Marico Ltd Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : Yeah, thanks for the opportunity. My first question is on the foods business. So very strong growth here. Wanted to understand if there is any one off this quarter? And between the two new businesses or True Elements and Plix, would you expect FY25 higher growth in Plix? And in True Elements, if you could specify in a very hyper competitive and a lot of similar kind of brands, how True Elements is now able to differentiate and thereby grow strongly?

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : Sir, understood. My second question is on your international business. You have diversified away from Bangladesh, which is a good strategy in the current context. Another FMCG company said that past few weeks in Bangladesh has been quite challenging, which is understandable. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2024 / 12:30PM, MRCO.NS - Q1 2025 Marico Ltd Earnings Call My specific question is, how are your EBITDA margins in Bangladesh versus say the console margins or say the standalone margin? And second is how serious is the impact till now some colour if you could give either in terms of manufacturing or in terms of demand and distribution, how big is the impact till now? I understand these are daily consumption, so this will come back. But till now how is the demand in Bangladesh.

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : Sure. I'll follow up on that later. Last quick question on value added hair oils. Other companies in that space are also facing the same issue, demand is low there. I wanted to understand when rural recovery is there and of course it's in the initial phase, in this category where is the customer going? Because in lot of your other categories or maybe for other companies also rural demand seems to be reviving and good benefits. But here clearly all companies are facing similar issues. So why isn't the customer in the rural reviving here also? And do you think he will come back once the rural demand picks the pace further?

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : And one follow up on that, the BTL being higher is it due to any specific reason that it has picked up by those competitors and those will be all regional players essentially, right, bunch of regional players?

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : Understood. That's all from my side. Thanks a lot.

Question: Vivek Maheshwari - Jefferies - Analyst : Hi. Good evening, everyone. A few questions. First is Saugata and Pawan on VAHO. Again, there are different reasons in different years, but generally speaking that portfolio has -- and you have tried your best you have explained in the past as well, and the bigger thing is you are also gaining market share, right? What is wrong with this category? Is there a possibility this is more like a structural issue consumers not using hair oil? I just don't know and at the value level is there some market share loss? So at an overall level you are gaining but in case of market at the value level, is there some market share loss? I just want to understand what exactly is going wrong here.

Question: Vivek Maheshwari - Jefferies - Analyst : Sorry, Saugata, what I meant at the value as in at the bottom end have you lost shares for example? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2024 / 12:30PM, MRCO.NS - Q1 2025 Marico Ltd Earnings Call

Question: Vivek Maheshwari - Jefferies - Analyst : Okay, got it. And the other question is Saugata, I mean, if I recall correctly in the, I don't know which year I think a decade back or so you tried muesli at that time, I think Kaya distribution also Marico did at some point of time. What do you think will be different this time compared to let's say the previous attempts?

Question: Vivek Maheshwari - Jefferies - Analyst : Got it. And just couple of follow-ups on that. So on Kaya side when you are going to take that over, so what will be the existing revenues that will straight away come to you, Saugata?

Question: Vivek Maheshwari - Jefferies - Analyst : Okay.

Question: Vivek Maheshwari - Jefferies - Analyst : Okay, got it.

Question: Vivek Maheshwari - Jefferies - Analyst : Right. Okay, the reason of asking Saugata, this question was because the press release also says four to five years, INR100 crore. And I thought if it is selling -- by the existing team, you could have reached their way faster than that, unless I'm missing something. Unidentified Company Representative So currently the scale is quite miniscule, Vivek. And that's where our might will come in and we will be able to grow the brand to [INR100 crore] in the next four to five days. So currently, scale is not very large.

Question: Vivek Maheshwari - Jefferies - Analyst : Right. And yeah, I mean point taken, you have done quite well on the digital side. Lastly on the acquisition, but in organic bit that you have mentioned, and you have also articulated your confidence on the food side whether it's on the margin or on the overall business, when you think about inorganic now? Will it be more skewed towards foods then because anyways have done reasonable, quite a bit on the PC side?

Question: Vivek Maheshwari - Jefferies - Analyst : Sure. So sorry -- so in conclusion, your point is you want to build scale further or you want to go after let's say more -- let's say the thought process is more around margins in case of foods or build scale? Sorry I missed that part.

Question: Vivek Maheshwari - Jefferies - Analyst : Got it. Thank you. Wish you all the best.

Question: Harit Kapoor - Investec - Analyst : Yeah. Good evening. I had three questions. I will say it out. One was on the exercise on SETU as well as some destocking at the wholesale level or some channel management. Just wanted to know, how long does this take to where you're off take as your primary start to kind of match each other. That's the first question.

Question: Harit Kapoor - Investec - Analyst : Got it. Second thing was move on the three year phase plan for say SETU, [1 million going to 1.5 million] direct reach. I just wanted to get a sense about how does this reduce the wholesale mix from your channel sales, from what currency to how much does it go down to?

Question: Harit Kapoor - Investec - Analyst : And last question is on the generally industry question you mentioned in your presentation as well as your opening remarks that the pickup in industry has been seen more in HPC over foods. Do you look at this more as the base thing that HPC has been weak last year and looking before that as well? Or anything else to read into this industry trend because that's something we've been seeing across the board last quarter, quarter and half.

Question: Harit Kapoor - Investec - Analyst : Got it. Thank you.

Question: Mihir Shah - Nomura Financial Advisory & Securities (India) Private Limited - Analyst : Hi, thank you for taking my question and congrats on good set of numbers. Firstly, on parachute, does parachute need further price hikes? Last quarter you mentioned that there is a possibility of another round, is that done or there's another round in the offering? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2024 / 12:30PM, MRCO.NS - Q1 2025 Marico Ltd Earnings Call Also when one looks at the offtake volumes, it's much stronger than expected. I mean, I heard you mentioning that it will take couple of quarters for this stock adjustment in GT to coincide with the primary sale. But given that the offtake is so strong, should one expect, high single digit growth going forward? Or especially, you've taken the price hikes. And also you can triangulate how the competitive intensity is playing out. I heard that the flanker is growing -- the flanker brands are growing in mid-teens, but other competition is talking something different. Can you talk a bit on these three aspects, please?

Question: Mihir Shah - Nomura Financial Advisory & Securities (India) Private Limited - Analyst : So apparently, there's a lot of competitive intensity in coconut oil is what we picked up from the one of the other players. And there's a lot of deep discounting happening. We heard that you mentioning that deep flanker brands are growing in low to mid-teens, mid-teens I think so. So maybe you can shed some more light on how the competitive intensity is spreading out there.

Question: Mihir Shah - Nomura Financial Advisory & Securities (India) Private Limited - Analyst : Perfect. Thanks. So that's all with that. Secondly, on Saffola, it seems the pricing led growth going forward in second, third quarter will be closer to low to mid-teens. Do you see any pricing action here that you may need to take to ensure the volume growth trajectory is maintained? Or do you think that there's no need for further pricing action and the volume will still hold to mid or single-digit growth?

Question: Mihir Shah - Nomura Financial Advisory & Securities (India) Private Limited - Analyst : Thank you very much. That's all from my side. Wish you all the best.

Question: Avi Mehta - Macquarie Capital Securities (India) Pvt. Ltd. - Analyst : Yeah, hi. I just wanted to revisit this Bangladesh thing. Could you help us understand how should we look at the performance from a near term perspective? Does it impact the portfolio diversification pace in any manner? And I just wanted to kind of better understand how should we incorporate this bit in?

Question: Avi Mehta - Macquarie Capital Securities (India) Pvt. Ltd. - Analyst : Okay. So, would it be fair, Saugata to say that, from our perspective of how we look at the business, this is something that should not significantly change the broader growth trajectory even from an annual perspective? Is that --

Question: Avi Mehta - Macquarie Capital Securities (India) Pvt. Ltd. - Analyst : Got it. And second is on the Kaya business, Saugata. While I understand the sales number, could you give us a sense on how the profitability would be shared between the two entities.

Question: Avi Mehta - Macquarie Capital Securities (India) Pvt. Ltd. - Analyst : So we will be paying the royalty and everything accrues to us. Any rate that is available in the public domain that you could share? Unidentified Company Representative We won't be sharing the royalty rate publicly, but it's a standard terms. So it's not a very significant amount, and therefore a large part of the profitability will be accruing to Marico.

Question: Karthik Chellappa - Indus Capital Advisors - Analyst : Yeah. Thank you for the opportunity. I have two questions. The first is on the value added hair oil portfolio. If the premium and the midsegment is actually doing better than the bottom of the pyramid segment, could you give us some color on how that impacts the margin profile of the value added hair oil business?

Question: Karthik Chellappa - Indus Capital Advisors - Analyst : Okay. My next question is for one of the drivers of medium-term margins, I think Saugata earlier mentioned that the Middle East and South Africa also will start to see an improvement in their margin profile. Could you give us some color on relative to the international margins, how far is Middle East and South Africa today?

Question: Karthik Chellappa - Indus Capital Advisors - Analyst : And we can assume that currently these two geographies are probably tracking below your international margins, right, obviously? Unidentified Company Representative So, it is definitely lower at this stage. But as Saugata had alluded earlier in the call that, these are the structural levers that we see which can improve the margins further as we go ahead. Because these businesses are growing at a very fast pace, we are getting scale and the scale advantages will kick in. So it has improved from the past, but we still see there is a potential of improvement going ahead as well.

Question: Karthik Chellappa - Indus Capital Advisors - Analyst : Perfect. Okay. Thank you very much and wish you and the team all the very best. That's all from me.