Jyothy Labs Limited (532926) Earnings Call Transcript & Summary

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

Hi, everyone. It's good afternoon, good evening to wherever you're calling from actually. It's our absolute pleasure as I said to welcome the management of Jyothy Labs Limited for the 1Q FY '21 results conference call. The company is represented by Ms. M.R. Jyothy, Managing Director; Mr. Ullas Kamath, Joint Managing Director; and Mr. Sanjay Agarwal, Chief Financial Officer. At ISEC, we like the long-term story of Jyothy Labs. We've got an [ add ] rating, and we have an outperform [ listed ] on the stock. Now over to the management for the initial remarks and then we'll open up for Q&A after the presentation concludes.

Good evening, everyone. All of you would have seen our results. Let me take you through them in detail. Before we talk about the results and the brand performance for the quarter gone by, let me briefly update you on the current market scenario. We are on Slide 5, if you are in the presentation. Overall, the consumer sentiment has improved from the lows of April 2020. Indians, by nature, are fairly resilient in any crisis, and despite the daily surge in number of people getting affected of COVID-19, people have embraced the new normal and are resiliently working to get our economy and lives back to normal. Our ground level assessment indicates that we are at a cross roads and the underlying consumption trends are yet to settle. Specific to trade channels, general trade is doing well as consumers prefer to buy at the neighborhood kirana stores or on e-commerce websites, where contactless delivery is possible. While large-format stores of modern trade and canteen store departments continue to face operational issues, a few modern trade and canteen departments are not operating, especially the large-format ones. Further, they are opened for restricted hours and have reduced footfalls. As for the rural and urban trends, rural demand has been positive due to good monsoon and increased government support. While owing to intermittent lockdowns, several urban centers continue to face last mile delivery issues. The quarter of the Q1 FY 2021, as you all know, started off with a nationwide lockdown. And 'til the end of the month of June, the nation and economy were only partially opening up. As we speak, restrictions of manufacturing, operations, supply chain and sales market visits continue to impact normal operations of the business. Despite the unprecedented constraints, we are proud that the Jyothy Labs showcases a resilient performance and delivered a positive sales growth, mainly due to 3 key factors. Our portfolio agility, we align ourselves and leverage on our core essential and hygiene product portfolio, which accounts for a good 80%, 85% of our total business, which was complemented by a flawless execution by every member of Jyothy Labs and our channel partners, who with their determination and commitment collectively have ensured flawless execution to meet consumer demand and deliver positive growth. Adherence to strict financial prudence, this crisis [ impels ] us to take proactive measures and focus on improving our key financial parameters to enhance shareholder value. The amalgamation of all these factors actually has helped us to continue our positive growth momentum in the month of July as well. Moving on to the next slide. Presence of our core essential and hygiene portfolio across all product categories of dishwash, personal care, detergent, household insecticides and toilet and floor cleaner helped us in delivering superior growth. Backed by the strength of our portfolio, we focused on our execution with meticulous planning and redesigned our short-term priorities in following areas. Go-to-market. Owing to restrictions prevalent due to lockdown in several urban markets, we focused on strengthening our direct delivery through our retailers application. We spoke about it in our last conference call as well. In order to strengthen our presence in the rural market, we undertook a special drive to add more sub-stockists across India. As there was an increased demand for low unit packs of INR 5 and INR 10 across brands in accordance, we have also scaled up our manufacturing operations to meet this increased consumer demand. We also increased our focus on e-commerce platform, which allows contactless delivery and is growing at a fast pace in urban areas. In fact, if you see, our e-commerce growth has been 1.75x over the previous year. We also focused on new launches, keeping with the -- our ethos and focus on innovation and the renewed importance of hygiene. [ Also ] the introduction of Margo handwash and hand sanitizer. In the current quarter, we further added T-Shine Floor Cleaner, which is 100% organic compound based floor cleaner. In terms of media activities, owing to the lockdown restrictions, we decided to do more focused media spend. Renewed attention was given to digital marketing, and we'll speak about it in our brand slides, and several tactical micro marketing plans were initiated during this quarter. In support to the Atmanirbhar Bharat, we launched Jyothy Labs #VocalForLocal campaign on a pan-India basis, under which besides expensive promotions on print, media and TV, we also did on ground marketing efforts. We also launched our company's very first corporate TV commercial, covering all our 6 power brands in a single commercial, which besides the National language Hindi, was also launched in 8 regional languages. Enhancing production facilities, keeping our production facilities aligned with the target of delivering growth. Despite all the constraints we commenced operation of a new dish wash manufacturing plant at Pithampur in Dhar, which will help us in catering to increased demand for dishwash products in Central India. The CapEx of this was done prior to March 2020. To talk about what is the current status of the entire operation post the nationwide lockdown 1.0. Our manufacturing plants and supply chain partially resumed since mid-April 2020. And currently, we are operating at near pre COVID levels. Moving on to the next slide. We adhered towards strict implementation of financial prudence, where under we took proactive measures and meticulously planned and monitored all key financial parameters. Despite the restricted [ discipline ] we have delivered an increase in sales volume, higher EBITDA, increased PAT and most importantly, improved free cash flows. To talk about some of the specific steps to ensure seamless supply to consumers across India, we focused on retail SKU rationalization and plant-specific sales planning, strict adherence to business hygiene, only cash sales, controlled trade scheme and very important proactive alignment of all our business partners' interest, which in a few instances, included higher margins for them for additional expenditure incurred by them on freight and manpower. During the quarter, the input cost prices are volatile and in order to ensure steady supply of raw materials, we decided to use a pragmatic approach and made proactive payments to all our suppliers to ensure once restrictions are -- were eased, we had preferred business relationship with them. Also critical times, I mean demand innovative and strict measures. Hence, we implemented cost discipline across the organization, including focused media spend to keep improving our share of voice across brands. Moving on to results section. Our net sales increased by 2.5%. This is on a consolidated basis, whereas sales of our FMCG business increased by 4.1%, and FMCG business volume was up by 6.1%. The key difference between our FMCG business and consolidated is only fabrics for business, which we will speak in the next slide. Our gross margin has improved due to soft input prices. However, due to low post wash fabric care sales, gross margins have been flat at the range of 46% to 47%. Our operating EBITDA increased by 16.6% for the quarter. In value terms, it has increased to INR 76.5 crores from INR 65.6 crores. And in percentage terms, it has increased to 17.7% from 15.5%. Similarly, our PAT has also increased by 33.8% to INR 50 crores. Moving on to the next slide of category wise revenue. Fabric Care sales declined as consumption of post wash category, Ujala Fabric Whitener and Crisp & Shine saw a reduction. And the reason behind that is, as with the lockdown, people followed the directive of staying at home, staying safe, which implied lesser people stepping out of their houses, except for essential work. And more people opted for work from home. So these sales, as we see in the month of July, they have picked up and we've seen early signs of revival in this category as well. In addition, sales of our premium detergent such as Henko Matic, also marginal decline since they have a higher saliency in institutional channels of modern trade and canteen store department, which we spoke earlier are facing operational issues due to lockdown. Our Dishwash category has seen a good uptake and momentum during the lockdown with increased emphasis on hygiene. Household insecticide sales also did well. This was as a result of extended season this year and consumers adopting a cautious and a preventive approach towards their health. Personal Care sales have remained flat over the same period last year with increased importance on hygiene and our entire portfolio of personal care is Margo. So our Neem base Margo portfolio of soaps, face wash, hand wash, hand sanitizers are positioned to witness strong demand going forward. And in specific, we have seen an increased demand, especially of the smaller SKUs, which is helping us to have a higher penetration with the new users. Our laundry services business. So the FMCG business, if you see, is at 4.1% value growth. And if we add for the consolidated business, our laundry services business, which is a retail store-driven operation, primarily in Bangalore, then Mumbai, Delhi, Poona, could not operate due to lockdown. This business only accounts for 2.5% of our total revenues. And in the month of June, once Bangalore started operating where our maximum number of stores are there, we have seen 60% to 70% of the demand has already started coming back. The next slide is talking about a snapshot of our financial performance and key financial ratios. Moving on to the next slide, a quick understanding of our EBITDA movement from last year to this year. In June 2019, it was 15.5%, which has been reduced by 2.3% due to lower gross margin in the current quarter while advertisement and sales promotion expenses this quarter increased the EBITDA by 3.4%, leading to overall EBITDA for the quarter increased to 17.7%. Further, if you look at the other expenditure, it includes a donation of INR 5 crores paid for relief was done for COVID-19 to PM and Chief Minister's Funds. If we exclude our COVID donation, the EBITDA for the current quarter would have been at 18.8%. Moving on to our brand performances and initiatives. Our Fabric Care constitutes 31% of our business, Dishwashing is 36%, HI is 15% and Personal Care is 14%, and we have a well-diversified portfolio as most of you know. Moving on to our Fabric Care business. Ujala Fabric Whitener, where we are the market leader, we continue to increase our retail visibility. During lockdown, the usage of fabric whitener has reduced. However, a section of consumers continue to use fabric whitener as it is integral to their ritual or washing of white clothes. What we see now is we are seeing -- I mean, buoyancy in the rural economy, which will compensate for the urban slowdown. And post the unlock phases and people resuming work and their pre-COVID routines, we are seeing signs of revival in the month of July in the Post Wash segment. Ujala Crisp & Shine, we plan to expand the brand to nearby states. A new TV commercial was launched with the superstar Nayantara. Similarly for Ujala IDD, Ujala instant dirt dissolver, which is a detergent powder, currently being sold only in Kerala, a mass media, TV and digital campaign ran in Kerala featuring Manju Warier for Ujala IDD detergent. On Henko, we have -- we are now more focusing on general trade, while modern trade and CSP channels have yet to stabilize. Moving on to the Dishwash category. With renewed focus on hygiene, our Exo and Pril continue to do well. Also with people preferring to stay at home and work from home, there is increased consumption of food at home, resulting in more utensils being washed. Also, we are focusing on smaller packs, which is leading to higher growth for the brand and also giving us -- unlocking opportunities in rural market where they prefer small packs. We have been focusing more doing focused marketing for both Exo and Pril on digital and social media. Household insecticides, we have seen a healthy growth in sales of all the constituents, which is coils, liquids, liquid vaporizers, combi machines, which one can attribute to extended season this year. Right until May 15, mosquito season was there and the consumers were picking up. And also, consumers have adopted a more cautious and a preventive approach to health. We are continuing our TV media support and additional emphasis through digital campaigns, focusing on key states to generate offtakes. Moving on to Personal Care. Personal Care business is primarily Margo franchise. We continue to invest behind the brands and have launched extensions in form of Margo hand wash, hand sanitizer, which are doing well. Both summer season and emphasis on health and hygiene is helping the brand grow. And again, here, we are investing on digital medium to reach out to consumers. To further strengthen our hygiene portfolio and consumer demand, we launched a 100% organic compound base T-Shine floor cleaner in all Southern India states. Also, we extended T-Shine, which is the toilet cleaner to -- extended it to Bangalore, which was earlier was only focused toward Kerala market. Building an Indian company and serving Indian consumers, we are proud to support our Honorable Prime Minister's vision for being a VocalForLocal business. We rolled out our national launch of VocalForLocal campaign covering all our brands. You all can see some of the -- some of our power brands, which have been put on the slide. And we covered all our brands in 1 shot in 8 languages in TV and print media. And not only we spent on TV and print, but there has been on ground promotion, which is hard work done by our sales team, which has really enthused our retail partners in our products. And the marketing campaigns have been put on the next slide. Going forward, we are quite optimistic on our business prospects. While business environment and consumer sentiment are expected to remain volatile, we will focus on our core essential and hygiene portfolio, keeping employee health and safety are at most priority. We are confident to deliver competitive growth backed by a strong portfolio and relentless execution. Also, we continue to focus on a local-for-local campaign which has gained significant momentum with the Atmanirbhar sentiment growing among retailers and consumers and we saw the pictures of them on the ground with the sales teams. Finally, soft input prices will support steady gross margin. Besides several cost optimization initiatives we have taken, which will support healthy cash flow management for the coming quarter. With that friends, I finish my presentation. I will be happy to answer your questions or any clarifications you need. Thank you.

[Operator Instructions] The first question is from the line of Percy Panthaki from IIFL.

My first question is on the gross margins. They have declined over 200 basis points this quarter. And I'm assuming this is mainly a mix effect, where basically, there was a big decline in Ujala Fabric Whitener, which depressed the margins. Now if you can just give some idea as to what is the trajectory of recovery you see on the fabric whitener? And if basically, it is going to remain subdued versus the rest of the business and the mix effect is going to come through, the gross margin pressure, how do you plan to counter act? Like this quarter, you contracted to add spend but obviously, ad spend cannot maintain at a very low level and you will have to restore them. So what other line item will contract the gross margin pressure, if at all?

Thanks, Percy. Good question. But as you all know how the lockdown situation is changing in the country every day. So it's too early to say how the trends in the Post Wash will come up. But having said that, the sales have picked up and have shown signs of revival in the month of July from what we had seen in -- so May was better than April and June was better than May. And July, we have seen a much better trend in the post-wash category. So hopefully, if things remain more or less same where we are, we should not have a high impact because of lower Post Wash sales on the gross margin. As of now, the raw material prices have been at the levels of the last quarter. So overall, we believe that it should net out if there is no decline. And our EBITDA margins will be in the guided range of 15% to 16%.

Right. And also, just wanted to understand what is the difference between volume and value for the business this quarter?

So as you know, there's been a higher sales or higher demand of low unit packs because we are focusing more on rural and semi urban. The INR 5, INR 10 packs are really flying well for Margo, Exo INR 5, INR 10, Henko INR 10 pack, which is good for our business. And therefore, higher sales of these low unit packs have added to higher volume and what [ will be ] value increase of 4.1 to 6.1.

Okay. So you're basically saying that the volume growth is higher than the value growth?

Correct.

And that's because on a per kg basis, the smaller packs are sort of cheaper than the larger packs.

Right. And also minor, we can add also there have been some additional trade offers selectively been given. So combination of both has got business volume at 6.1 versus sales being at 4.1.

Understood. Understood. But this is a little contradictory to the information that we have from data aggregators, et cetera, where they have been actually calling out that because of lockdown people are not able to go to the store as often as they used to. And therefore, whenever they go, they buy larger quantities. So a lot of companies have actually said that the large pack proportion in their portfolio has gone up.

Perfectly fine, Percy. It is more of an urban/ rural split. In urban, yes, when all of us go, we try to buy a little more. But when you go to rural markets, there, the people will buy more of INR 5, INR 10 because that is what they can afford at this point of time, and none of them are sure about how things are going to go for them. So the trend, what you have seen is more for the urban. Rural, you will still find rural and semi urban, the low unit packs are selling much more.

Okay. So Sanjay, can you give some clarity on this 4% growth that you've seen in the business as a whole? How much was it in urban? And how much was it in rural?

So if you look at it, rural has been growing better. And maybe for medium term, we will see this trend continue until lockdown issues recede in urban areas.

Right. But is it like better by a factor of 2? Or I mean has urban actually declined and rural grown this quarter?

No, no, urban has not declined. But what we are seeing is, it's again a relative when we talk about, which has been growing better than the other. So in the past [ it was ]...

Urban has also grown.

Urban has also grown, but the rural growth is better than the urban growth.

Understood. Other question I have is for Jyothy. Ma'am, in this kind of an environment, we've seen a lot of companies launch different kind of products, which are on the health and hygiene platform. Now obviously, a lot of our products are already on the health and hygiene platform. And to that extent, we really don't need to launch something new. However, just wanted to understand your thought process, if there are any portfolio gaps here that we can sort of fill? And is there any plan to do anything of that sort?

Yes. So Percy, like you said, we are almost in the hygiene portfolio. If you see our ad, Exo, it's antibacterial Dishwash [ bar ]. We have been rightly pitched on most of our brands. Going -- and also, we had launched the Margo hand wash and sanitizer. Going forward, yes, we have plans to launch a few more in the same health and hygiene segment. You will see that coming.

Yes. And any clarity -- I mean, any information you can share on these new launches like hand sanitizer? How much have they contributed to this quarter sales?

So right now, it had -- it's not as much, but it has seen a good growth, and we are seeing that continuing in this quarter as well.

The next question is from the line of Amit Sinha from Macquarie.

Team, congratulations on a good set of numbers, given the environment. My first question is on some kind of target on FY '21 topline. I mean, I'm asking this question, and I know that last quarter, you had very specifically said that given this kind of a volatile environment, you are not giving any particular guidance. But now with 3 months, 4 months into the pandemic and some sort of stability coming to the supply chain and demand, and potentially, your portfolio actually being a beneficiary of the current pandemic. If I see, basically, most of the products are actually gaining out of the current environment. Just wanted to understand what is the kind of top line growth which you are targeting for the year?

Yes. So Amit, we have stayed away from the guidance for this year because every month is different. And I mean, as you know, and you also answered the same thing that challenges are coming up in like West Bengal, Bangalore was much better a few weeks back and now Bangalore has got into their own issues with lockdowns and stuff like that. So we are taking every month. We are taking every quarter. And then only we will be able to give you any performance. It's too early to say for FY '21. What we know is last quarter went by okay. July has been positive sales growth. And we expect things to be normal for us the way we are doing, unless something drastically changes. The fact is today, still today, modern trade is not operating, canteen store departments are not operating. And the few of them that are operating, they are still facing operational issues, footfalls have reduced there. So it's a little early to talk about our guidance, but what we know is we will manage the entire business. And our EBITDA guidance is for 15%, 16% for the full year.

Okay. Sure. Second is on the personal care, so just wanted to understand the kind of top line number, which is there in the personal care. Does that include sanitizers and all the launches which you did this quarter?

Yes. Yes, Amit, that's right. See sanitizers and all, we launched it in the month of May. And they're scaling up the production levels. As of now, hand wash and sanitizers don't contribute much to the overall personal category, but we are seeing good sales of the same in this quarter also.

Sure. But if -- even if you are not sharing the numbers, but assuming some number from some of these new launches, it looks like that the Personal Care segment has underperformed, relatively compared to some of the other peers. Any particular reason for this? And have you seen any recovery in the growth in July?

So Amit, if you look at only Personal Care and Margo, if you want to go in very much in deeper detail of it. See Margo, the only challenge which we saw, which is more or less behind us, is Margo has higher salience in our traditional markets of West Bengal and Tamil Nadu, which during the entire quarter had faced stricter lockdown. So barring that, Margo has done pretty good. And even what we see in the month of July, the sales of Margo has picked up, and it's in a positive -- good positive zone.

Sure. And lastly, my question is on HI. This quarter, the numbers are 150% growth. I know that 1Q is not the main quarter for HI. But just wanted to understand, I mean, how do you see the -- basically 2Q panning out for HI? And how should we look at HI for the whole year from your initial assessment?

HI, after a long period of time, has started doing well. The quarter 1 went off okay. Even now the reasons which I spoke is more about people getting more cautious about their health, and the season has also helped. And for us, the importance is we are focusing more on liquid vaporizer sales, so that is 1 portfolio which we are focusing on, and it has started doing much better than whatever the coil and liquid vaporizer, we have been more skewed towards coils. And which now would be -- I mean, with the automating machine what we had and it's started doing well in most of the market. So we want to focus on liquid vaporizers. And overall, we are seeing this category will show good growth in the next coming quarters also.

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

Just had a few. The first thing the numbers on the substockist additions. If you could just talk about what's the number that you've added? And on what base is that? And how do you see distribution in terms of expanding rural or [ GT ] in the current year?

So Harit, we have a decent coverage, 40% of our business comes from rural market. What we have called out here is that if -- when we see the growth getting more push into the rural market. And therefore, we have taken an additional drive to add more substockists, because there are challenges in the wholesale market, so the substockists or the rural market are not getting their stock. So we haven't put any number to it, but that we are finding all the white spaces, wherever we need to add substocking, we are going after this.

Is it specifically in any region per se? Or is it just the fact that you're supplementing the distribution because you want to make the most of the current situation, or...

This will be more long-term because adding these substockists is not only during this COVID time. The growth are direct reach and our contact with the substockists in the rural market will help us in the long term. So it's not only specific to this quarter.

My second question was on HI. So if you could just give some idea on the category on the categories for you that have grown. So has it been, say, a steady across, say vaporizers and coils or has the low end grown at a faster pace, if you could just help us understand? And what is your sense on what's happening in the [ liquid and incense ] market?

So both the categories have done well, coils and liquid vaporizers. However, as I've said, our focus is more on liquid vaporizers, but both the categories have done well. Incense sticks, yes, it was growing quite significantly in the previous year. Now government has put certain restrictions, and we are seeing a reduced impact of those illegal incense sticks, but both coils and liquids have been doing well.

Got it. My last question is on the promotional intensity side. So have you seen any benefits of lower promotional intensity and trade offers? Because typically, these are categories which are in where promotional density trade offers are very high across HI and detergents even in certain cases, Dishwash. So just wanted to get your sense of how it has been during the quarter, and then how do you see this trade offer or trade promo intensity going moving forward?

So we had -- we used to have offers. But during this time, we had reduced the offers because as such, there was good demand in the market. Going forward, it will be -- we will take decisions as we go along is what we can say right now.

And the reduction in offers would be across categories, right, for this quarter?

Yes, yes.

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

So my first question is with regards to your guidance for the margins in the range of 15% to 16%, and given the fact that you have done already 17.7% margins in this Q1. So are you -- I mean, witnessing any sharp declines ahead? And that is why the subdued guidance in terms of margins?

No, nothing like that, sir. What we have done in Q1, it is nothing that -- we believe that we will be able to exceed this target. But given the volatility and uncertainty with this beginning of the year, we decided that we will aim at least for 15%, 16%. And hopefully, we'll be able to beat that.

Okay. Sure. And sir, a related question to this is like the -- we have seen a large contribution from the reduction in the ad spend that has then contributed to the margin this quarter. So how -- what is the -- what would be the guidance for the full year in terms of the, for the ad spend as a percentage of sales that you would be looking for?

So yes, for this quarter, we did reduce. But going forward, it will only improve from here. But again, we will see what is the kind of trend that is happening in the market. And we'll take our calls accordingly. The idea is definitely not to reduce the spend, and there will be -- we will take a rational call when it comes to it. Going forward, this quarter, we are seeing an increase in spend compared to the last quarter.

Okay. Sure. And my next question is with regards to the HI category per se. So while some of our sales would have been carried over from Q4 to Q1 of this quarter. And definitely, the 27% growth will not be sustainable. But what do you think would be a sustainable growth for HI category for you going ahead? And a related thing to this is, while we have seen good sales growth, we still continue to do an EBIT loss in the category. So when do you think it will turn profitable? At what level of sales do you think we can turn profitable here?

Sir, our growth in this quarter has been 151% and not 27%. But having said that, the profitability is, again, because coils don't make much money and liquid vaporizers are where there are heavy -- good gross margins. So as I said, our focus is moving towards what you see over quarters, we have increased our LV share. And so over a period of time, you will find HI also contributing decent of money in the overall profitability for us.

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

Sir, if you can dissect the demand, you spoke about Tamil Nadu in particular. So if you can dissect the demand region-wise, South India and non-South India, for the quarter and how the recovery is actually shaping up now?

Tejash, recovery is more or less, I would say that semi-urban and rural is much, much better, as Sanjay said, but South was doing well barring Tamil Nadu in the initial stages, like Kerala and Karnataka were doing extremely well [Technical Difficulty] Tamil Nadu when the problem started. In Tamil Nadu again, in northern Tamil Nadu, we did have more problem than compared to the southern Tamil Nadu. And then like Delhi, north of Delhi was okay. And again, Maharashtra, ex Mumbai is okay, Ex Pune was okay, rest of the places. So it is more a combination of urban, semi urban, rural and product-specific. But the team has done extremely good job, and our suppliers is to -- from morning 6 o'clock to 11 o'clock in the morning. So they were able to supply wherever the demand was there. And again, wherever the production like was there. So there's a combination which you worked out, but to answer your question, it will be south and followed by East and then the North and West is what I would say, by and large, [ barring the pockets ] like West Bengal, Chennai, Delhi and Mumbai.

And sir, the recovery trends are also similar?

Absolutely, yes. Yes, yes. But now again, that is reversing now because Kerala is getting into a little bit of problems, if you see the numbers of COVID cases. Karnataka, over the last 2 weeks has been very bad. And Tamil Nadu will hopefully have a couple of weeks coming, Tamil Nadu should be perfectly fine. But Delhi recovery is a very, very hard thing and that gives us a real positive note. [ Right now ] in Delhi, overall cases are less than 7,000 now positive. It makes us to believe that it's a matter of time. So that [ takes then down of us ] are very, very confident about turning around completely in the coming probably 3, 4 weeks.

Sure. So second, in this quarter, 1 trend, which is very much visible so far in all the results, e-commerce had a way disproportionate representation in terms of growth in many categories and for most companies. So how was it in our portfolio and what are we doing specifically because that seems to be the channel for growth, at least for this year in current environment? What are we specifically doing to actually increase share on that channel?

Yes, we have seen good growth in e-com. And we have been doing, see, as such because consumers have also opted -- the urban consumers have opted for contactless delivery, that channel is seeing a growth, and we are also witnessing the same. We are continuing what we used to do in terms of specific spends on those channels, but it's nothing which was very different that we are doing. It's that overall, the channel is showing good growth.

Sure. And lastly, just extending the previous participant's question on HI. Now it's heartening to see that we had 151% growth Y-o-Y on that segment. But if that kind of growth also doesn't generate profitability, then there is some structural issues there because growth and profitability have remained [ binary ] for the segment for a long now. And obviously, we have called out mix and all, but organically, it doesn't seem to be happening along. So how can we address this because if this kind of growth also [ can't generate profitability then ] perhaps growth is not an answer.

Yes. Sir, if you see the last quarter when we had the base quarter, the EBIT level, the loss was INR 5 crores. Now it is INR 2 crores. Significant reduction has happened because of higher share of liquid vaporizers. And I think next few quarters once LV, liquid vaporizer share increases, one would find a positive number out here as well.

What was -- I missed the LVs number for the quarter. What was that?

Sorry, the last year, June '19, it was INR 5.18 crore EBIT loss, and now it is INR 1.97 crores. And it also depends on -- sorry.

No, I was just asking liquid vaporizer's contribution for this quarter.

Yes. So we have been at around 70/30, 70 has been coils and 30 has been liquid. Now we are moving towards 60%, 55% for the coil. So liquid vaporizer will become 35% to 40%.

And that is the breakeven point or that [ matter is still far ]?

So the breakeven, I think another 5%, 10%, we will be in a profitable zone.

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

Sanjay, how is the mix in Dishwash solids versus liquids? And will it be similar for the industry sales also the market [ picks up ]?

Abneesh, for the Dishwash, the growth is there, both in liquid, which is Pril, and in Exo also. While we've seen little shade higher growth in the bars, INR 5 and INR 10, but the growth is equally good in both EXO and Pril.

And in soaps, Margo, you mentioned because of lockdown in Tamil Nadu and Bengal, you had more impact. Now if you see [ in the kikda ] presentation, they have said that [ det oil ] has become number one. So wanted to understand in Tamil Nadu and Bengal, have you seen consumers gravitate more towards the [ det oil ] kind of formulation? Because it definitely deals with the overall COVID proposition. And is that a product gap in your portfolio? I know Margo is a very niche soap, so is it too much to take it to [ det oil ] kind of formulation? But any comment on the consumer behavior? And any thoughts you have on the product gap?

No, nothing as of now. But yes, [ det oil ] maybe they have done because they are in that segment, but we have seen good growth as such in those markets. It's only because of lockdown that effect would have -- we have seen that. Margo is also, if you see the core ingredient being Neem, is also a naturally antibacterial and anti-germ kill kind of a soap. So we don't foresee any -- that kind of an issue with the brand. And it will do well once these things ease in.

My next question is on surface cleaner, et cetera. We are seeing a lot of players enter this who are much larger than you as a company, not in that category. So is that a risk? Because you yourself are in a start-up phase in these products from a pan-India basis. So suddenly, if much larger player comes into surface cleaner or toilet cleaner, et cetera. How would you respond? Because already, there are [ kikda are kind of Big Daddy ] and now the players like GCPL, ITC, everyone is entering this.

Yes, Abneesh, but somewhere we need to start the business, right? And Ujala, when I started at INR 5,000, we never thought that it can become this big with 80% market share. When we started Vim, we never thought that we can have the biggest #2 player in the marketplace. And when we acquired Pril, we never thought that it would get into 18% market share. So this is a business like 130 crore population, there is enough scope for everybody to play in this business. I don't know why people get [ obsessed ] with the 2 companies. This is a big country. Atmanirbhar Bharat is a campaign which is going far. And there is LocalAndVocal. And you know what the campaigns are going about. And in Kerala, trust me, we are the king. And there cannot be other person in Kerala, which you know. Even in the detergent space, we are #1 there. So neither we are worried nor we are scared. But we go in a measured way, state by state, very baby steps, small steps. And when you look back after 10 years, definitely, you'll ask me the same question, then you'll be proud of us is what all I can say. And see, any of our products, wherever you see, [ see 5 years behind the new law that all this we'll have done a great job ]. So it is not just that we go just because it is COVID, no. It's all which was there in the pipeline. Everything is coming out of R&D, even the sanitizer was there, even the hand wash was there, the [ use ] is that it happened in the right time. But that lockdown period sanitizer which have come out with 21 days and during the first lockdown period, it is something which showcase the capability of R&D and the management team that we can still launch. And today, for us, the hand wash is a production problem, sanitizer is a production problem. And you know that in the marketplace, best of the best people have launched the product, but at Jyothy, today, we had just a production constraint. Any number of trucks if I get, I'll be able to sell there. To that extent, absolutely at Jyothy, we are confident that whatever we launch, we go slow, we study. But finally, even if we get 10% market share in this country, large country [ we have Abneesh. ] So I will not be discouraged by your caution, that gives me more confidence to say that I'm committed to do well in this segment, which we do.

That is an interesting point, just 1 or 2 follow ups here. So Atmanirbhar Bharat, vocal local, does it work when consumer is buying because all these Unilever brands or [ nikda ] brands have been there for decades? So second is GCPL, Dabar, ITC are also all local companies. So just wanted to highlight that fact that the new entrants are all local companies anyway. So if you could address, because you have spent advertising money also on this Atmanirbhar Bharat, local vocal, does it really work?

Absolutely works in market, because at the end of the day, like consumers are Indian. I'm not saying that Hindustan Unilever is not an Indian company or that GCPL is not an Indian company. All I'm saying is that Atmanirbhar Bharat campaign is made in India, made for Indians. And we are saying that we have been doing this from 1983, what's wrong in that. And it is the first corporate communication which we have showcased across the country and people know what kind of portfolio brands, what we have, and every brand is a hero. So to that extent, and [ our buyers ] go to the poster and when they paste that Atmanirbhar Bharat poster on the retail outlet, it makes a lot of difference at the outlet level, but I'm not saying that the others are not. But my answer to your question was primarily saying that any product what we launch, we see from our capability point of view and not from competition point of view.

So that's helpful. Last question. HI, very good performance, and a lot of questions have been asked. Just want to understand, in terms of focus, when you say coils will not be the focus, what exactly you mean for advertising budget will only be for the electrical? Is that the right way to understand?

Yes, yes, that's right, Abneesh. We've been spending only on liquid [ vaporizers ].

The next question is from the line of Sanjay Manyal from ICICIdirect.

Congratulations for resilient numbers. Just 1 question on the distribution perspective. How is the trade inventory at the end of June '20, as against inventory level in June '19?

So our inventory levels -- for the June, our primary and secondary sales growth have been same. And the inventory levels, we have been keeping it at a lower levels at the distributor so that we can protect their channel partners' ROIs in the current environment. And we've kept it at a bare minimum what -- so that they can make a better ROI.

Great. Right. And how is the recovery in distribution? Have you been able to serve all the distributors now?

Could you just repeat your question?

So how is the recovery in the distribution? Have you been able to reach all the distributors, since I'm sure they have been disoriented -- their [ route ] would have been disrupted post COVID?

Yes, definitely. So month of April was quite low, then it improved in May and June. As of now, you can say, yes, general trade has come back. However, the CSD stores and modern trade stores are still facing the challenges. But the [ rural trade ] has, more or less, as we speak now, has come back. And we've been able to build to almost all our distributors in all part of India, except if some distributor falls in any containment zone, so they are not able to bill, which you will find in sporadic cases across India happening every now and then.

Right. Great. Sir, sir, 1 last question on the fabric whitener. What I understand that probably the -- a lot of the sales is probably coming from South, specifically from Kerala. And recovery, the pandemic recovery was much faster there and those were the market which opened up first. And you have seen such a [ steep ] decline in sales. So is there anything else which we should read other than the out-of-home activity other than that, is there anything in this number?

No. As in, it is because that people have not gone out. And especially when you sit at home, you don't require a post wash or you may not frankly address that well. So any post wash for that matter would have been a dip in numbers. That's the only thing. Otherwise, there is no such issues on that.

Okay. Okay. And if I just could put a last one. A lot of companies have mentioned about the SKU rationalization. So is there any plan in that respect? Have you been thinking about SKU rationalization in terms of those SKUs, which are not working probably you will discontinue or something like that?

No, there's nothing discontinuing any SKUs. I think it's more of prioritizing where, say, certain plants are operating at some limited capacity. So we just -- those which SKUs are more fast-moving, we would just prioritize them and plan accordingly. So that's how we have been managing our -- planning for our production.

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

I have a few questions. Very interesting remark, you said that the focus in rural is through the LUP. What kind of revenue contribution is from LUP, which is in the quarter gone by?

Sir, LUPs are on an overall brand, overall company level, it will be 25% to 30%.

Has this number was significantly different a year before?

Not significantly different, but yes, marginally, it is increasing as of now.

Okay. On the distribution front, you said that the focus is on rural. Sir, would you be able to quantify what kind of number of outlets, which has increased in terms of distribution touchpoint, or any particular number you have in mind that this number of rural distributors you are planning to put it in the system, maybe another next 2 to 3 quarters?

Shirish, no specific target. What we have, it is only -- it's a continuous journey. So it is not that we'll do 1 quarter and then we will stop. India is so large, and we still have to reach a large part of India. So it is only every now and then because right now, we know in urban, we will -- I mean salespeople cannot go in Bombay it's difficult, for local trains are not working, how will the sales people travel from A place to B place? So therefore, where the lockdown restrictions are lesser, which is in the rural market, is where we are focusing our time to add -- improving or strengthening our distribution at this point of time.

Okay. I also saw 1 of the interesting comments you mentioned is that you have put additional capacity for Dishwash in Pithampur. I was much more amazed seeing that why you've chosen MP as a location. Is that because it's [ safe in ] India? And what is the capacity you are building? And what are the products which you will manufacture there?

Ullas Kamath here. Sir, Pithampur is the property which we acquired from Tata Chemicals long time back. It's a huge property. So there is a sufficient land was available, and we have only put up the factory for manufacturing at this point in time for dishwash bars, because the product was going from the south or it was coming from the east. So [ we thought it would be nice to have central ] business India. So the CapEx was already done in the 31st [ last May ] 2020 only. And that's what we have launched on July 2. And again, the category, Dishwash category is going extremely well. And as explained by Sanjay, that category is highest growth for everybody during this lockdown period, because people are sitting at home and cooking at home and washing more utensils. So to that extent, it has become very handy for us to cater to the needs of Central and Northern India.

So you will manufacture only Maxo, or Pril also will get manufactured?

No, no, not Maxo. Exo dishwash bar, it is a dishwash. Maxo anyway is there in Pithampur. It is our old unit. It is already there in Pithampur. And now there's a new unit, which we have already put there.

Okay. Okay. This is a separate unit?

Separate unit in the same complex.

Got it. No, I visited the factory. So that's why I was remembering.

Absolutely, it is in front of that.

Sure. The next question is on CSD. Sir, will you be able to share what kind of CSD business we have got this quarter? And what is the number in base quarter?

We'll not be giving exact numbers on CSD. All what we can say is, yes, CSD has been around 8% to 10% of our overall business. And currently, we have seen a sharp decline there, and the reasons, I think all of us know. So we are hoping that this quarter, things will improve. And -- but we'll have to see how the overall everything pans out.

I was just trying to understand what kind of loss to the total revenue in this quarter. That's why I was worried that's it. So you may to say that this 8% to 10% business has not come in quarter 1?

No, no, it's not that the entire business is not coming. There has been a decline there. But we've been fortunate enough that the entire general trade has done well. And the overall business has posted a positive growth. And the same trend, we have seen it in July, and let's hope for the best.

Okay. Just last question on Maxo. You mentioned that quarter 1 was better. But if I understand, quarter 2 is the season for Maxo business. So is there any preemptive decisions we have taken in terms of extending credit? Or you're still in cash?

We are completely on cash and carry, and this season is definitely is extended by probably about 15 days or so. And the sudden jump in the usage of mosquito repellent is one of the reason is that people don't want to go to the hospital, whether it is for dengue or chikungunya or malaria or [ for any whatsoever ]. So that is a fear is partially people are using more mosquito repellent during this period. And also extended monsoon has helped and year-end [ net for ] also has helped for the people like not to get into the mosquito related diseases. That's why the consumption drastically has gone up. And I hope that it will continue from the other more couple of more weeks in a more serious way.

Yes, exactly. That's the point which I'm trying to ask, will ask Ullas, because most of the monsoon-related categories, whether it is other related categories [ or ] non-mosquito. So because the season is preponed somewhat about 2 to 3 weeks. And the other companies are facing supply chain shortage. So is that the case with Jyothy also?

No. We don't have any supply chain problems. We have [ in of our ] production facility. We do have in North and center and in the East and the South also. So we don't have any problems about it. But it's just -- and also second part of your question, is there any credit sales? No. All are [ same it is ] cash sales.

The next question is from the line of [ Sanket Diwani ] from -- an individual investor.

Actually I wanted to ask, do we have a segment-wise breakup in terms of geography? Like how much are we catering in the North region, South region, East and West in India?

We can't give that full details. But all I would say that like, we are extremely strong in East and I mean South and East and North and the West, but more or less the percentage is more or less the same. The details, we don't want to share.

Okay. So how does the company plan to grow in the other regions, like we know the company's very strong presence in South. So how is it looking to expand in the North region and West?

Most of the growth is coming from the North, I mean, non-South region. That is the way only we can grow geographically, and that is where the growth is coming from. It doesn't mean that we are not growing in South, but we are growing more in our non-South area.

Okay. And can I know about the free cash flow, which has been generated in this quarter?

Sanjay?

So at March year-end, we were at around INR 100 crores of -- sorry, INR 200 crores of debt on standalone balance sheet, now we are around INR 100 crores.

Okay. So is there any CapEx plan that will be coming here?

No major CapEx during 2021, and all the CapEx were already done in the last year. Some maintenance costs here and there, but no major capital expenditure in the current year.

The next question is from the line of Anand Shah from Axis Capital.

Just a couple of questions. Within the channel split, can you give us to how much did GT grow? And how much did modern trade decline?

So Anand, general trade has done well despite good [ bet of sales ] people, in spite of all the constraints, they have been able to reach to the retailers and did a phenomenal job. So general trade has done well. Modern trade marginally has been negative. And CLD, as we all know, has been more impacted. So to that extent, the numbers have added up to 4% top line growth.

Okay. And then in this modern trade, it is a specific player issue as to from the large guy who's struggling? Or is it across the board, you're seeing that moderate trade because of store restrictions or timing restrictions and social distancing all has impacted?

No, I think that it's across the board. Every player is having challenges. The challenge is more when the stores are larger stores, if we have some of the smaller format stores, there, it is much easier for them to operate. But if the malls -- if the stores are in malls and very large-format stores, so they have faced more challenges. So it's across the chains, we have seen the challenges, but I think everybody is now trying to bring back their business.

Okay. And just largely on HI, I mean, is it at all possible to give a monthly color? Because I would assume you would have lost INR 30 crores, INR 40 crore business in Q4, right, because we were not able to build pipeline because of the lockdown in March. And some sales definitely would have got carried forward. I mean to that extent, was it that April was disproportionately high because you saw pipeline filling and then May and June? I'm just trying to understand what [ you had ] sustainable growth here.

So Anand, what we can say, we're all going through unprecedented time. 2/3 of the quarter, we were mostly under lockdown, and which affected both the operations and the movement. So when we look at the numbers, obviously, May was better than April and June has been better than May. And when we look at our numbers from July, I think things have been more normalized. And we have seen over the last year, July to this year, the numbers have been in the positive zone.

Okay. So the numbers in July also are positive even within HI as well to that extent?

Overall.

Yes. And you have seen an uplift in general, you're saying, in growth rates in HI because as a category, it was struggling over the last 2, 3 years?

Yes. See, overall, when you're looking at our numbers, we again come back to the same thing, that our portfolio is more essential in hygiene portfolio. A lot of hard work has been done with the manufacturing sales [ take ] on the entire organization, which is helping us to deliver a positive growth in July. So it's more of a portfolio driven approach and the hard work which has gone behind that, that the month of July has been also [ been ] positive growth.

Yes. In addition to that, Anand, sir, in addition to that, monsoon has been good and that spurious agarbattis are not doing that well and the season is extended. And also because of the COVID fear, people are consuming more mosquito repellent. So that's the 4 major reasons why people are using a little more. And that's one of the reason is what I would say.

Ladies and gentlemen, due to time constraint, we take the last question from the line of [ Aman Jain ], an individual investor.

Congratulations on the excellent results in Q1. Just a couple of questions. One being, what are the kind of cost reduction measures that we have undertaken, because a lot of companies have taken cost [ mitigation ] measures?

We have taken across whatever is required, but definitely, we are not taking the salary cut and are absolutely are like, taking care of all the people in the company, no cost cutting there. But other than that, wherever, whatever possible, we have taken like cost cutting and it is what is shown in EBITDA [ comment ].

Okay. And these will be sustainable throughout the year as to, they would contribute positively to the EBITDA, is it?

Absolutely, absolutely because of the reason that, just to add what Sanjay has told, I was probably the few companies we called up on 24, 25th to all our vendors saying that whoever wanted -- small vendors who wanted the money -- we release the money for them to meet their salary payment or their wages or their payouts. And that helped us to get the supplies back when we opened the factory in April 10, 11 and started opening the factory. We were the first to get our raw material also. So to that extent, we have taken care of all our stakeholders. And at the same time, cost reduction because the raw materials cost is a little softer. And I think that we'll be able to maintain this kind of margin comfortably going forward also.

Okay. And that would also result in expansion in our working capital cycle? Or that is still okay?

That's still okay, under control now, absolutely no problem because cash flow has been fantastic.

Okay. Okay. And just one more question from my side. So I was just going through an old interview by the promoters. This was in 2017 or '18, where we had a desire or a vision to reach INR 5,000 crore turnover by -- in next 5 years. So that would be around FY '22, '23, while we've not been able to reach half way also. But what is the kind of growth part that we have for next 2, 3 years, if you could highlight something on that?

Right now, we just want to come out of this COVID problem, [ Aman ], because this is unprecedented and the kind of like the way how the countries have run into problem, right, from U.S. to -- from Europe to China also, everywhere the only thing which you talk about is COVID. And I know like most of the companies are talking about survival and then revival, at least in our case, we are showing a healthy top line in the gross margin and the EBITDA and healthy PAT also. To that extent, this year, we are trying to see how best we can manage our costs and how best we can build our top line. And definitely, the new generation you'll see is now the Managing Director and I'm sure that we'll have a great vision document from '21 to '26 for that next 5 years. There will be somewhat will be [ tilt ] towards that, but wish is that we need to grow more than the industry growth. That's [ why sure ], which we are showing now.

Okay. Okay. And just 1 last thing. We had exchange release in regards to release of pledge of shares. So currently, I think there is 0 pledge. And I'm assuming we -- the promoters wouldn't pledge again the share? Or is there a plan to repledge and take a fresh loan?

Absolutely no more pledge, that is what I can say as a part of the management group, but it is the promoters' decision. The fact that they have closed the loan means that they don't want to borrow again. But end of the day, there's no condition that one cannot borrow money against the share. But as a good prudence, we have closed [ our shares ] completely and no intention of -- in the loan again against shares.

I now hand the conference over to Mr. Ullas Kamath for closing comments.

Thank you very much, Manoj and his team who wonderfully organized this analyst call. Thank you very much. And all the friends and on this community, if you have any other follow-up questions, you can always contact Sanjay, he is available 24/7. Thank you very much.

Thank you ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.