Marico Limited ($531642)

Ladies and gentlemen, good day, and welcome to the Marico Limited Q4 FY '26 Earnings Conference Call. We have with us today the senior management team of Marico Limited, Mr. Saugata Gupta, MD and CEO; and Mr. Pawan Agarwal, Group CFO and CEO, International business. [Operator Instructions] Before we get started, I would like to remind you that the Q&A session is only for the institutional investors and analysts. And therefore, if there is anybody else who is not an institutional investor or analyst, but would like to ask questions, please directly reach out to the Marico Investor Relations team. I now hand the conference over to Mr. Saugata Gupta. Thank you, and over to you, sir.

Yes. Hi, everyone, and good evening to all those who have joined the call. With FY '26 having concluded, I will begin with a brief overview of the operating environment, after which I will take you through our performance and strategic priorities going forward. . During the quarter, demand sentiment remained broadly stable, supported by [indiscernible] inflation, improving rural sentiment and favorable policy stimulus. These are further aided by the enhanced affordability following the GST rate rationalization implemented during the financial year. We are optimistic of a gradual improvement in consumption trends in the quarters ahead, supported by these factors. However, the onset and progression of monsoon as well as the inflationary impact of the station prices will remain a key monitorable. I will now move to our performance. FY '26 marked a year of strong execution in a tough operating environment. Volume growth in India business, International business constant currency growth and consolidated revenue of Marico reached multiyear highs. The India business continued its improving volume growth trajectory during the quarter. Offtakes remained robust with more than 95% of the portfolio gaining or sustaining market share and over 90% maintaining or improving penetration on a MAT basis. Investments under Project C2 are yielding visible results particularly in rural reach and execution quality, supporting the revival and sustained growth of general trade this year. In parallel, alternate channels, including organized retail e-commerce and pick commerce continue to scale strongly, driving differential growth in urban and premium portfolios. Delving deep into our key categories, Parachute continued to demonstrate strong resilience during the quarter and delivered low single-digit volume growth after adjusting for MLA adjustments. With copra prices having corrected to about 35% from peak levels and expected to remain rebound from here on we have passed on the benefits to consumers to some selective pricing actions. As pricing stabilizes, we expect the recovery in consumption with a pickup in volume growth, which will be evidently visible from Q1 FY '27 itself. Our strengthened distribution and robust back end and supply chain capabilities position us well as compared to the smallest players in current situation, while the brand has continued to strengthen its leadership position during the year. Value-added Hair Oils delivered robust growth in this quarter led by volume growth in the low 20s and meaningful market share gains. The portfolio grew 20% this year, backed by strong momentum in the mid and premium segments, which is on Shanti Amla portfolio. These high-margin segments have delivered close to double-digit volume growth on a 2-year CAGR basis. We have also entered the almond oil category under Air Care franchise and we have made considerable inroads in modern trade already. We expect VAHO to sustain its double-digit volume-led growth trajectory, supported by a focused innovation pipeline, improved availability following GST rationalization and distribution expansion under Project City. Saffola Edible Oils delivered steady performance in an elevated pricing environment. As we enter FY '27, we expect stable growth while maintaining our focus on the threshold level of profitability. We will remain disciplined in passing on necessary input cost movements through calibrated pricing actions while continuing to drive premiumization and pushing for higher growth in cold press oils, Saffola Gold and total variants. Food transition to a mid-teen drone on the back of double-digit growth in core Saffola Foods in Q4, the Foods portfolio exited the year at INR 1,000-plus crores in revenue. We now have a wholesome play in food with our portfolio spanning from mainstream health and wellness with Saffola clean label and modern breakfast and snacking with 2 elements, premium boom snacking with 4700 BC and functional nutrition with Cosmic and clicks. You must note that this growth is being delivered alongside a significant improvement in profitability. Our focus remains on building fewer, bigger and more profitable player while driving category development, innovation and strong execution. In Premium Personal Care, we continue to scale with a clear focus on profitable growth. the portfolio comprising serums, male grooming and skin care exited the year at an ARR of INR 50-plus crores. The digital first portfolio of premium personal care exited FY '26 at INR 1,100 crores plus ARR, the scale-up of this portfolio has been accompanied by a structural improvement in profitability as we aim to exit FY '27 at a double-digit EBITDA margins and eventually teens EBITDA margins in FY '30. Beardo and clicks remain on accelerated growth trajectory to improving profitability. Our digital transformation continues to accelerate, with 55% of Marico core spend, advertising spend now directed towards digital media, of course, 100% of the digital -- I mean it's 100% spend in the digital brands. Consequently, the combined revenue share of Foods and Premium Personal Care, including digital first brands in the India business, moved up to 23% this year despite the sharp pricing-led growth in the core portfolio. We expect the share of these new businesses to expand to about 27% which was earlier target to reach 25% in FY '27 and aspire to move about 1/3 of our business by FY '30. Moving to the International business, we delivered robust growth this year, supported by broad-based performance across markets. and portfolio diversification. Bangladesh maintained its strong momentum, while Vietnam, South Africa and the export markets continued scaling up as key growth engines strengthen resilience of the portfolio. In MENA, performance in the Gulf region during the quarter was impacted by near-term supply side constraints in March, while Egypt continued to deliver strong growth. We'll continue to monitor the impact on sales in some markets in the Middle East, which contributes as in the Middle East region to only 4% of our total turnover, but we see no immediate major concern. We're also making steady progress in premiumizing our portfolio across markets driven by expansion into beauty and personal care categories and supported by innovation. This is expected to drive both differential growth and margin expansion over the medium term. How our ongoing diversification -- and premiumization effort across India and international business markets are already reshaping our growth construct in a meaningful way. By FY '30, we expect to have substantially transformed the portfolio, resulting in lowering the share of commodity-linked businesses from more than 70% to 50% over a decade. To sum up, we have delivered our -- on our aspirations across key performance parameters by navigating a highly volatile input cost environment and strengthen the underlying growth drivers of the business. More notably, we have delivered double-digit profit growth despite facing united inflation in key inputs. This performance reflects the resilience and pricing part of our core categories profitable scale-up of our new businesses and the strength of our operating model anchored in supply chain agility, cost discipline and the result of ramping up of investments in future ready capabilities. Despite ongoing geopolitical tension, we have maintained strong supply chain assurance through strategic positioning across raw materials, packaging materials and finished goods and do not foresee any material disruption in the near term. Further, we believe that our supply chain and back-end advantages will act as a competitive advantage over smaller players and drive superior volume growth and market share gains from these players during the next few quarters. We remain focused on consistently driving competitive top quartile outcomes in the near term. We expect to sustain high single-digit volume growth in the India business in FY '27. The internal business is expected to maintain strong momentum in mid-teen constant currency growth driven the broad-based performance across markets. At a consolidated level, we'll aim to deliver double-digit revenue growth across revenues in high teen and high-teen EBITDA growth subject to stable macros. On the cost front, we are witnessing divergence in input trends, while copra prices have corrected meaningfully declining by approximately 35% from peak levels, vegetable oils and other crude-linked inputs continue to execute and upward buyers, driven by ongoing geopolitical tensions in the Middle East. While we benefit from tailwinds in copra, we will mitigate cost pressures through calibrated pricing actions and cost management initiatives. So far, the weighted average input cost increase next year is, therefore, extremely marginal. We have already implemented price hikes will utilize the impact. Over the medium term, our [indiscernible] remains anchored in driving profitable growth through expansion of the total addressable market, sharper portfolio choices accelerated premiumization and continued investments in digital media analytics, automation and AI capabilities. This calibrated an ambitious approach to growth underpinned by strong execution capabilities and disciplined capital allocation gives us the confidence in our ability to deliver consistent, sustainable and profitable growth over the medium term. We will aim to maintain our current track record of top quartile volume growth in India and teens constant currency growth in International business. At a consolidated level, we will aim to sustain double-digit revenue growth to comfortably cross INR 20,000 crores in revenues and aspire for mid-teen EBITDA growth by FY '30. Our growth trajectory reflects both ambition and execution, scaling some INR 10,000 crores to INR 15,000 crores in just 2 years and adding another INR 5,000 crores plus by FY '30, with a transformed portfolio as we continue to build fewer, bigger, bolder and faster plays a resilient operating model and a disciplined capital allocation, we believe we are well positioned to deliver this sustained profitable growth at scale as we across our journey into 2030. With that, I conclude my remarks. Thank you, and we can now take some questions.

[Operator Instructions] We have the first question from the line of Abneesh Roy from Nuvama Wealth.

Congrats. I have 3 questions. First is on international business. to part. One is Bangladesh, there is a sharp acceleration of sales growth versus full year growth of 25%. So any one-off here? Was there some delayed pricing which is benefiting now? Or was it a soft base? And given now in FY '27, entire year, a democratically elected government is there versus a very fragile government in most part of FY '26 in Bangladesh, what will be the outlook? Second subpart for the international piece is MENA, obviously, in the March month was challenging for all FMCG companies, which were having business there. In April months, are there alternate channels from which maybe the business has seen some improvement. So if you could update on April, I understand March, there was a sharp decline or maybe no business for most companies. How is April based?

So I think coming to Bangladesh, we have been extremely steady. Now sometimes, there are quarterly this one, and obviously, there are some pricing which has been taken into account. But I think overall, as I said, I think as long as we continue to deliver, obviously, Bangladesh has been a critical component and has continued to remain resilient and therefore, annualized double-digit growth, we are happy. We believe that we have been resilient in Bangladesh and continue to diversify and deliver consistent growth in Bangladesh, and we are actually, we'll continue to invest behind brands diversify. And we are pretty confident about delivering this number. . Coming to MENA, March, obviously, there were issues on shipment. There were some visibility. So there's a difference between impact on offtake and impact on the primary sale because primary sale is a function of some of the shipments. There are alternative routes. We just don't feed MENA from India, some of the stuff goes to Egypt, there are alternative routes there. So therefore, I think what I alluded to in the call is that, broadly, the impact, I mean, is less and we will wait and see how the situation unfolds. But I think in terms of offtake, we have no reason to have significant concern.

Understood. My second question is on some of the recent acquisitions. So if you could give us some update on 4,700 BC and some of the other ones in India and Vietnam, et cetera. What is the initial scale up in distribution? Any initial shocks because in M&A, generally, we see in India, especially everything looks quite positive initially, but actual business comes up in the first year. There are a few challenges, either inventory buildup or any other channel. So any learnings you can share on any of the recent acquisitions?

So I think firstly, those challenges happen when there is a 100% sale happens. We now have a playbook. Of ensuring how the integration happen, how we do the valuation, what are the things we look in. I think it has been a positive start. We are, I think, extremely privileged to have most -- and one of the things we do is we ensure that we partner with a fantastic set of founders. In all the cases, they're unique set of brands. And therefore, we have had positive start, no hiccups. And I think the one big change that has happened now that we have a house of brands, we are seeing the impact of synergy at least in the back end benefits long-term profitability, long-term traction or even, for example, if you know that like in a brand like a popcorn and 4700 we see a price point pack can be taken over by GT. We have actually started immediate synergies on modern trade. . So it started off very, very, very well. And as I said, that we don't acquire or buy stake in places where there is -- we believe that the business is fundamentally weak or unit economics is not there. And I think -- I mean, so far, our success rate on that front has been fairly okay.

Understood. Last quick question. So I think you are one of the unique companies from an FY '27 perspective, where the raw material is deflationary I think for most other companies, clearly, there is a sharp inflation. But if I see your retail construct out of 4, 3 are quite in Phase 3, the big one is deflationary. So if you could tell us, as a basket, how things stand, I do understand things are volatile on a daily basis, but some sense if you can give as a basket, how much is it up now? . Second is you did say some corrective actions. So is there a MRP cut also? Or is it just select damage intervention, select promotions being change, et cetera, in Parachute. And one final question here. So can you cross-subsidize your inflationary part of the portfolio? Because the bulk of the portfolio, copra is deflationary. Can you cross-subsidize your foods and personal care by this, which can give you market share gains only?

So I think from a pricing perspective, what we've done is since we have seen that copper prices have come down proximately 35% on the peak, we have taken price cuts in nonprice point in small pack to the extent of about 10% or so. We haven't really taken any call in terms of increasing the malt. But as of now, that's the call that we have taken. . Now on your question of cross subsidizing, we always take a portfolio approach. Of course, we have to keep in mind in terms of what are the expectations from a profit delivery standpoint. And of course, we'll keep calibrating those calls and take portfolio in terms of when you take the calls on pricing, et cetera. Now coming to our margin next year, of course, there are a lot of moving parts. As you rightly said, yes, we have a tailwind in terms of copra prices where we have some gains coming in as compared to from the high base of last year. But because the crude where is at this point in time and where it will move, we don't know. But still if you look at our guidance, what we've given is that if situations were normalized, we would target to deliver about high teens EBITDA growth, which, in fact, is slightly higher than what we had guided in the previous call. But this definitely assumes that situation should normalize soon. But if it doesn't really sort of, then it's difficult to tell where exactly we will be.

And just to add, I think, to what Pawan said that See, normally, whenever there is parachute deflation, which is -- I think we now have -- in terms of our overall proactiveness and managing deflation is much better. But having said that, this is a unique year where we believe that given the supply chain constraints and other challenges the smaller players will face, I think this is advantageous for us. So therefore, instead of cross subsidizing, there is itself, we have a kind of a competitive advantage this year if this supply situation and all these constraints continue.

And on the RM basket, any sense, some of the companies have said...

Abneesh, I would request you to kindly rejoin the queue again. We will take the next question from the line of Mihir Shah from Nomura.

Congrats on the very good performance. I wanted to just understand on your rationale behind the upward revision on the EBITDA guidance. as this is despite the new acquisitions, which could have some drag on the margins, plus the inflation in crude derivatives that we are seeing currently is very sharp. I believe in 3Q, as Pawan highlighted, you had highlighted about mid-teens EBITDA group and now it's been high teens. So what is driving the change in assumptions would appreciate some thoughts on those?

So I think 2 things. I think firstly, just to give a perspective, 2 of the 3 acquisitions, for example, comics and kinetic are profitable. As you know, Skinner tech is in the mid-20s, Cosmix is in the high teens. So therefore, actually, these acquisitions and number two, of course, there's a significant as we talked about in Plix, which is a large part of the digital business, which is also experiencing an upward trajectory and operating margins, okay? So now coming to -- I think now we have a firmer view of Copra, which is now going to be range bound for the rest of the year. And we have a street version of what could be, of course, is very difficult to predict. But our current estimates suggest and, obviously, we have taken some pricing action in that part of the portfolio, where there is an impact on input cost, which we have taken immediately when this issue happened in March. So therefore -- and therefore be a form a view of -- and therefore, there is a best case of you given the current sedation that this should be around mid-teens. And obviously, as I said, that there has been far better also visibility of what the digital business, profitability improvement agenda is and what we can achieve. And as I said, the one more thing which we have done is as -- now that we have what I call a basket of brands or portfolio brands in digital synergies coming in. I think we have been able to realize better gains in terms of input costs and procurement and other Cosmix drivers. Secondly, I believe that one of the significant competitive advantage or a capability, which we have owned over the last 4 years ability to handle adversity. And they started doing covet. We faced Ukraine, where there was put cost -- we had our own unique adversity in terms of 100% increase in copra prices. So we manage the situation far more proactively in terms of supply chain assurance and other things. So I think a combination of all that we -- given the current situation, there's a best case visibility, which suggests that we should be able to deliver a high teen. When I talked about in Jan, obviously, those -- we now have much more firmer data and visibility of that.

Got it, sir. That's very clear. Secondly, on Saffola, both the volumes and pricing has seen some improvement on a sequential basis. And also actually, press not highlighted that there were some pantry stocking up in the early part of March due to the waste Asia crisis. So I wanted to check just one, the level of pricing that will be required on Saffola to maintain margins to any pantry stocking up and -- and what can be the sustainable volume levels for Saffola for FY '27?

Yes, I think as I said, we have made it clear in Saffola, we are okay to have a low to mid-single-digit volume growth subject to a pressure level of margin. So wherever there has been input Cosmix increase, we'll pass it on and we have done already. Now coming to the other important thing we are doing is -- we are focusing on Saffola, gold, total and cold press oils, which is the higher margin portfolio and higher realization portfolio. So there is no change Obviously, given the volatility, there could volume and value growth could fluctuate quarter-to-quarter as long as I annualized, that is the kind of an aspiration. .

Understood. And just 1 last clarification on VAHO. Did I hear you correctly when you said there was 20-plus percent volume growth in VAHO and wanted to understand, is there any ensuring or pricing should 1 expect during the first half of FY '27 in VAHO which cut...

There would be some, there would be some pricing, yes.

Already have taken about 6% to 7% price increase in response to whatever increase we have seen in crude and derivatives. So that's the price increase that we've taken. And for special volume growth what you asked for is in quarter 4, it was 20% plus volume growth in the VAHO portfolio.

We will take the next question from the line of Avi Mehta from Macquarie.

Just wanted to kind of understand you pointed about supply chain constraints that are present by the smaller players and especially in Parachute. Could you give us a sense on how is it? Where are we -- what are the kind of constraints you're facing to better appreciate the competitive advantage that you were kind of alluding to?

See, I think it could be, as you know, all polymers, packaging materials, it could be full in the factory. Now we don't have such contain. We have ensured to the best of our ability. These things are managed and also obviously, ability to foresee that, like, for example, any smart player would have bought in advance in March, early March because this issue started up in February 27. Obviously, some people had a window of ensuring that you have that supply chain assurance, which gives you both the Cosmix advantage and as well as supply chain advantage. So a smaller response and ability to foresee these would be lower and therefore -- and also what happens when is high inflation, they have working capital constraints, they are not able to stop and have kind of a position buildup in these. So that's the advantage. And we have seen this during Cord. We have seen this highly stationary times that always that we -- so this is a good thing for us because normally in a deflationary environment, they become active -- we believe we have reasons to believe they are no longer active that much even if there is a deflation of informed copra because all the other things have neutralized that copra impact for them.

Saugata, the advantages that we saw, which started probably to the start of the concrete, -- would it be fair that competitive landscape is broadly the same. It's not kind of changed materially from there on. despite government trying to reduce coking price availability, et cetera. So it's more -- it's something that should sustain could sustain for some time. is the right read through is that .

It depends. Obviously, as I said, that overall -- see, the issue is, as I said, that today's packaging material, there is inflation and there is some kind of what I won't call it lack of availability, but there is constrained availability. Obviously, a small player ability to cope with that is lower, and it is going to continue for some time. .

Got it. So it makes some inflation plus availability, which is why this time it's going to be, which is what kind of gives us more confidence from -- and hence, the upgrade is what you are essentially kind of setting .

That's right.

Got it. And the last bit I just wanted to kind of get a sense, see, on the Foods portfolio, we have now kind of broadly come out of any -- when we kind of look at the growth momentum kind of going forward, we are now it's fair to expect profitability plus a 25% kind of plus growth momentum now is something that we can kind of achieve here? Or is inflation concern and hence their growth could take a hit any color over their income?

Let's take it as a 20% as a base case and then we will see. .

We will take the next question from the line of Harit Kapoor from Investec.

Just 2 or 3 for me. One was on the gross margin side on the and alone entity. Given that sequentially, we normally see some sequential drops. But given that there has been a sharp improvement sequentially, is it fair to assume that the low-cost base completely starts playing out in quarter 1 only for copra? Is that the right way to think about it? .

Will stop playing out from quarter 1. But let me not get into quarter-wise as to what could be the gross margin expansion. But rather I would want to pin a picture for the full year. And I believe for full year about 300 to 400 basis points improvement over the exit of FY '26 is fairly possible.

Got it. And just one thing on your sense on this consumption uptick, which it looks like in quarter 4, right? You've seen a lot of the companies actually deliver numbers which are ahead of third quarter trajectories. I mean what would be your kind of prognosis thought process at least on a top-down basis on what's kind of driving this at a sector level would be great to hear your comments. .

See, if you look at the second half of the year, I think 2 things would have happened. I would say that one, of course, some of the parts of the sector were lapping a slightly softer base. But more than that rural had earlier recovered. -- we started seeing a recovery in urban. It's a combination of, obviously, the GST rate rationalization and the affordability factor led to, I think, price increase. I mean the price drops, which we had taken. See also what has happened is that if most of the -- especially in food now that everything is 5%, that unbranded to branded assets to packaged conversion is going to likely to get accelerated with that. And we are also seeing in value-added hair oils, for example, is a large category where there is some unbranded small players. So the gap is actually pretty small. Secondly, I think we continue to enjoy good a period of very low inflation, low inflation helps in FMCG consumption. -- ultimately, people are aspirational. They want to get into aspirational brands there as disposable income increases. And even now as we speak, I think the government has done a fantastic job of containing the kind of a shop which other countries, a lot of emerging markets have faced because of the current crisis. I think we have been insulated. And therefore, we believe that which -- I mean, the sector and especially the organized part of the sector because, as I said, that they are in -- they have a better cooking ability in terms of handling these kind of adversity. So it looks okay for the sector and definitely looks okay for us because as far as we are concerned, we are inflation neutralized to a large extent.

Great. And just one last bookkeeping was on the tax rate. Just any sense on FY '27 on data consolidated level would be helpful.

Yes, you could consider around 20% off.

We will take the next question from the line of Tejas Shah from Avendus Spark Institutional Equities .

On some good set of numbers. So we just 1 question. See, we have been navigating macro headwinds well over the past few quarters, in fact, past few years. And while the government has kind of parallel for the last 20 years or 1.5 years is trying to revive consumption by making a of interventions. So as we look ahead next year, -- our growth confidence is primarily driven by internal execution? Or are you beginning to see signs of sustainable convention recovery at ground level as well.

I think, as I said, in the second half of the year, the sector has started accelerating. Having said that, at the end of the day, we have to ensure that -- we continue to deliver top quartile performance. We believe that we have multiple vectors of growth, whether the recovery of the core C2 has significantly given us a distribution reach advantage the VAHO turnaround, the diversification strategy, the stable business is international and the significant profitable growth trajectory of digital. So I think multiple vectors are playing out. And sometimes 1 or 2 are not playing, might not play, for example, I mean we had a short-term issue in Middle East. But I believe if I have 8 or 9, 10 as a to vectors of growth, and they are in a symphony, 1 or 2 strings not working, even then we are pretty confident of delivering what we are seeking to achieve.

And lastly, the government's effort fiscal effort also has been led by state governments also in some cases, -- so are you seeing any divergent growth trend in some of those states where, let's say, there's a lot of push to more money in hands of bottom end of the consumer? Or is it very secular as of now? .

I think it's pretty secular. Obviously, it's also for us, it has been a function of where we have got deeper gains because of [indiscernible] because as you know, in some of the states, our distribution, especially the direct distribution was not indexed under-indexed, and therefore, we are seeing that. Obviously, because of our portfolio, especially in food and premium personal care, the metros. But to us, I think one of the things which is unique to us, we called it out first before others is that we need to get GT back on right, back on track. . We started investing behind invested to say that as a general trade contribute so much to the country, create so much employment, I think -- and which is a source of competitive advantage for us because the entry barriers have decreased in OT, but it continues to be in GT. I think our systematic investment, and we believe that we owe it into the entire general trade, our distribution partners and everything to increase the viability. So to us, that is a big thing. And therefore, we believe independent of what happens in a state consumption or anything. This will help us to grow and consistently grow.

We will take the next question from the line of Arnab Mitra from Goldman Sachs.

Sorry, my line was muted. So congratulations on a great year, Saugata and Pawan. My first question is on Foods. So if I look at the 16% growth, I assume this includes turnover past quarter turnover from the acquisition. So if you could just help me understand how the organic business has done relative to the last couple of quarters? And are you seeing an improvement there and what are the buildings of there for FY '27 as you go ahead in the organic part of the food sales?

I think the first good news is that in the quarter, the core Saffola Foods has grown in double digits. Now why overall food growth is still not looking all that great in this quarter is because these 2 elements is lapping up the base quarter, which was a high base. And secondly, we've also taken some SQ rationation call over there for some of the low GC products to accelerate the path of profitability in 2 elements. However, we definitely expect team growth in 2 elements in FY '27 also? . And thirdly, also for Plix over the last 3, 4 quarters, Plix is now both pivoting more to personal care. And therefore, the contribution of Plix in the Foods growth is progressively coming down. So these are the reasons as to why Foods growth despite inclusion of 4,700 and caustic is at about 16%, 17%. But as Saugata alluded earlier in the call, that we definitely believe going ahead, it will be a range of at least 20%, 25%, if not more. .

And it's not the entire quarter of Cosmix mix and it's a few days. It's not entire this one. It's around -- we started doing it and I think maybe 50 days of something off, yes.

Got it. So in that sense, like for next year, then I think you spoke about 20% plus growth in Foods you should potentially be able to do a lot more because the organic business also is recovering, and you will get a full year plus I assume there will be a ramp-up in that business. So just wanted to check whether you think the foods growth can be higher because of the M&A also adding to that 20%?

I think we took a base case, let's take it at 20% to 25%, I think -- but we'll see. I think -- but as I said that I don't think we have any concern as far as food is concerned, at least immediately, and you will see the results coming from quarter 1, all I can say. .

Got it. My second question actually was -- I just wanted to go back to the Bangladesh performance because last 2 quarters, there has been a very strong acceleration from 22, 29 and 35% growth rate -- so just wanted to understand, is the pricing cycle on coconut oil, they're going different from India in the sense that is Bangladesh also likely to see a deflation now on pricing or the price trends there are different for the inflation net growth could continue in the coconut oil business. If you could just help understand a little bit on how these last 2 quarters have accelerated unless we should invest decelerate immediately or it's a gradual go back to that mid-teens kind of a growth that we've historically had. .

I think we shouldn't read too much into this quarterly strings. On a steady-state basis, we expect definitely to deliver double digit growth in Bangladesh. Specifically talking about the last couple of quarters, I believe it's a combination of good performance of both core and the newer portfolio comprising shampoo, maybe, et cetera. And I think it's also driven by decent volume growth. So therefore, going ahead, I think from a guidance standpoint, we would say that at least double-digit growth is for sure is going to be delivered. . And I think one other thing which we are being watchful is about as to what happens on the consumption side, depending on the inflation, et cetera. But over there also, I believe that the robust business foundation and strong mode that we've built over the years in the favorable Cosmix structure. We believe that we are in a unique position to sort of -- whether any of these kind of things play out, we would be in a position to sort of deliver healthy growth in this market. .

We will take the next question from the line of Vivek Maheshwari from Jefferies.

Great results. Two questions. The first question is, and I understand the -- there is a fair amount of volatility because of whatever is happening around us. But when I just look at your guidance of INR 15,000 crores F '27 revenues and high teen EBITDA growth if I just calculate the margins, the margins are actually lower than what you would have done in like 4 out of 5 years in the past, whether FY '25, '24. Is it so -- and this is despite the fact that copra is correcting your mix is getting better. Some of the new initiatives have started to contribute the portfolio mix is getting better. So is it just because of the uncertainty that you are -- you have given this guidance as a base case? Or am I missing something? Would love to know that. .

Are you suggesting that we are not going back to the peaks of the operating margin? Is that what your question is?

So your margins here, Pawan -- yes, so it's still way lower than what where, let's say, the last 5, 6 years, margins highs were. So I just want to understand what am I missing? If there is something dramatically different from, let's say, '21, '23, '24, '25? What am I missing there?

One thing just to be kept in mind, Vivek is that peak margin was also a year where we had low inflation in all the commodities. Now this year, while we would have copra tailwind, but the way and where the crude is at this point in time, there could be hit in the crude led derivatives. So broadly, what we have said is in gross margin terms, we expect about 350 to 400 bps expansion for FY '27, built up the NP investment, again from the current levels. I believe maybe 2002 basis points can be increased in the and balance 150 bps to about 200 bps base case in case of 150 bps rating margin expansion that we're looking at. operating margin percentage is also a function of where your revenue is because we have had a significant revenue growth, and therefore a denominator effect also plays out. So while we are delivering 17% in this year, it's also because of significant denominator effect. So therefore, keeping in all this thing, we are saying about 150 basis points expansion. And therefore, if you do the math, it will come out to about high-teens EBITDA growth from a guidance standpoint that we have given.

Right. But Pawan, just to follow up and just to clear my understanding, in the past, and as I said, 3 out of 5, actually, sorry, mind back, not 4 out of 5, but 3 out of 5, the margins were closer to let's -- this time around, your other parts of the portfolio mix VAHO, which is a high-margin portfolio is also doing better. So I don't want to -- so is there a possibility that the guidance is a bit more conservative sitting today? Or it is just the volatility, which is what is driving this kind of guidance? .

I think we would be the only company who will be giving this kind of guidance in this kind of environment of IT and EBITDA growth. So I don't think there is a conservatism, which has been factored into it. But we also need to be mindful in terms of the environment that we are operating in. And still we are saying that despite a of crude and what derivatives, the [indiscernible] derivatives, where it is trading at this point in time, we are still sticking out our neck and saying that we would be delivering 150 bps of expansion operating margin will deliver high teen I think that's more than 1 can expect, I guess. .

No, no, totally agree or -- no doubt about it. And...

Let us stabilize also in the sense that if the situation stabilize maybe after 1 or 2 quarters, we will get a better visibility. Right now, this is a base case kind of a situation. in terms of 150 bps expansion, what he is talking about. .

Sure, sure. And I just want to clarify, it was just about the math rather than anything not to say that your guidance and your disclosures are continue to be the top match, I would say. The second, without making it very abstract and open-ended thing, but Saugata, what will be the 1 or 2 things because your execution is good in the surface of the commodity cycle, you have done very well. versus peers also, you have done extremely well, your new product strategy, G2C, whatever premiumization, everything has been good. What are the top 1 or 2 things that you worry about at this juncture for FY '27 and which we should also monitor for your business?

So I think if you look at it, obviously, the macro geopolitical, this one, fortunately, of course, our Middle East construction is low, the macro geopolitical this 1 is important. And obviously, FMCG and the kind of portfolio we have, whenever there is of inflation, it has an impact in terms of consumers either downtrading or outtrading. See the macro factors. I believe as far as internal factors are concerned, the way we are going about doing it. I don't think -- we are on a momentum on that. I don't see that as an issue. But obviously, we have to watch out the macro factor because if you see historically, inflation is FMCG consumption biggest enemy, especially in the bottom of pyramid or in rural. And the last one is another monitorable is if it is a strong [indiscernible] year in terms of effect impacting consumption towards the back half of the year stretching into the quarter 1 of next year. But all these factors are not Marico's one. But I believe at this stage, I think in terms of the machine that is running, we are okay. We have -- internally, right now, there are more of the external factors and internal factors.

We will take the next question from the line of Nihal Mahesh Jham from HSBC Securities.

I had 2 questions. First is on the PC&O part. So what would be the relative price index at this point in time after we've taken the price cuts? And given a firm view of corporate, you already have, what is the incremental pricing action we are thinking? .

As of now, I think we have taken that what Pawan alluded to at around a 10% 10% on the non-price point packs. I believe copra will be range-bound and if we could manage with this. We'll manage we'll see, wait and see. And as I said, that we are -- we seem to be in a relatively advantageous position compared to the other deflationary cycles because of weaker competitive positioning because of all the supply issues.

Right. But the 10% cut would still, from an RPI perspective, take a premium to the loose coconut oil. So is that something we'll consider in terms of readjusting or we are not looking at that as a metric. .

Even last year, when the copper prices increased by more than 11%, 30%, we did not take as much price increase. We have taken about 60% price increase from pricing ARP standpoint, we are not significantly off. And as I said, we have taken calls on certain nonprice-based and if the -- depending on copra objective, we might take so difficult. At this point in time, the sites that we will want to stay with this. .

And just to add, I think -- this -- the price elasticity model has got challenged in the last year because we were ourselves surprised because of the strong brand equity of Parachute that we were able to carry on a flat volume growth in spite of 60%. So therefore, we are -- there could be a case of a recalibration of our pricing model over the next couple of years.

Understood. The second question was on clicks. If you could just say what was the ballpark EBITDA margin for this say, given you've been alluding to looking at margins and the brand did a breakeven last year. The second part of the question was that when we bought the brand, the Hero product was ACV and Foods was a much larger contributor -- and given the trends we see at least of the weight loss -- what is it that has changed where the focus is now shifting more to personal care where I would believe that this part of the portfolio still has a lot of scalability and should highly be a much higher contributor to growth? That is the question.

So I think Flex currently should be hitting around mid- to high single-digit kind of a thing. We hope very soon it will get into double digits. Yes, we started with ACV. I think what it pivoted towards and that is a function of mix stands for plant-based and hair and skin food and hair and skin food is what we pivoted. If you look at all the Plix play in Personal Care, we believe that the personal care had higher profitability. It expanded TAM, the brand could carry itself up. But you will see similarly some of the launches, even in the nutraceutical this 1 over the next couple of months. . I think secondly, what we have focused on Plix is and we have a very strong D2C play. And I think D2C is around, what, 45% of the business in Plix. And therefore, we own the consumer, we -- and it's a profitable CM to B2C play. So therefore, it is important that we start cross-selling, upselling, so therefore, it could be an ACV consumer having a hair growth serum. And that's how the Plix has played. So the -- the overall portfolio has pivoted towards that. Having said that, we will see action in the nutraceutical space. In fact, we have just launched an ACV can drink. It is available, I think, in 1 or 2 quick commerce players, and we will -- as you know, globally, there has been a shift from carbonated subdrinks to healthy drinks, especially developed markets, we have just launched one. We had -- so you will see some of the players in nutraceuticals place also. Now the other thing is that between Plix and Cosmix. Cosmix will be in the slightly more serious nutraceutical and protein play. So there will be in the vitamin supplement this one nutraceutical player. Plix is a more fun brand. So it's a slightly more fun brand. So therefore, we will then straddle both the things together. But going forward, we believe the center of gravity of Plix will be more towards Personal Care, which is far more profitable in the long term.

We will take the next question from the line of Sudesh Deshmuk from IIFL Capital.

This is Percy from IIFL. So my first question is on -- am I audible? .

Yes.

Yes. So my first question is on the construct of the overall hair oil markets between VAHO and coconut -- we have seen in the last 2 quarters, very strong growth in VAHO across all companies, not just Marico. And do you think this has got anything to do with the fact that copra price has -- I mean the coconut oil price has become very unaffordable. So there is a little bit of market share shift towards VAHO. And going ahead, do you think that market share shift could reverse a little bit where copra price is coming down, and there could be sort of a little bit of market share move towards copra away from VAHO. These are not very, very large shifts. But to some extent, can it bring down the VAHO growth? And can it actually accelerate the copra growth and act as a buffer against the general sort of slowdown we see during a deflationary cycle in volumes of copra?

See, as you know, that we repivoted our strategy on VAHO. What had happened is that there was a significant focus between the 2 major players on price points back, especially in Amla and mustard. And therefore, we decided that, and therefore, that also a lot of spend went from ATL to BTL. A couple of quarters, we decided that we should, as a leader, 1 of the volume share leader in the category. -- we must behind -- we must invest behind category growth. And therefore, we -- and therefore, in the mid and the premium segment, which are high -- much more higher profitability. Consequent to that, if you notice from Q2, our VAHO growth started accelerating. Obviously, the GST reduction has helped because share from some of the smaller players or some unbranded to branded that has helped. I think that is the reason. And we are extremely confident that we will be able to consistently deliver high growth -- higher growth in VAHO, including double-digit consistent growth. .

Right. So my stopping point was that, of course, you have done good actions on not denying that. But across the industry, if I look because many players are listed -- we are seeing all the players reporting extremely strong growth on VAHO. So it seems to be more of an industry phenomenon in addition to, of course, you're doing maybe slightly better than the industry. But overall, VAHO industry, not only in value terms, but even volume terms is growing way above what our long-term average would be. So the question was in that context. Maybe I'll take that further off-line. . Also, just wanted to understand the second question on Plix. It's had a huge ramp up over the last few years. And I think it must be coming close to touching INR 1,000 crores kind of ARR. So do we see any kind of slowdown just from the point of view of absolute size of the brand? And what kind of growth can we expect in Plix as a brand? Of course, I'm seeing food and personal care put together at the overall brand level. Can it keep growing at a sort of fast clip or at some point of time there are some barriers that we hit in terms of it needing some new channels of growth in addition to sort of online. What are your thoughts on these?

So without getting into specifics, let me tell you, I think Plix has added advantage of a far more broader TAM than some of the other brands because they do play in BPC, this is 1 of the very few unique banks that play across distinctive categories, which is nutraceutical as well as nutraceutical wellness and personal care. Coming to , of course, you are right. I mean as it reaches a certain number and it's to you can't be expecting that kind of a growth. But I'll give you the philosophy, broader philosophy of our overall digital play. We are here to build to last. We are here to create a sustainable, profitable, consistent growth in the business -- -- so for me, any day, I will work for a 20%, 25% growth with significant increase in -- steady increase in profitability over a 60% growth without any increase in profitability. And I think Plix is a brand and Beardo, we are sure we can do both. So obviously, I think as long as the digital business continues to grow 20%, 25%, 30% and be consistent on the journey to go into the teens profitability, which we have talked about in 2030, we'll be happy. .

Do we need unlock of new channels for 20%, 25% growth in the brand? .

I think, as I said, we believe in maximizing full potential focus is a very important thing. I think food is something which we believe has a far better omnichannel potential verses BPC, but we are open to it. I don't think there is any capability or resource consents to the growth, but we want growth, which is mindful as opposed to growth, which is [indiscernible].

We will take the next question from the line of Aditya Soman from CLSA. .

So 2 questions. First, on the sort of guidance of INR 15,000 crores. Now the growth is obviously lower than what you've delivered. And is this largely a function of so deflation in copra prices? Or is there anything else that again is -- which is why the growth is more conservative than what is delivered active out there? .

So I think delivering double-digit revenue growth is not conservative in any category or any sector. I don't know where you're coming from in terms of conservatism in this. See, this year, what happened is significant inflation that was built in. What we have said consistently that we are confident of delivering high single-digit growth in India, kind of a mid-teens kind of a constant currency growth in the International business. . And subject to that, that leads to a kind of growth, which is again a double-digit revenue growth overall blended. Obviously, as you know, that we have taken some pricing correction in Parachute in the non -- this 1 pack to the extent of 10%. That has been incorporated into the revenue expectations.

No, that's very clear. I just wanted to check if that Parachute price cut because the guidance was similar even earlier, right? So I mean I'm assuming that you've already factored in there will be a price cut for Parachute.

Exactly. .

Thank you very much. Ladies and gentlemen, we will take that as a last question for today. I now hand the conference back to the management for closing comments.

Thank you for listening on to the call. To conclude, we closed FY '26 on a very strong note, achieving multiyear highs on most of the key business parameters in India International business. These results underscore the strength of our brands, disciplined execution and strategic diversification and premiumization initiative across geographies and categories. In a volatile moment, we believe that our ability to foresee and manage risk will continue to hold us in good stead. . As some of you rightly mentioned that we are in a unique position in terms of RM cost, which is a great positive for us. In addition to this positive shift in digital businesses, growth trajectory in premium VAHO, strong momentum in industrial business gives us confidence on the top line, bottom line guidance that we gave. So we'll remain focused on sustaining the underlying volume growth momentum and improving the earnings growth trajectory meaningfully in FY '27, while continuing to make consistent investments in pursuit of our FY '30 strategic aspirations. That's it from our side. If you have any further queries, please feel free to reach out to our IR team, and they'll be happy to address. Thank you, and have a great evening.

Thank you, members of the management. On behalf of Marico Limited, that concludes this conference. Thank you all for joining with us today, and you may now disconnect your lines.