take better. When we kind of come out with new mixes, how do we kind of scale them up in a more larger manner? How do we kind of multiply them across the world? And I think we've now well set to do that, because some of these bridges have been built. We have a very strong international business, we've kind of created a global, I would say network, and that gives us the ability to do that. I think when it comes to core, I think it's just about defining what good and great looks like and just not giving up, irrespective of the challenge. Yes, and one can fail for a week, one can fail for a month, one can fail for a quarter, but just not giving up. Our iconic brands are extremely strong, and I think I do see some opportunity of really scaling up stuff there.

Next question is from the line of Avi Mehta from Macquarie Capital. Please go ahead.

Yes. This is Avi here from Macquarie. Just Aasif, I wanted to just better understand your focus on pace. Does this mean additional investments or what exactly do you have in mind? An second, if you could share with us what was the reason given by Sudhir for this sudden decision if at all that was shared? Thank you.

Maybe I should go first?

Yes, you could cover it, [indiscernible].