S H Kelkar and Company Limited (SHK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the S H Kelkar and Company Limited Earnings Conference Call. [Operator Instructions] Please note that, this conference is being recorded. I now hand the conference over to Mr. Mit Shah from CDR India. Thank you, and over to you, Mr. Shah.

Thank you, Rayo. Good morning, everyone, and thank you for joining us on S H Kelkar and Company Limited's Q3 and 9M FY '25 Earnings Conference Call. We have with us Mr. Kedar Vaze, Whole-Time Director and Group CEO; and Mr. Rohit Saraogi, EVP and Group CFO of the company. We will begin the call with the brief opening remarks from the management, following which we will open the forum for a Q&A session. Before we begin, I would like to point out that some statements made in today's call could be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would like to invite Mr. Kedar Vaze to make his opening remarks. Thank you, and over to you sir.

Thank you. Good morning, everyone, and thank you for joining our earnings call today. I appreciate your time and interest in our performance, and I trust that you have reviewed the results documents shared earlier. We maintained strong momentum during the period, driven by robust revenue growth. The domestic FMCG industry continues to witness subdued demand, but we saw steady attraction across all our segments, particularly in the small and mid-sized accounts. This group consolidated revenues for the next 9 months -- FY '25 to INR 1,556 crores, reflecting a strong 17% growth year-on-year. While the FMCG landscape is evolving, with newer players emerging, our ability to work across a broad spectrum of customers, from large global companies to emerging small players, has benefited us enormously. On our European segment, it continues to perform well, with core business revenues growing by 11.8% on a like-for-like basis. Demand in key international markets remains steady, supported by a strong product mix and favorable regional dynamics. Europe remains a high-potential market for us, where we are making strategic investments to strengthen our presence and enhance our market share. Focusing on the gross margins, during the quarter, gross margins were impacted by higher raw material prices, which have increased faster than anticipated. While near-term pressures persist, we expect margins to normalize as raw material availability improves and the impact of pricing actions materializes. Given the ongoing geopolitical uncertainties, we remain cautious and continue to focus on our inventory management to mitigate risk. EBITDA margin for 9 months period, excluding investments in new geographies stands at a healthy 17%. While these investments have resulted in higher costs, they are strategic and essential to strengthening our long-term competitive position and to expand our footprint in new markets and with global MNC accounts. We are confident that over the next 3 years, these investments will drive higher market share, greater operating leverage and sustained value creation for both domestic and international markets. Coming to the Flavor segment, we delivered healthy revenue growth, recovering strongly from a low base last year. Alongside top line growth, we delivered healthy profitability improved -- supported by improved market conditions, deeper customer engagement and better operating efficiency. Meanwhile, the turnaround of our Global Ingredients segment remains on track with segment continuing its recovery. This progress is driven by structural initiatives undertaken in the past such as backward integration, coupled with ongoing emphasis on optimization on the operations and efficiency. Looking ahead, the global environment for exports out of India appears favorable, providing opportunities to build on this momentum, and accelerate growth in this segment. Coming to our balance sheet position. The net debt stood at INR 703 crores as of December 31, 2024, reflecting the impact of ongoing inventory replenishment, following the Q1 incident and capital expenditure at the Vanavate facility. Additionally, there is a delay in collecting GST refund of over INR 50 crores on the export sales, which has been pending with the government for over 2 years, impacting our cash flows. While we continue to pursue this claim, we remain committed to maintaining financial discipline and also actively engage with our insurer with a partial claim settlement expected in the coming months. As we move forward, we remain committed to driving sustainable growth and strengthening our global market position. The alter production sites now fully operational. Our efforts are being directed towards driving efficiency and reducing inventory and we are confident that our dedication to creating shared value for all stakeholders [ Technical Difficulty ]

Participants please stay connected we seems to have lost the line for the management. Please stay connected. Yes, sir, you are connected. Please go ahead.

Yes. Where did you last hear? Disconnected.

You were mentioning that you are confident. Hello? Kedar.

Yes. Did I cover insurance?

Yes, you covered that part. You were probably in the last slide.

So, it was the end. We are confident that our dedication will create shares value for shareholders in the long term. With that, I invite the moderator to open the floor for questions. Thank you.

[Operator Instructions] Bharat Gupta from Fair Value Capital.

Kedar, a couple of questions from my side. So just wanted to check what will be the investment spend during the quarter 3 in terms of the creative development center and how you are going to spend out there in the Q4?

Rohit, do you want to answer that?

Yes. So Bharat, your question is towards the new investment we are putting?

Right.

Yes. So in Q4, it was in the range of INR 12-odd crores. And full year, we'll look at around INR 45 crores to INR 48 crores.

So for FY '25, it will be towards INR 45-odd crores.

Yes. A bit lower because over a period, we have increased the spend. So quarter 3 on an annualized basis will come to some INR 45 crores, INR 48 crores.

Okay. Just also like in terms of you mentioned about the synergy playing out with us with respect to the investments which you are making. So just wanted to check, will it be towards the U.S. subsidiary or how you want to further leverage position with the MNCs out there in the RFQ space? So this investment is dedicated towards that particular side?

No, the investment is in the 2 geographies in Europe, U.K. and U.S.A. largely on the product development teams, which are being hired and put in place in these areas. This allows us to work in these markets, U.K., Germany, Europe and American market and at the same time, engage with the global MNC at their headquarters. So it has a dual purpose. We are looking at growing our market share and markets in the local markets in American market as well as the European market. In addition, it will help us with the global MNC account.

Okay. Coming on the gross margin trend, so you -- like what has been the key reason attributable for a sudden spurt in the raw material prices? Is it supply constraints? Like how globally, geopolitically, how this quarter we have seen such a --

Gross margin changes are largely on a few natural products, which account for quite a substantial part of the cost. So these are owing to drought situation in Indonesia and Brazil, respectively, in the last year resulting in the increase in the natural cost. In addition, first half of the year, we were unable to pass on any price increases to our clients due to the incident and supply chain disruption. So we have not taken any price corrections in the first half. So we sort of expected some compression of gross margin, not to the extent that actually played out, but we expected some compression of gross margin. And as a policy, we have increased the pricing in this quarter, and we expect the gross margins will restore over the next year. In aggregate for 9 months, we are still at 44% gross margin. So we don't expect this to fall further down.

Just in terms of the guidance, if any color which you can provide with respect to FY '26 because primarily given the tax relief, so how do you see the order inquiries playing out from the FMCG players for the upcoming year?

So we are continuing to be committing to our 12% CAGR which we had set out last year, and we are continuing to see that as our trend line for the mid and longer term. This year, we are ahead of the curve almost 17% on the 9 months to 9 months comparison. So that will be -- it will end as a strong year. We look at some signs of slowdown in some pockets in the days coming ahead and good growth opportunities in other pockets. So we see that double-digit plus growth, we will be able to maintain on the longer term. With the second year or 18 months from now in all the large investments in Europe and other development centers, we will kick start a next leg of higher growth from 18 to 20 months from now.

So for 18 to 20 months, 12% kind of a growth seems on card for us. And the signs of slowdown you are mentioning, that pertains to the businesses which we are deriving from the small and medium enterprises or it can be with respect to large accounts?

No. The slowdown is largely on the domestic Indian large accounts. We are seeing momentum. It's not de-growth. It is growth, but it is a slower growth than it was, let's say, last year or early part of this year. So we have seen growth, but the momentum has slightly eroded, I would say, towards the last quarter or last month of the third quarter. After Diwali, the momentum has been slow. We expect it for the full year to be normal. But at the moment, it is subdued on the larger accounts.

All right. So there has been some sort of a deferment with respect to the new product launches from the large accounts from the Indian domestic large accounts in a way.

I don't think there is deferment of new products, but overall volume and pricing basis, I think the inflation and the existing saturation of some of the products which resulted in not rapid growth.

Right. And margins will be able to maintain over 16% to 18% for the upcoming year?

Yes, the margins are at the moment, subdued due to these new investments. Next year, the margin should be in the same range, 16% to 18%.

[Operator Instructions] We take the next question from Rushabh Shah from BugleRock PMS.

Yes. I have 2 questions. A few years ago, the company forayed into a new product category of industrial use of ambient fragrances for the consumer durables and automobile accessories segment. So how has that business moved for us?

Yes. So that is one of the big growth areas for us. We are continuing to see that is growing. That's why I mentioned in my call newer areas. So that is one of those segments which is growing, which is not the traditional FMCG.

So sir, have we made any further investments into that?

Investments in what sense?

In that new product category?

No, this is -- it's not -- it is already in our portfolio. We continue to grow it. There is nothing -- no new investments or new product development. This is largely in the Asian market and in Indian market. So all the teams are there. Everything is in place already.

My second question is, what are the key risks you see in your business? See, the raw material risk is one of the risk which is always going to be there. That is the nature of our business. But what are the other major risks do you see in our business for a longer period of time?

It's a consumption driven business. There is always a fragrance and flavor requirement, whether it's high economic growth or low economic growth or recession. So that's a very strong positive for us. From a business risk, I think there is industry as a whole is extremely resilient. It's very defensive in long terms and slow and fast growth, it continues to be growing and it's a profitable industry. Within the industry, the risk effectively is the competitive intensity, how we are able to compete vis-a-vis our competitors. And that's really the main concern or risk that competitors do much, much better than us and we don't grow or we are not able to keep our market share. That is the only risk. So it's not a very big disruption industry in that sense.

Just a follow-up, sir. So how has the competition been for you in the past 5 years? Has it grown or have you gained market share? How has that been?

So we have actually lost some market share during the demonetization and GST these 2 years. Apart from those 2 years, we have continued to gain market share. We continued to grow faster than the industry average and faster than the competition.

So my last question is that the company in Netherlands called Isobionics, we created a product called Santalol, which is a key ingredient for sandalwood oil. So how have we been able to take advantage of that and how it has benefited us?

So, this partnership, we are basically exclusive distributors. We have a number of products built on this partnership which we are making and selling. To kind of give you a ballpark number about INR 60 crores of revenue in this year, something like INR 65 crores of revenue this year will be coming from products like what you mentioned that past collaboration or past working -- closely working with Isobionics.

Next question is from Jainam Ghelani from Svan Investments.

So as you mentioned to an earlier participant that we can expect 16% to 18% margins for FY '26. So what gives us confidence that have we signed new contracts with the price hikes? Or do we see the overall industry and market improving?

So I think the price hike is not a difficult situation. We are in discussion with the clients and that will happen in normal course of business. So there is I think -- if you look at the third quarter results, the top line growth has been robust. We don't see any reason to feel that the top line growth is challenged for us in the coming year. So the top line momentum is good. On the gross margin, all corrective actions have been taken. So we expect the gross margin to slowly inch upwards. And on the cost structure, whatever the expected growth, 12% plus growth next year, we will normalize our cost structure as we have invested heavily this year and next year, that will balance out. So we are very confident of delivering 16% to 18% for next year.

Okay. And sir, so can we expect that from Q1 FY '26, the gross margins could come back to a normalized level?

I think Q1 next year, the trend will be upward, whether it is fully recovered or there is -- because again, there have been big changes in the dollar to rupee as we speak. We need to factor that in and see how much of that will translate into cost increases for us and all of that kind of may disrupt the gross margin recovery. But it will be upwards than quarter 4, quarter 3 this year.

Okay. And sir, how is our MNC order progressing that would it be possible to quantify in terms of revenue or in terms of percentage by any chance?

Yes. So we have indicated around $10 million business this year. I think we are on track to achieve that number. And we expect it to continue to grow.

So sir, can we expect that to be almost $20 million next year?

No, it was kind of $3 million to $4 million, somewhere between $3 million and $4 million last year. We will be around $10 million this year. I expect that to continue to grow by 20%, 30% here on.

The next question is from Prakash Kapadia from Spark PMS.

Kedar, a couple of questions from my end. In FY '26, how are we looking at sales in India? What I'm trying to understand is government is focusing on boosting consumption. So are we seeing more inquiries or some new product developments or it's too early to gauge demand recovery in India? That's the first question. Secondly, if I look at employee cost, they are up sequentially by 10%. So from this base, given that the development center is opened and we've taken the global route for scaling, what kind of an increase should we expect from next quarter onwards on this base? And you mentioned the insurance claim you should get maybe next month. So what kind of a debt are we looking at by the year-end? And what could be the CapEx for next year? Those are my questions.

Okay. So the first question in terms of the growth, while there is a lot of slowdown on the larger clients and the economy in general in India, we have not seen really a slowdown in our overall business. We continue to have strong growth. I think the budgetary provisions in terms of reducing some of the tax slabs may, in fact, spur some more consumption, which will be beneficial for us to further have a good growth year. On the cost, I think the quarter 3 number on the cost of all the centers is largely fully costed in the quarter 3. There may be some incremental 10% additional cost as we finalize and fill up some of the last positions left. But by end of this year, we will have those costs all in the book as well. So as I earlier mentioned around INR 45 crores to INR 48 crores of full year cost is what we have onboarded in this year. And that will continue to be in the normal books and grow at, I guess, 5% to 6% inflation year-on-year. We expect our business to grow double-digit plus. So we will compensate. It should be quite normal next year, if we grow 12% to 14% top line our numbers will all fall in the right way. The last question was on the debt and inventory. And I think the focus on the inventory reduction is now. We expect that inventories will come down in the next 6 months. And proportionately, that will come down by almost INR 100 crores in addition to the insurance payout, which is expected any time now.

And on the India side, being a key supplier and part of their supply chain, when do we get a sense of demand? But how difficult or easy is it to scale? What I'm trying to understand, assuming some of these initiatives by the government fructify in terms of demand coming back say, from Q1 onwards. So how soon or how much time does it take for us to fulfill? Because I'm sure if there are new products, you would have got a sense.

Your question I have already answered. Once again, let me reiterate. While the overall news of slower demand in the larger accounts is there, the grass root demand in totality for us has not been low. I think we have taken substantial market share from competitors in this period since the overall demand was lower, but our growth has continued on the normal -- actually very robust 15% year-on-year quarter growth. So we are on a strong growth trajectory. We have not seen any slowdown in our business yet, and we expect that there is more growth in the early part of next year as the steps that the government has taken to increase consumption start to play out in demand generation for our plants.

Next question is from Rohit Nagraj from B&K Securities.

Again, delving on the debt part. So can you let us know what is the bridge between, say, FY '24 year-end debt of INR 500 crores and INR 700 crores. So what are the components which have increased the debt by INR 200 crores, including inventory, maybe the CapEx or Vashivali facility for which we will get the claim incrementally? So how this INR 200 crores can be segregated among these pockets?

So I think if you look at the INR 200 crores, we have almost INR 140 crores of inventory losses which have been replenished. We have built up another INR 50 crores of inventory over and above the INR 140 crores, which we have replenished. So INR 20 crores of cash flow has gone into inventor INR 75-odd crores has gone into capital investments for rebuilding the factory, most of which will be covered by the insurance repayment. And around INR 50 crores is stuck in the GST refunds, which is in process. So this is the effective cash flow that is incurred over and above the normal routine. And that's where the debt has gone up from the INR 540 crores level to INR 700 crores.

Sure. Second question is for the quarter and for 9 months, how has been the growth from volumes and pricing, if you can just break it up?

So most of the growth has been volumes. We have very limited price corrections being done in the last 9 months. So almost all of that is volumes. There may be some impact of currency exchange rate, but mostly it is volume.

Just one last clarification on the development expenditure. So FY '25, we will be completely doing away with the development expenditure of about INR 45 crores, INR 48 crores. And from next year onwards, there will not be any incremental on this part, except the inflation adjusted increases that will happen on the bridge.

That's right. So our objective and it's been pretty aggressive investment we have covered all the 4 major areas where we want to operate Southeast Asia, India, Middle East, Europe and America. We have put in teams and development teams and production operations teams, so that we are catering to all these 4 markets. And we have no plan to grow beyond these 4 markets in the near term or even medium-term business.

Next question is from [ Keiran Lee from Table Tree Capital ].

I just want to break down into segments, right? So when we are talking of 14% sales growth or whatever the CAGR is for the next year or 2, I mean, I'm just putting calculation, so it's about INR 3,000 crores we'll probably hit by FY '27. That's a very, very healthy growth. So what I'm trying to do is, is there a faster growth that we're going to get in Flavors division versus Fragrances division? And the reason why I'm asking is on the Flavors division, we've grown very healthily this quarter or at least even in the 9 months. And it has a very healthy EBIT, right? It's close to 22% EBIT. So it's adding far more to the bottom line as a percentage, right, than the fragrances for the 9 months. So if we are expecting more and more flavors growth, then our operating margin automatically has to bump up quite a bit. So I'm just trying to see where the growth is going to come from. If it -- is it more heavily loaded to Flavors, which means our EBIT would be faster? Or is it going to be more -- ? Yes.

I think -- I understood your question. I think the flavors market in the Flavors business, we did investments 3, 4 years ago, and now it is in the kind of full recovery of the investment. So it is actually delivering results which are higher than the average result for the flavor industry we expect. So another 2 years from now, we expect some more investments in the flavor business, similar to what we have taken up in the fragrance business in the last 2 years and this year. So every sort of momentum we are on the lower side or below the average in the fragrance side. We are in the investment phase. In the flavors we have finished the investment phase. We are now in the growth phase in the second half of the growth phase. In a couple of years, we will further invest in flavors. And then you will see the fragrance margins have restored and improved and the flavor margin position will require the next stage of invest. So this is kind of not structural in terms of our business. It's just the level at which we have investments vis-a-vis the growth maturation. So within Fragrances, let's say, the India business, which is the most mature has much higher results, but it also means that our market share and as a result of our market share, our growth is lower -- lower than in new markets, which we expect the growth to kick in and give us much faster growth. So the -- it is true that the flavor margins have been better this year compared to, let's say, 2 years ago and overall fragrance business. But structurally, both businesses are the same. So it's not going to result in any differential in a 2- to 3-year horizon, it will even out. The fragrance will start to catch up with the flavors, not the other way around.

Okay. Got it. Understood, sir. Understood. Sir, then -- from a gross margin standpoint, we are taking the price hikes and so on and so forth. Are there any alternatives, sir? Let's say, the drought continues for a year more, don't know, right? I mean, we've seen what happened to cocoa prices for a while now. So are there any alternatives that we can think of over the next year or 2 in terms of replacement? Or there is no replacement for any Indonesian or Brazil drought kind of situations?

So I think the Brazilian drought and Brazilian issue is affecting some of the citrus and other products is a more structural issue. So we have worked with some Indian vendors. We have now a large part of domestic sourcing for these kind of natural products. So that will kick in this year and early next year, maybe by that time, we will have some alternate to the situation in Brazil. For Indonesia, it's not really an easy alternative for replacement. It is quite widespread product. And as this is a short-cycle product relatively, so in 6 months, things should correct.

Got it, sir. Got it. And my last question, sir. I mean, we have grown substantially higher in India. We were very, very hopeful of the Europe business growing much faster than the averages because we're going to take market share away because Europe has slowdown and so on and so forth. Beyond the investments because the investments will pay off in the next 18 to 24 months in the Europe business. In the interim period, do we see continuing gaining market share in the European market as in right now, 9.5% growth is from Europe. Can we see a structural improvement there where it goes to 12% to 15% from Europe in the interim 18 to 24 months? Or that going to happen only after the 24-month period?

No. So we need to understand the European business has grown at 11.8% like-for-like last year to this year. For a European market, which is growing less than 2%, a 12% growth is a 10% faster growth than the industry or the market average. So we are doing exceedingly well. We also need to be cognizant that there is no much lower inflation in the European zone. So when we look at 11.8% or 12% growth in European context, it's a very, very healthy growth. So there is nothing there which is sort of low growth in any which way. It has been a good substantial and fast growth in Europe. And we expect it to continue going forward. We will reach a point or 2 where we need to invest in the production capacity in Europe as we have now invested in the development capacity and the sales momentum will -- it will be a good problem that our capacity is fully utilized, and we need to invest in the next phase of.

Next question is from Sandip Sabharwal from Asksandipsabharwal.com.

I have tracked the company now for 12 to 16 quarters. My question is that there is a lot of volatility in the performance of the company. Sometimes suddenly, the growth slows down and then there are some reasons for that. And sometimes there is some margin squeeze which happens. 2, 3 years back, you had indicated a glide path for reducing the debt substantially. But we've actually seen that the debt expands. So leave aside this fire which happened because there were some acquisitions you did at some stage, then suddenly some CapEx comes up. So it's very tough for investors to actually evaluate what's happening in your company. So can you make some comment on this?

Yes. So I think the -- let's say, not everything goes as what is planned. Let's understand that point of view. We are seeing in terms of the investment cycle and opportunities we are seeing opportunities for large investments, and we are not waiting for those opportunities because those opportunities come in, like we have invested behind global MNC, that business can happen we've been trying for 10 years. And when it did happen, we need to substantially invest behind that business, put the development centers, put the production facilities, et cetera, in other geographies that we maximize on that opportunity. So yes, while the track record in quarter-on-quarter, year-on-year has not been predictable on a longer term, we are doing exactly what the industry and the business requires, and we are building a strong foundation for continued growth and continued profitable growth and continued cash flow conversion. We are not there. We are not in the kind of the size where we are now globally present everywhere in mature market, and we can then have extremely high predictability. We are still in that way, hungry and fast-growing company in the industry. So we will have ups and downs as we adjust our strategy to opportunities and events that happen in the global world.

Just one clarification. You talked about this INR 140 crores loss of inventory. So was this a loss of inventory in the fire and this will also get covered in insurance? Or I didn't get that.

Yes. So the INR 140 crores that I talked about is the inventory that was lost in the fire. We expect substantial part of that to be paid by the insurance in the next, let's say next month.

INR 140 crores plus INR 75 crores of the -- for the factory. So total will be around INR 215 crores will be your claim and then whatever the insurance company clears for you. Is that right?

That's correct.

Next question is from Amit Jain from Monarch Networth Capital.

Just a few -- just a couple of things. One, on the margin front, when you are guiding this margin of 15% to 18%, so my understanding is that whatever investment that we made, most of them are recurring in nature. So have we taken -- so this guidance takes into account those expenses like on the creativity side, so these must be salary expenses. So I just want to check my understanding whether it is correct or?

Yes. So your understanding is correct. It is taking into account the normalization of the gross margin and the continued growth in double-digit plus growth that we expect. So this will happen the combination of these 2 events. The costs are recurring in nature. Our size of business will grow much faster clip than the increase in the cost plus the recovery on the gross margins, which is expected now will bring back the position on the profitability.

And secondly, sir, as far as this price revision which you are taking for your clients. So just want to understand what is the mechanism? So it happens once in a year? Or is it -- what exactly the mechanism for this revision? Because you mentioned that last year, you could not take this price because of that fire incident. Just want to understand what exactly is the mechanism for this price revision?

So normally, we -- every 6 months or so, we review the cost structure and cost increases, we go back to the clients if there is a substantial change in the input costs, then we go back to the clients with pricing corrections. So this is a normal process, which is reviewed every 6 months. And it's not that pricing happens to all clients and all products at one go. It's a continuous process. But at some point, you have a bigger corrections, but you cannot plan the exact timing when the raw material increases and when you are making the quotations to the customers. So there will be some periods when there is a margin compression. And likewise, there is margin expansion many other times when you hear the price increases have come in place and the costs have not yet hit the account.

Just a follow-up question on this. So the dip that we have witnessed in this quarter, last quarter, so can it be treated as an abration or we can see such bouts of dips whenever such price correction happens, that abrupt hike in the raw material prices?

So what has happened is, as you know, we are carrying a lot of inventory and in the replenishment of the inventory in the fire, some of these raw material prices had already gone up substantially. So we got a hit in the last months of the calendar year. In normal situation, we would have increased the prices to the customer before the increase in the inventory cost would have hit us or simultaneously. So we have a mismatch of 3 to 4 months of inventory, which was kind of, I would say, destroyed in the fire which had an impact in it.

And lastly, sir, you have -- we have a very sticky business because the fragrance business. Now when we are guiding for double-digit growth above the industry growth, and if we exclude this large MNC account, so are we still hoping that, yes, we will be beating this industry because I just want to understand the new -- the share of the new clients we are adding in this overall when we are guiding for, let's say, 12%, 14% revenue growth for coming couple of years going forward?

Yes. So we are not considering the global MNC growth in the 12% CAGR that we outlined and that's our strategic growth. We have enough customers, enough engagement with new products and current volume growth plus new markets in Southeast Asia, Middle East, Europe, and now we are starting in the U.S. So we have a lot of markets where our penetration levels are quite low, and that allows us to grow faster. And we see enough engagement across all the customers we have to enable us to grow at 12% plus year-on-year.

So basically, we will be majorly this growth will be led by new client addition or it will be a mix of both higher wallet share and new client additions?

Both, higher volume share, new client and new geographies. So completely new areas and new clients in those areas.

The next question is from Amrish Kacker, who is an individual investor.

Just one question from my side. On a broader and longer time frame, is there some more detail on the Flavors business that you could share or a timing of when you're likely to outline a broader ambition for this?

So the Flavor business is it's a business division that has started later than the fragrance business. So it is about 25 years old compared to 100-year-old business, which is the fragrance business. Having said that, it has its own trajectory. We have continued to build it up from 0 with some acquisitions, and we have now finished the investment, as I was mentioning in the development and the production for the current size. And we expect it to be good strong 15% plus CAGR growth business. So eventually, it will grow faster than the fragrance on the current base. On the overall, the Fragrance and Flavor business globally is roughly split equally. So we see in the longer term that the flavor business will have more and more, let's say, more and more percentage of the overall business.

We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.

Thank you. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarification or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time.

Thank you very much. On behalf of S H Kelkar and Company Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.