Jyothy Labs Limited (532926) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Jyothy Laboratories Q4 FY '21 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, Head of Research from ICICI Securities Limited. Thank you, and over to you, sir.

Hi, everyone. Good morning, good afternoon, good evening, depending on the part of the world you are joining from. Welcome to the Jyothy Labs 4Q FY '21 Results Conference Call. At ISEC, it's our privilege to host the management of the company represented by Ms. M.R. Jyothy, Managing Director; Mr. Ullas Kamath, Joint Managing Director; and Mr. Sanjay Agarwal, Chief Financial Officer. At ISEC, the research view on Jyothy is a bullish stands. We have a buyer rating with a target price of INR 190, which is approximately 30% upside from the current price. And we have been long-standing believers of the Jyothy Labs value creation story. Over to the management for comments and Q&A after that. Over to you, sir.

Thank you, Manoj. Friends, this is Sanjay Agarwal. We are happy to report our healthy financial performance of the company for quarter 4 FY '21. Before we begin, as you would have seen our opening slide, we want to thank all our team members who in spite of fear of COVID-19 have been maintaining all necessary safety protocols and have gone beyond their call of duty to make sure that the company is able to service its consumers 24/7. I would request our Managing Director, M.R. Jyothy, to further brief on this.

Yes. Thanks, Sanjay, and good evening, all our analyst friends. This is only for your info. The thing that which we want to bring to your attention is, one is, it's sad that the country is undergoing the second phase of COVID really bad. It's a bad scenario out there. And it's a difficult time for all of us. And in the midst of it, your company also is -- I mean, we are also facing the same thing. What we are doing on our behalf -- what we are doing is we are keeping track of each one of our people. For us, our people comes first. What we are trying to do is while doing the business, we are seeing or taking care of each one of them. They have been provided with N95 masks. They're being monitored on a daily basis. We have help line numbers for support. We have in-house doctor consultation. Personal calls to all impacted employees, we -- our HR monitors and are on calls with them. We have also extended our Mediclaim to all the off rolls and at the CSA and distributor salesmen as well. This is all to ensure that none of us have to lose the precious life. We are doing all that we can to see that all of them are safe, including their families. I'm on a call with them on a weekly basis just to ensure that we are with them and to assure them that in this time of difficulty we are with each one of them. So with that, it's only as an update, it just only as a thing that I wanted to ensure that from our side, we are with our people. Yes. And I hope that we all will be able to come out of this very soon, and God give the strength to each one of us. Yes. With that, I hand over this to Sanjay to take forward the presentation.

Thank you, Jyothy. Before we talk about specific Q4 FY '21 numbers, we'll just give a perspective on a market scenario. I'm on Slide 6, if anyone of you are going through our presentation. So we are reporting these numbers for Q4 FY '21 when India was still in unlock phase. As you all know, Q4 had similar trends of Q3 of FY '21, wherein we were witnessing healthy consumer demand across Home & Personal Care. There was a good rural demand, and urban consumption trends were also good post the normalization of activities, and almost all trade channels were operating back to pre-COVID levels, including modern trade and CSD channels, which was quite encouraging for the team. However, as we speak, we are in Q1 of FY '22 and the rise of COVID cases are now increasing, which is disrupting the supply chain and restricting mobility of sales team. And we are -- again, neighborhood stores are back in spotlight. One of the interesting phenomenas we are seeing in the neighborhood grocery stores, which have led to the growth of FMCG stores is these merchants have reconfigured their business model, and the whole momentum has shifted to digital. And that's where we are also focusing and working with these merchants to adoption of digital technology. Also, as expected, online channel is seeing a very good traction. The next slide, we just wanted to talk about how we have strengthened our consumer-centric approach, which has accelerated our growth plans under the leadership of our new Managing Director, M.R. Jyothy. Our 5 strategic levers are as follows: Distribution. We are driving products to last mile. We have hired some senior team in sales, in trade marketing, in R&D. This all is increasing or improving the productivity of the salespeople, and we are using digitization a lot in that, focusing on the TG, taking brands where the consumers are following cluster approach to accelerate growth. And the resultant is that our pipeline stock has come down to 8 to 10 days now. So that's the strength we are building in distribution. The second is on the brand investment. We're increasing media spend, as you would have seen in the last 2, 3 quarters and going forward. So we are investing in the business and we are listening to consumers. And hence, in the next slide, we'll talk about our market share. Our market shares are gaining. So there is a full commitment to strengthen our brands. So that's the second strategic lever on which we had worked for the last 12 months and which is what is going to lay the path for our growth. The third is on the digital technology. So there is an adoption of digitization across the organization, including demand planning. And it's quite noteworthy to know that during COVID period, we implemented CRS, Continuous Replenishment System, across all India. And also, technology is changing the way we are thinking about our go-to-market strategy as well. So therefore, technology and digitization is the backbone on which we are working. The fourth is, innovation. As you all know, we are an Indian company, and our focus always has been on the core. So focus is on the core, but our thirst is on innovation. And you would have seen a number of innovations coming from different categories to strengthen our existing brands, and the objective is to drive healthy growth across categories. And the fifth and not the least, is to focus on sustainability. Today, consumers are buying more sustainable products, and that is one of the key drivers in all our decision-making. So with all these 5 strategic levers, I would request you to the next slide, which is the most important slide, if you ask me in the whole presentation is on the results is how has the journey been for the last 12 months? Because that will set the pace for us going forward. And if you see the sales growth, Q1, we were at 5%; Q2, we were at 8%; Q3, we were at 15%; and Q4, we have been on 26%, 27%. This all ended or adds up to a year growth of 11.6%. And this is in spite of -- as we have been talking in all our calls, in spite of Post Wash Fabric Care is, which is broadly 12% to 15% of our business, which has remained impacted in the year. If we look at ex Post Wash Fabric Care, our growth has been 18%. So very healthy growth we have managed in spite of all the challenges, and that is backed by our essential and hygiene portfolio, which has been the backbone for the entire growth. If you look at it for the last 12 months, our EBITDA growth has been 25.3%. Happy to confirm that our EBITDA margin guidance, which we had given in the beginning of the year, in spite of all the challenges where we said 15% to 16%, we have delivered 16.5%. Our PAT growth is at 17.3%. That's on the P&L side of it. On the balance sheet side of it, you would've glanced through our numbers. We are a net debt-free company. And the cash flow -- and this is the first time our consolidated balance sheet is on a net debt-free basis. And if we look at our cash flow from operations to EBITDA stands at 125%, a very healthy cash flow conversion what we have done, and I'll talk about some of the balance sheet numbers in the subsequent slides. The other thing is while we run our business, a strong discipline we had kept on driving efficiencies and maintaining business hygiene, which has held us very well, which is no variance in primary and secondary sales, 100% cash sales. And the resultant has been that our pipeline stock with distributors which used to be 20, 25 days a year back, has come down to 8, 10 days. And this has held -- I mean, we have been able to do it with the help of a lot of measures, including the CRS, which I just spoke. Now this definitely has impacted our revenue for this quarter by 8% to 10%, but it has set the course for life. And most importantly, our ROI for our distributors has improved significantly, which will definitely help us in doing business with them. On the second part of it, which is in the proof of the pudding, if you look at across all our categories and brands, we have done exceptionally well. There's been a consistent market share gains across all the brands in which -- for all our brands, whether it's Exo Bar, market share gain of 120 bps in one calendar year; Pril, 130 bps, Maxo Coil, 170 bps; Maxo - LV, 40 bps; Ujala Fabric Whitener, 60 bps; Ujala IDD, 100 bps. So all in all, what we believe what we are doing is, it's like we are running and we are building something together. And we really look forward for a higher growth. So this is a good summary to see where we are heading to and what we have done in spite of all the challenges. Moving on to the next slide on our results for the quarter 4. Revenue is up by 26%. FMCG sale is up by 27.3%. Gross margins have remained flat. A&P spend, there is an increase by 7.9%. Our operating EBITDA at 14.3% to INR 70.9 crores. Our PBT, before exceptional item is INR 56.3 crores. Just to talk about this exceptional item. This exceptional item is we had set up our manufacturing plants in Guwahati and Jammu, way back in 2000, on the premise that 100% of the excise duty paid through PLA would be refunded. And that's how most of the -- many, many companies set up their plants out there. However in 2008, there was a change in notification by the government -- by the revenue department, in which it was -- the 100% excise duty benefit was restricted to certain specified percentages, which was litigated by the industry, and we were also part of that. And we won by the government of -- sorry, High Court of Guwahati and Jammu. And the matter was then pending in Supreme Court, which the order has come against the industry. And therefore, we had to write-off this INR 23.5 crores. It's a noncash item. This was what we had accrued in our books in those years and which we had to write-off as a noncash and onetime item. PAT for the quarter is at INR 27.3 crores, increased by 2.6%. Without the exceptional loss, our PAT would have been in the range of INR 50 crores. Similarly, for the full year, our revenue is up by 11.6%, gross margin at flattish 47.1%. Operating EBITDA at 16.5% generated INR 314.5 crores. PAT had INR 190 crores, after exceptional loss of INR 23 crores. And the most important thing is net debt free. The net cash balance on 31st of March on a consolidated basis is at INR 76.89 crores. And with the healthy balance sheet of net debt-free and focusing a lot on execution, there is a healthy cash flow generation and both today has -- subject to AGM approval, has proposed a dividend of INR 4 per share which used to -- which was INR 3 for the last year. And the INR 4 works out to a payout ratio of 75%. So a very healthy dividend we have proposed for our shareholders. The next slide is just a snapshot of our financial performance and key financial ratios. Overall, very good all around performance with healthy margins. With respect to the category wise revenues, all categories are performing well. And as we have spoken in the past, except Post Wash Fabric Care, which has yet to completely normalize. And Fabric Care has grown by 15.7%; Dishwash 33.2%; HI, 35.8%; Personal Care, 38.4%. Overall, FMCG growth has been at 27.3%. Similarly, for the full year, FMCG business has grown by 13.1%. Next slide is just a quick understanding of our EBITDA margin from the last year to this year. And gross margin flat. Employee cost, A&P and other expenses have reduced as a percentage of sale. And therefore, for the quarter, EBITDA margin is at 14.3%, and for the full year, it's at 16.5%. Moving on to key balance sheet data points. The key 2 things to look out our working capital days. There is a significant improvement in our working capital days from last 2 years of 23 and 35 days to 15 days. And that has happened with all the execution points which we set. And this is a very healthy number to continue, and we'll target to -- aim to keep -- be at this number or try to improve going forward. And the net debt ratio is minus 0.05 being debt-free cum status. Moving on to specific brand performances and initiatives. Our category-wise business revenue broadly has remained same over the last 2, 3 years where Fabric Care is 36%; Dishwash, 1/3 of the company, 34%; HI and Personal Care, 18% and 10%, respectively. In terms of Fabric Care, which is 36% of our business, Main Wash has started doing well, or doing better, since modern trade and CSD business came back to normal in Q4, while Post Wash is still constrained as offices and schools have yet to resume. Ujala Fabric Whitener, where we are the market leader. We continue to increase our retail visibility. Our market share gains, again, here have been very healthy. If you look at calendar year '17, we used to be at 80%. Now we are at 82.6%. The reason I'm saying here is because in spite of owning the category, we have been focusing on how we can improve our more penetration in it. So we have been doing a lot of BTL activities, which is wall paintings, van branding, to showcase the superiority of Ujala Supreme over low-cost blues. So that's the growth what we have seen in Ujala Supreme. Similarly for Crisp & Shine, it's a specialty Post Wash product. Brand is doing -- on a quarter-on-quarter basis, it has improved, but still to come back to pre-COVID levels, and we hope things normalize because the whole Post Wash Fabric Care is important from a margin profile as well. It has much higher margins than our overall portfolio. So once both Fabric Care -- sorry, Fabric Whitener and Crisp & Shine sales are back to normal, it will aid in our margins as well. Next slide is on our Ujala IDD, where we are in the top position, in the mid-priced detergent powder market in Kerala. Here too, our market share has increased from 17% which was there in Calendar '17 to 20.7%. So very good increase in market share, and we continue to have TV presence with Manju Warrier in Kerala and Tamil Nadu, where currently this brand is operating. On Henko, the growth is back with modern trade and CSD channels and urban centers were almost normalized. And I mean there is -- in this quarter, yes, CSD and modern trade, we still have to see how much impact they're going to have. But as of now, there has been some -- I mean the issues are there, but we'll have to see how the lockdown finally, if it extends, then we'll have some issue. Otherwise, things are broadly going along as of now. For Dishwash, we had a growth of 33%. It accounts for 34% of our business. The double-digit growth is driven by both Pril and Exo, where we are seeing higher penetration and market share gains. And also, we spoke in the past as well, the growth is backed by more in-house consumption, emphasis on hygiene and also our strong distribution focus across all channels. And we have been focusing on smaller SKUs, which have gained a lot of acceptance and selling pretty strong in the rural markets. And seeing the momentum in both Exo and Pril, we have been increasing our marketing efforts. And campaigns like integrated campaigns, thrust on digital, improving brand visibility across retail outlets, those have been the increased marketing efforts we are taking to reach out to consumers. Moving on to the HI. We continue to deliver healthy growth. Once again, here, both in Maxo Coil and Liquid Vaporiser, we have gained market share. And this is a heavily competitive space. And in that, if we have gained market share, really something our execution has been done well. The seasonal sales have been satisfactory. And with -- again, consumers being driven more towards preventive measures towards health, and our focus continues to remain on Liquid Vaporisers. This quarter, we also launched fit all machine liquid vaporiser bottle, which has further enhanced the brand value for Maxo. And it has its unique offering. So again, we are quite bullish with launch of this new refill launch. Last category for us is Personal Care, which is 9% of our total business. Personal Care for us is primarily Margo portfolio with soap, hand wash, face wash, sanitizer. And we have seen good demand backed by our focused distribution and also consumers' preference for natural-based products. So that is something which has driven personal care growth. And coming seasons, we see a good growth coming in that. One of the last slides now to talk about the way forward. We are driving towards higher volume led growth. We are shifting gears and we are preparing for the future. And how we are preparing for the future, we are having a sharp management focus on brand investments, which we already spoke, use of technology and strengthening our distribution infrastructure, trying different ways of reaching to the consumer to the last point. So those have been the fulcrum on which we are driving all our growth. Also, since there is a sequential inflation in commodity cost we just want to highlight that from our perspective, given we have a diversified portfolio, we will balance it with strategic price increases, drive towards higher-margin product sales from our portfolio, cost optimization initiatives and balance with trade scheme to protect our margins. So that would be our strategy, and that is where we are currently going with. With that, friends, I finish my presentation. We are happy to answer any questions or clarifications you may need. Thank you.

[Operator Instructions] The first question is from the line of Manoj Menon from ICICI Securities.

I had just a couple of clarifications, if I may. The first, Sanjay, while you commented about the cash generation improvement, essentially significant improvement in the multiple line items in the balance sheet. And also, I heard you making one small statement about the endeavor to sustain it. If you could just elaborate on some of the projects, which you would have worked on at the corporate level and on, let's say, what we would have done on some of these line items, which resulted in these outcomes? And that's one. The second is has these outcomes been higher than expected, lower than expected? So what I'm simply trying to understand is 2 things. One, the efforts which has gone into -- through some examples which you have demonstrated? And point #2, the sustainability of it, which is my job to extrapolate. So that's question #1.

Manoj, the first question you said, you were asking on line items of balance sheet or the P&L?

Balance sheet. My question was referring to only to the working capital improvement, which has resulted in the cash generation improvement.

Right, right. So the most important thing is, first of all, we have made our entire sales on a cash basis. And we have been very, very clear on keeping the primary sales and secondary sales intact and no push in the market on that perspective, kept our inventory levels low and very good [indiscernible] management. So I think very basic things, what we have done, but we haven't done any excessive just to do numbers maths at any point of time. So that's how the working capital has been managed, and we think it is a sustainable working capital days what we will be able to do.

Okay. So is it fair to assume that the current working capital activity, the numbers what we have is this something which is likely to hold for the next 3 years or so? Is that a fair assumption?

Yes, Manoj, that's right. Because once we have taken the decision of doing a CRS type of thing with entire secondary is the -- primary is backed by secondary. And the entire business is on cash sales and with -- once the process has been set, I don't think so we will be changing it. And the 15 days is a fair benchmark to have for 3 years and going forward.

Understood. The second one, I'm sorry if I missed that comment. If -- just from a clarification point of view, I heard about CRS in detail. But did you quantify the impact of CRS, which may have impacted your reported revenues in the last 3 months? Is there a quantification there?

So Manoj, it will be around INR 45 crores to INR 50 crores, which should be around 8% to 10% of the top line for the quarter.

8% to 10%. Okay. So just to -- okay, understood. Okay. So basically, my 2-year CAGR is, et cetera, from negative should look like a mid- single-digit number.

Yes.

Understood, if I do that -- and understood. Okay, on an underlying basis. Got it. And -- okay. The last question here is, I heard some comments about market share gains. Just only wanted to understand only one perspective from all 3 of you was, how do you look at the source of the share gains exactly? And what I'm just trying to understand is, is it really from more formalization of categories? Is it coming from more activity driven, innovation driven? So what are the source of share gains so that again, it's up to us kind of as an analyst kind of what is the forecastability of these share gains? The stickiness of the share gains, actually, that's what I'm trying to understand.

Yes. So Manoj, on the market share, it would have definitely come from the competition and some bit being in the local players that are there. And these are more -- state-wise, it would differ. But what you see is on a national level. So individual states, there would be local players and competition and national players as well. So some gains from both ends have happened. As you would have seen our last year, I mean, the performance that has been there has been on small unit packs. And we have tried to be there and take advantage of every opportunity that was given to us. One is through increased reach by distribution and also backed by activities and BTL and being there. So rural for us has been a great driver last year. And we have been able to be present in the necessary SKUs at all levels. And that was the main reason behind the market share gains. So some states, we would see more. And so on an average, yes, at a national level, that's how we have gained.

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

My first question is on the efforts you've taken on distribution. So would you be able to just give me some data on that in terms of your direct reach as well as total reach for the end of this year? And how it compares to 12 months ago and 24 months ago?

Right, Percy. Percy, I think, one, we are -- we have added on the stockists, which is basically on the sub-stockists side of it. So we have added around 500-plus sub-stockists to focus more on the rural side of it. And because that is where long-term growth is, and we thought this is the right time to invest there with the help of technology. So one, we have added there. Second, on the distribution, which is there in the urban areas, the point is to aid the salesmen with a lot of data, and we do a lot of back-end analytics to assist them in doing the right beat. How do we add or make their cause more productive? So I think that has been our more focus in the urban side of it. And in the rural also to look at how we can increase our debt through van operations. So our focus more was -- is on adding some stockists, using digital van operations. As a number, if we have -- I mean, as per AC Nielsen, we are reaching at around 8 lakh to 9 lakh shops on a direct basis, and our Ujala Fabric Whitener is available in around 3 million outlets. So one, we are not going madly with just increasing the number of outlets, we have said in the past as well. But the objective is to how we can make -- how we can sell more lines per call? How we can use more productive calls? And in the current environment, even aid the salespeople when they cannot go out in lockdown, to do even telecalling and make sure that their daily sales numbers are maintained.

Right, sir. Secondly, just wanted to understand -- I understand that there are a couple of segments which are under pressure, mainly of Post Wash and some part of the year, even your detergents. But I mean, including everything, your entire portfolio, the 2-year CAGR for FY '21 full year is about 2.5%. Now with the COVID also being there, second wave, maybe, of course, the kind of restrictions are not there in the second wave as much as they were in the first wave but still, there is some amount of consumer behavior, which will get affected in Post Wash and Detergents. So with this kind of -- 2.5% kind of growth that we have currently for the full year, and the situation on the ground, environmental factors, et cetera, are not changing very drastically. How would you look at your sales growth going into the future? I'm not asking for a numeric guidance but any kind of qualitative commentary you can make on the same will help.

Yes. So Percy, for us, on the 2 years, CAGR, the way you looked at it, you also have to look at it the way we have brought down the -- distributor pipelines dropped from 20 to 25 days to 10 -- 8 to 10 days. So that has also factored in maybe 3% to 4% of our yearly number. Second, because of the Post Wash Fabric Care not being there, as I already said, if we look at ex Post Wash Fabric Care, the number is 18% for the full year, which as we move along, and hopefully, the lockdowns, current lockdowns are not that stringent like what we had seen last time. And hopefully, in the next couple of weeks, which are very critical, we'll see where the country is heading towards. But if things come back to normal, hopefully, then all that growth of -- which we have not seen of Post Wash Fabric Care will come back. Also, through the last year, when we're trying to do a 2-year CAGR, CSD and modern trade were not there for most part of the year. So that has also impacted. And so I think these are a few things which we need to keep it in mind when we are doing a 2-year CAGR, which we believe once things become normal, we'll be able to have a much higher growth. The key strength what we got or what we have today is our essentials portfolio, which is helping us and the distribution and the brand innovation, which we are doing, which is helping us gain our market share. So I think those are the most important thing, the way when we look at our business profile. How we look at, going forward -- so one, we are -- I mean, we spoke about what our plans are. And we are extremely confident of those plans, which is evident from that we are gaining market share. But going forward, yes, we will be -- we'll be competitive. And we'll be growing higher than the category growth, that's quite there. And all our efforts will be there to get to double-digit volume growth in the medium-term going forward.

Right. And my last question is, thanks for giving the market share for all the brands. Just one brand is missing, which is Henko, if you can give the market shares and the movement there also, it would help.

So Henko, we have not been subscribing our market share there. We have -- I mean, it's a very, very large category. Detergent is INR 20,000 crore, large category, and we are a small numbers out there. So we don't track from the AC Nielsen perspective. But we know our internal growth has been good, both in modern trade and CSD and the urban centers.

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

I have 2 questions. If I look at sales growth for '21, except for Fabric Care, all other segments have grown. So just if you could give some color how much of the sales growth, which we have seen as structural habit change. And on the market share, Jyothy did comment, if you could give some more clarity, which category has further tailwinds to enhance our market share? That was the first question. And if you could quantify the NPD contribution for FY '20. These were the 2 questions.

Yes. So yes, for us last year, Fabric Care was the one -- I mean, which didn't do that well with the kind of environment that was there at that point in time. We also have a large presence in modern trade from detergents. I mean from a detergent's perspective as well. Post Wash is the one that actually suffered. One is because of no activity of people going out, thereby reducing the usage of Post Wash as such. So what we are expecting and we are seeing is once things come back to normal, which is pre-COVID levels, once activities resume, once offices and schools open, all of these would be back on track, very well back on track. One is the brand strength that Ujala has and both the post washes are under Ujala. One is for Fabric Whitening, and one is a unique, completely unique proposition of giving crisp and form and shape to your clothes. So which is completely dependent on an outdoor activity, which is you need to be very active. And hence, the usage of such things would definitely change once people are -- the activities resume. So that is, for sure, [ short ] is going to come back. The rest is, if you would have seen the insect repellent's portfolio for us has done well, mainly from -- the thing that people want to prevent -- to take a preventive approach. So which in a way has helped us. One is we could get a lot of trials that has happened. So the positive way to see for me is last year helped us if I were to say, more of trials have happened. We have had a large number of smaller SKUs gaining momentum, which also means that many, many households have tried our products. And we are very sure with the kind of quality and the brand presence and the investments that we are doing on each of these brands backed by innovation, it will -- the efforts are to continue. And even if you are able to retain at least 50% of the users who are -- who have tried you even once, that itself is a very big gain for us. So that's how we see the future. It's only that the Fabric Care and the Post Wash, which have got badly hit last time. But in the fourth quarter, as you would have seen, things for us had started looking up. Now with whatever the way things are, the moment, things are back on track, all of this will be a short kind of gain for us. We've been investing behind innovation in each existing category as well. And that also should yield us a big gain. We have been nicely positioned and differentiated with competition even in -- if you see Exo Bar, we are the only dishwash bar in the country to get a coronavirus-kill claim; and Maxo Genius, where we fit all machines. It's a very, very important when you see from a consumer lens. So these are the innovations even within the existing category that we were able to bring a kind of change a kind of difference that will make in consumers' life. So this happens on an ongoing basis. Our job is to see that we make our consumers' life better by providing them convenience and I think that these efforts will definitely help us gain market share and thereby growth. NPD for now is small. If you would have seen it is only last few quarters that we launched it. As of now, it's only 3% of the sales. [Foreign Language]. It will take some time to go, while we are investing on the brands, some of them have been regional and very specific to certain states. We will scale up as and when we see the response in these markets to take it to a national level or not. So those are the kind of things, the initiatives that we have taken.

[indiscernible] talk about and recruiting new users. So could be more expertise and more rural driven focus is targeting to build sustainable volume growth in some of the products where we've seen market share gains or not necessarily?

Sir, I couldn't get your question. You were not clear.

I was trying to understand, some of the market share gains and recent SKUs which you've launched or the LUPs, are these more targeted towards rural of India or not necessary?

We have seen traction more in the rural but definitely like you said not necessary, we have seen a welcome this thing at both the ends, but more specific to rural. And like how Sanjay said, that our distribution, our focus also has been on driving distribution. So all of this has helped us. So it's -- every element of it, which has helped us gain growth in these brands.

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

I just had 3 questions. Firstly, was on the price increases. So I just wanted to get a sense of what's the level of price increases we expect over the next 6 to 12 months in order to kind of pass on some of this inflationary pressure? How much you've already taken? How much you expect going forward?

So Harit, as you know, the RM price basket has been quite volatile in the last 6, 9 months. So we are calibrating all our approach in that, and we've taken -- if you're looking for a number, say, 2% to 3% of our top line is, today, we've taken selective price increases in few brands and done reduction in trade schemes, so which effectively takes care of 50% to 60% of the price rise, which has happened. Going forward, also, we are we are monitoring it very closely and seeing how we can avoid taking a price hike. But if that is the last option, but we will take price hike as and when if it is the last option for us to do to protect our margins.

Got it. Got it. The second question is on the innovation side. So where you've spoken about innovation quite in detail. I just wanted to get your sense on just looking forward into fiscal year '22, is the focus going to be around these 5 new innovations which you have done? Or should we look at more additions to this over the next 12 months?

So whatever we have launched so far, we will focus on growing them. So these are relatively new in the market. So our focus is first to also see to it that these grow. While I say that we would see some few innovations also coming up this year. We'll be seeing some more innovations coming, but broadly, we would want to focus on what we have already launched in the market.

Got it. And how many of these 5 would be national now? And how many are still regional? Are they all regional? Or how many are national launch now?

Yes. So if you see the things done on Exo Dishwash bar, the claim that we have, what we have is a national one, the Maxo Genius is a national one. Few of the others are more regional, more south specific. One, mainly because south as a market, are pro-innovations, they tend to access things a little more. And you get to test these things out first there before you go national. So that's the approach we have taken. And depending on how we get the feedback, those will be then taken up on a different scale.

Understood. Understood. Last question was just a data point. I just wanted to get just the number on what's the LV share now in total Maxo? And how has that changed in the last 12 months?

So it's from 8.4%, it has gone to 8.8%.

No, I just wanted to know the mix -- sales mix of -- as a percentage of sales, how much is LV for you now? And how it has changed over the last one year?

Yes. So LV, which used to be Coil and LV. Coil used to be 70% and LV was 30%. Now it is going towards -- LV is around 35% to 40% of our total portfolio.

So 30%, Sanjay, it was about a year back?

Yes, a year back, and now we are at around 35% to 38% as we speak.

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

First question pertains to distribution. You have mentioned that at one point that hiring of senior team. So if you can share some details on hiring for which position and from where people have joined in the organization?

Yes. So we have hired on a national level, which is the National Sales Manager. We have launched -- we have appointed 1.5 years back, and he comes from Britannia. And we have also not only on that level, we have taken higher people at across different levels as well within the sales team.

Okay. So others are actually recent hiring in this year?

Sales -- no, most of them -- we also had somebody in R&D. All of these hires were done about a year or 2 back.

Sure, sure. Second question pertains to -- you also mentioned about digital initiatives. So what exactly -- and you used the word new age tech and distribution. So what does it entail? And how should -- as an analyst I should expect benefit of the same in coming quarters or years? Will it show up in better earning -- growth momentum in terms of sales or better efficiency in margins or better terms of trade?

Yes. So it will lead to both the things. One, it will lead to better working capital management at the company level because since if we have appointed a CRS system, it helps me to plan my demand pretty well, right from our factories to the retailer. It helps me in planning all my SKUs, which, otherwise, in a normal scenario, it's more of my estimate, but now it is more system driven estimate of which SKUs are going in which part of India at what point of time. So it helps in demand planning. It helps in my inventory management. It helps in my retail distribution because once we have the SFA app, once we have the app with the retailers, I will be able to increase my sales. I will be able to effectively use my 2,500 salespeople. And all in all, it makes me more agile and it makes me more confident of the business like today in a lockdown situation, we know that not 100% of the SKUs we can push because there is a limited bandwidth. Salespeople are going in those 4 hours, and they need to cover up their 50, 60 shops. So they know -- we know which are those 80% of the SKUs, which will make up to their numbers, right? That is at the retail distribution. Similarly, at the factory level, when we know the demand planning is there, very clear, we know certain packs, which require more physical work. So then we will be discontinuing those SKUs for now and making sure that the factories are operating in whatever limited time being able to do that. So technology just helps us in getting us from end-to-end in a much efficient manner and it saves money at every leg.

Sure. So then in that regard we are seeing a lot of companies, FMCG companies implementing CRS this year. And again, coincidently, everybody somehow chose -- most of them chose fourth quarter only. So any insight if you can share any particular advantage of the system post-COVID? Or was it part of the plan and it got pushed because of COVID last year?

See, I think all of us, while we endeavored that actually, this is that time of the year when we generally go to Trident and do our analyst meet, because at every March end, we go into that, but this is a time when we are doing these digital calls. So we all learned or the entire India and all of us personally accelerated at technology or digitization story in the last 12 months when we all know -- so because we are going to be manually, people are not going to be at one place, and it is difficult. So CRS and all are good things, which we -- see, we started a journey with distributor, this digitization, which happened 2 years back. Year before, we did SFA, which is the sales force automation. So distributors were done, salesforce was done. This was the year when CRS was to be done. And it has just coincided that we started off in April, May, June. And now by end of the year, we are almost completed. And it will keep refining as we go along because it will show us a lot of data. So there is -- I think it's just a coincidence that everybody has to get themselves more sharper in delivery and execution.

Sure. And from your presentation, it seems that all the pillars that we have identified for growth seems to be in place, and we are working on all those pillars now. So should we expect sustainable acceleration in growth rate for the company? Or in other words, what are we preparing organization for? And in terms of it should be sustainable double-digit growth from here? Or does very volatile environment to guide on that?

See, our efforts, definitely, I would say are to grow at double-digit numbers. While I say that I know what is the current environment, but the efforts are there. The plan is in place. We also have able people with us. So I would only say that efforts from every end at every end, be it technology, be it investment, be it people, business plan, everything is there in place. And hopefully, that will be done.

Okay. And lastly on, if I may. The dividend policy is actually is very favorable for minority shareholders. But in light of our not-so-in-past guidance that we want to -- or we are at least interested in buying some regional brands or regional champions. So in light of that ambition, how should we see this dividend policy sustenance? Will it be able to accommodate both the ambitions of ours?

Yes. So see, we always had a healthy dividend policy wherein 60% to 70% of our net profit has been given. And this time also, since this is the first time when we have become debt-free, and our balance sheet is ready to reward all the shareholders minority and everybody. So therefore, the Board thought it wise to have INR 4 per share as a dividend, and which is a good thing. Now going forward, this may not be the best time to do any acquisition. At least for now when things are in lockdown situation. But we are open for any regional M&A or any national brand, which comes in, wherein we can find to add value in those brands. So something we think we can add value, we'll definitely look at that. And the second thing is, obviously, we will buy in the categories in which we are present and we will not be extending ourselves into any noncore categories for us for now. And so we are open for that. But obviously, there is nothing which is there in the immediate time line for us. Current business is to grow organically. Based on all the core pillars on which we are currently working.

So at least for near future, dividend policy should be seen as for this year, right?

Yes. That's right.

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

Sir, my question is with regards to the RM inflation that you are seeing and especially in the LABSA prices, like we have been hearing that LABSA prices have gone up around 50%-odd in the last one month or so. In that context, I mean, how are you looking at the margins trajectory going ahead for this year? And if that is the case, would that in any way impact our investments of advertising?

Sorry to interrupt Mr. Jogani. There is a slight disturbance coming from your line. Request you to mute your line while the management answers your question.

Sure, Gaurav. So Gaurav, you're right, LABSA prices have been going up. And we are monitoring it very closely. And we have taken selective price increases in detergents in -- even the palm oil prices have been going up in soaps. So this is something been so volatile, we are ready to take price increases we have taken, we have reduced some trade schemes and which will take care part of it. Other part of it, it may impact the margins. But currently, our objective with our portfolio mix, we are aiming to protect the margin over medium term.

Sure, sir. So would you like to give any margin guidance in that sense, like how we are doing in the last year?

Well, we would definitely like to do that. But in the current context, I think it will be too much of crystal gazing and predicting it. Currently, when we are sitting in this environment, it will be a little difficult. But as I said, we will take all our efforts to protect the margins. I mean, subject to -- if RM price basket moves very, very irrationally from here on, obviously, we will be taking price hikes and to protect that, but it lot depends on how the overall situation looks like.

Sure. And just 2 booking questions from my end. One is with respect to what has been the volume growth for this quarter? And second is, the tax rate that we can see for the next 2 years.

Yes. So volume growth is around 24% for the full year -- for the quarter. And the tax rate is at around 18%.

For the next 2 years, 18%?

Yes, that's right.

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

I have 3 questions. The first question, just in relation to the previous participant. What is the weighted inflation you are seeing at this point of time? You did say that you have taken about 2%, 3% price increase and you're cutting down promotions. But I would be more keen to, if you can specify, what is the record inflation basket you are seeing?

So Shirish, weighted inflation will be around 5% to 6% of our RM basket.

Okay. Okay. Okay. My next question is that the quarter which has gone by, as some participants has said, there are a lot of digital focus, which has happened. And of course, meaningfully, you have also taken some actions. I'm more keen, at the end, the -- if I go back the industry commentary. I think everybody is targeting how the end consumer and the mediation, either through the e-commerce channel or through the Kirana, the replenishment. I just wanted to hear from Ullas sir, having a large sales experience, is this trend which the industry is trying to follow? Does it meaningfully say that we are now [Audio Gap]

Mr. Kundu?

Yes, I was not able to hear.

Sir, you may go ahead with your questions. Sir, you are on the question queue.

Yes. It was -- it went blank, sorry. Yes. So my first question was on, if I have -- you have -- this quarter, you're implementing the CRS system and there has been [ no ] correction in inventory. Which category has seen the maximum inventories? I think at least -- I mean, sort of my belief is that there would be dishwasher which would have got impacted because the washing across all quarters was doing very well. This quarter also has done well, but not at the same rate at which this quarter, it had done well. So yes, that's the first question.

So the gap will be in Maxo as a HI category. And CRS is not only in this quarter, it has been in existence. And the major -- all the lines or all the parameters were triggered off as in the last -- by end of this quarter. But Maxo was the largest contributor, if you say, in this quarter.

Okay. And how has the trend been in Dishwash now? I mean, have you seen a pickup -- a strong pickup because that's come back and probably more intensified. So have you seen something like that or expect to see?

So for us, Dishwash has been doing well since last year and it's still continuing to do well. It has also to do with people staying at home and the lockdowns being imposed, but the trend is showing an upward trend so far.

Okay. And I know this same question was asked last quarter as well. But at what level would household insecticide as a business for you start to see [indiscernible] which the investments in ad spend is far higher. There are -- losses are there. But there would be some targeted sales in mind or which would applicable you would see some momentum in profitability? Or there could be some cut down in ad spends, something over those lines?

Yes. So sir, as we have been saying in the past that our saliency has been more on coils, and we are moving towards liquid with our machine and now with the new refill launch. We were looking for profitability. And if you see in this quarter, we have -- at EBIT level, we have reported a positive contribution from HI after advertisement spend as well. So we are on that path. And hopefully, this profitability track will now continue going forward, subject to the amount of investments we do on media in this category. But for this quarter, yes, we have reported profitability in HI as well.

So in HI, sorry, let's say, 2 to 3 years, where -- what should be the expected contribution of the non-coil portfolio?

Yes. So see, today, as we move the ratio from 30% to 35% to 40%, we have come at the breakeven level. Maybe by around 45% to 50%, we will have a very high profitability in HI as well, which is definitely in a few years down the line.

The next question is from the line of Kaustubh Pawaskar from Sharekhan.

Just one more question on HI, sir. What is the contribution of Genius now? Because that has been doing extremely well for you. And I believe that this LV contribution increasing, I think Genius is also contributing to it.

Yes. Our contribution of Genius machines. So we had both. One is the Genius machine, and one is the ordinary machines. The Genius machine is the automatic one. And we also have the regular machines to -- that doesn't have any more [ sales ]. So the Genius machine is, right now, 10% of the overall sale. Our focus is to grow the Genius machine as much as possible, where we will also see our liquidity penetration increase as the brand grows. So one other very important thing is that our liquid vaporisers all machines. So for us, that is also a plus point. We have the machine with the competitor, or any other machine that is in the market, I mean, in the households, people need not bother. They just have to buy Maxo Genius, which fits in all machines. So with that, one is, we have a very strong machine return, which gives the convenience of -- to the consumers. They may not get up, go and change modes. It's an automatic machine. And also, it is our liquid vaporisers also is a convenience for consumers. They don't really have to think which machine do they have back home. So at both the ends, we have proper solutions for our consumers.

Right. My second question is, in your presentation, you mentioned that April was good, and you have seen a double-digit growth. So how are things looking now? Because May was a little bit difficult. Is it because that the southern market, the surge in the COVID gets us what a little bit late compared to some of the other markets. So now you are seeing some bit of impact on your sales in the month of May?

Yes. So definitely, the second wave is much harsher and broader, and it is impacting the service levels in distribution. However, the consumer demand is intact. So we are not too much worried about that part of it. We are continuing to focus on our execution. It has been good. Modern Trade and CSD for now seems okay. It depends on -- as I said earlier, it depends on, if these lockdowns get into more critical phase, then yes, it may -- it will definitely impact. But for now, till date, it seems okay for us.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Kamath for closing comments.

Thank you, everyone. And in case if you have any further questions, you can always contact Sanjay, and thanks for attending our analysts call. Have a safe -- and stay at home and stay safe.

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining.