Marico Ltd Q4 2024 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. My first question is on food's vision, doubling in three years that would mean 25% CAGR and related question is taking direct reach from 1 million to 1.5 million Project SETU, for both these do you need to do more M&A or is it based on the current portfolio largely? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2024 / 12:00PM, MRCO.NS - Q4 2024 Marico Ltd Earnings Call

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : Sure. One related question is on the India demand. Some companies have started talking about high single digit, double-digit volume growth in some quarter of FY25 and some companies are also seeing that going ahead rural will grow faster than urban. I think it will differ company to company. Wanted to understand for Marico on these two aspects, in terms of the volume growth for the full year for the India business and in terms of rural versus urban, what will be your take for Marico?

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : Sure. My second and last question is on Bangladesh. So you have come back to decent sales growth and you are aiming for a double-digit growth going ahead. So wanted to understand because we keep hearing that there is a currency issue there, there is overall some level of Anti-India sentiments also, I don't know if that does impact you, and overall economy also facing lot of challenging times. So in that context, wanted to understand this acceleration in growth. Is it coming because Parachute has taken price hike and you do have a sizable Parachute business. But in terms of volumes and market share, if you could comment, how are things shaping up there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2024 / 12:00PM, MRCO.NS - Q4 2024 Marico Ltd Earnings Call

Question: Abneesh Roy - Nuvama Institutional Equities - Analyst : Sure. Thanks a lot, Saugata. All the best, thank you.

Question: Avi Mehta - Macquarie Group - Analyst : Hi, Saugata. Thanks for the opportunity. So I just wanted to look at -- understand Project SETU little better and, you know, clarify a point. Now in addition to this benefit that could come in terms of reach, and hence to segment level growth rates, do you see it fair to see such a reduction in inventory, lowering the impact of channels, down stocking or up stocking that is witnessed during periods of copra and vegetable oil price (inaudible)

Question: Avi Mehta - Macquarie Group - Analyst : Okay, got it. But as I clearly understand, there is lot more benefits sales perspective and reach perspective in terms of quality, that is what you are targeting, got it. The second bit I just was your comments on pricing growth coming back in Parachute, vegetable oils, decline coming in the base, foods sector doing well, I just wanted to reconfirm that our expectations for FY25 are at double-digit (inaudible) and low teens profit growth, remains or is there any update on it?

Question: Avi Mehta - Macquarie Group - Analyst : Okay, perfect. That's all from my side. I'll come back in the queue. Thank you.

Question: Manoj Menon - ICICI Securities - Analyst : Hi team. Before the questions, I just want -- just have a clarification. So did I hear correctly that did you mention that the relative competitive intensity in VAHO is likely to get better?

Question: Manoj Menon - ICICI Securities - Analyst : I'm sorry Pawan, (multiple speakers) not audible. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2024 / 12:00PM, MRCO.NS - Q4 2024 Marico Ltd Earnings Call

Question: Manoj Menon - ICICI Securities - Analyst : Pawan, BOP would mean only Shanti, or would you include other brands?

Question: Manoj Menon - ICICI Securities - Analyst : Understood, very clear. Secondly on the D2C, I just want to double click on a couple of things actually. One, the [Plix] D2C brands are about 5% for the overall India revenue today. There is an opportunity to go online to offline, et cetera, et cetera, and even companies which have been predominantly online has created which means that company like Marico conceptually for the success proportion ratio, let's say in offline should be far higher. But could you just talk a little more in detail in each of these four brands, which will you actually see the higher opportunity online to offline, and is that one of the key considerations in the guidance of doubling of revenue in D2C? And another one just -- Saugata one last thing on the D2C part is that you also talk about organizational changes if any, we did find one exchange announcement few months back of an EVP digital appointment as well. So those would be helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2024 / 12:00PM, MRCO.NS - Q4 2024 Marico Ltd Earnings Call

Question: Manoj Menon - ICICI Securities - Analyst : Very clear. And Saugata, is it fair to say that you've already done the groundwork in terms of probably when I think about, you know, you've put ink on paper actually giving a guidance. Is it fair to say that you have actually identified which brands, geographies, outlets, SKUs, so you do have a fair amount of clarity on the execution? Now obviously you have to just execute. So is it fair to assume that way on D2C?

Question: Manoj Menon - ICICI Securities - Analyst : Very clear. Thank you and all the best on this. And one last thing, if I may. I'm not sure it's relevant for a quarterly call, but you know it's a platform to engage. Are you guys still get portfolio manager questions on, you know, let's say if hair oil is a sunset category. I understand that this has been discussed many times in the past, particularly during down cycles in general for FMCG. And historically have helped us with some quantitative information in terms of recruitment rates, lapse rates, you know, performance of different segments like hair oil versus, let's say, some other personal care segments, particularly in the BOP, et cetera. Could you just help us with some statistics to kind of, let's say, continue to assume that it's not a sunset category as it is perceived to be? Thank you.

Question: Manoj Menon - ICICI Securities - Analyst : Yeah I agree sir, okay, got it. I will probably connect with Pawan and team separately.

Question: Manoj Menon - ICICI Securities - Analyst : Sure, sure. Thank you so much. I'll step back in the queue. Good luck, thanks.

Question: Tejas Shah - Spark Capital Advisors (India) Private Limited - Analyst : Yeah, hi, thanks for the opportunities. Saugata, just wanted to understand the genesis of the project of expansion -- distribution expansion because in recent past whoever has kind of gone this path, has not resulted in kind of numeric expansion at least in terms of sales expansion, sales growth. So just wanted to know how should we think about that, this as the growth driver or this is a quality of distribution driver, or this is a margin driver going forward?

Question: Tejas Shah - Spark Capital Advisors (India) Private Limited - Analyst : So today, when we analyze our own data, numerically 16% of our distribution is total reach is actually direct. So should we assume that a large part of our revenue is actually coming from direct? Or how should we think about over indexation of that number versus our current revenue base?

Question: Tejas Shah - Spark Capital Advisors (India) Private Limited - Analyst : Got it, very clear. Thanks and all the best.

Question: Akshen Thakkar - Fidelity International - Analyst : Hi team. Congratulations on very good set of numbers. Just a couple of questions from my side. One was just double-clicking on your commentary around profit growth for next years. I think till last quarter we were calling out to low-teen growth and why you've not called it out, it did sound like you're talking about low double-digit growth here. So just wanted to understand is the interpretation is correct and if so, is Project SETU or investments that you're making there or elsewhere in the business causing this sort of lower and we're all for good investments to be made, no problem over there. Just wanted to be clear on where the difference is coming from versus the previous commentary.

Question: Akshen Thakkar - Fidelity International - Analyst : Got it. So you should take it as a bound that you tried to keep it within that range and we should read it only as volatility in raw material and not that incremental investments in Project SETU or something else which is about (multiple speakers) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2024 / 12:00PM, MRCO.NS - Q4 2024 Marico Ltd Earnings Call

Question: Akshen Thakkar - Fidelity International - Analyst : Sure.

Question: Akshen Thakkar - Fidelity International - Analyst : Yeah, yeah, of course, of course. Secondly just wanted to leave you with a comment on really welcome the disclosures on gross margins for food and whatever the EBITDA margin targets for digital first brands, et cetera, are. I think that just helps us understand margin drivers on your business a lot better from these levels. Otherwise, we come to think of 20%, 21% as historical peaks. But as I think you called out well that some of these drivers continue to help margins. Look forward to more disclosures around some of these businesses which are becoming less a part of your business. One very last housekeeping question from my side. On other income, there is a sharp dip this quarter. Is there anything one time that we should be thinking about in this quarter?

Question: Mihir Shah - Nomura - Analyst : Hi team. Thank you for taking my question. Quick question on VAHO. If you can again try and help us understand the 7% decline was largely because of high basic volumes or is there a price correction that was taken? I am sorry if I am asking again, I missed out on that part. Is it a price cut in VAHO that we have implemented or this is largely volumes have contracted meaningfully?

Question: Mihir Shah - Nomura - Analyst : Got it. So thank you for that clarification because I was just wondering (inaudible) pricing led then it'll direct through the remaining part of the FY25.

Question: Mihir Shah - Nomura - Analyst : Right, right. Got that Saugata, thank you for that. One more question on margins, actually, I'm just trying to understand the waterfall on the margin because Saffola, which was a low margin segment for you, Saffola edible oil, you know, was kind of in a very massive decline phase, which is coming back to growth phase and hence can ideally add on to the pressure. VAHO, probably, yes, there is some anniversarizing that is happening. But again, contribution will be lower. The positive swings will come from your new portfolio or the growth portfolio. But add on to your project, I mean, add on to, you know, add -- so will it -- will the margins -- if you have to hold onto the margin, will it be at the cost of ad spends or there is sufficient room for that to get investments behind the growth brands can be done with the kind of margin swings that we are expected to see. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2024 / 12:00PM, MRCO.NS - Q4 2024 Marico Ltd Earnings Call

Question: Mihir Shah - Nomura - Analyst : Got it, Pawan. Thank you and wish you all that.

Question: Karthik Chellappa - Indus Capital Advisors Ltd - Analyst : Yeah, thank you for the opportunity. I have two questions. First is on your direct distribution expansion of the additional 0.5 million outlets. Can you talk about predominantly which states will see this expansion?

Question: Karthik Chellappa - Indus Capital Advisors Ltd - Analyst : Got it. The second question is as far as the gross margin expansion in food just concerned of 800 basis points, what portion of this will be let's say, cyclical simply because of moderate inflation and what portion do you think will actually be structural.

Question: Karthik Chellappa - Indus Capital Advisors Ltd - Analyst : Got it. Just one housekeeping question. If I look at the others, under other expenses of INR321 crore, I think this is the first time where in a particular quarter it has crossed INR300 crore-odd. What would be the key expense items which saw this rise, anything specific to call out if there?

Question: Karthik Chellappa - Indus Capital Advisors Ltd - Analyst : Got it. Thank you very much team for this clarification. Wish you all the very best. That's all from my side.