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Edited Transcript of BAJAJCORP.NSE earnings conference call or presentation 18-Oct-19 10:59am GMT

Q2 2020 Bajaj Consumer Care Ltd Earnings Call

Udaipur Oct 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Bajaj Consumer Care Ltd earnings conference call or presentation Friday, October 18, 2019 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* D. K. Maloo

Bajaj Consumer Care Limited - CFO

* Kushagra Nayan Bajaj

Bajaj Consumer Care Limited - Non-Executive Chairman

* Sumit Malhotra

Bajaj Consumer Care Limited - MD & Non-Independent Executive Director

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Conference Call Participants

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* Amit Sinha

Macquarie Research - Analyst

* Arshad Mukadam

Vibrant Securities Private Limited, Research Division - Research Analyst

* Percy Panthaki

IIFL Research - VP

* Rohan Samant;Multi-Act Equity Consultancy;Assistant Portfolio Manager

* Sachin Shah

Emkay Global Financial Services Limited - Fund Manager

* Saptarshi Chatterjee;Centrum Broking;Analyst

* Sarvesh Gupta

Maximal Capital - Founder

* Shirish Pardeshi

Centrum Broking Limited, Research Division - Senior Analyst

* Srinivas Seshadri;Mirabilis Investment Trust;Analyst

* Tejash Shah

Spark Capital Advisors (India) Private Limited, Research Division - VP of Research

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Presentation

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Operator [1]

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Good morning, everyone. It's a pleasure to welcome you all on behalf of ICICI Securities for the Q2 FY '20 Bajaj Consumer Care Earnings Conference Call. I would like to thank the management for giving us the opportunity to host the call.

From the company side, we have with us today, Mr. Kushagra Bajaj, Chairman; Mr. Sumit Malhotra, Managing Director; Mr. D. K. Maloo, CFO; and Mr. Kushal Maheshwari, Head Treasury and IR.

I now hand the call over to Mr. Bajaj for his opening remarks. Over to you, sir.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [2]

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Thank you, everyone, for joining the call. My name is Kushagra Bajaj, I'm the Chairman of Bajaj Group and Chairman of -- Nonexecutive Chairman of Bajaj Consumer Care. I would first like to apologize for canceling the call last minute for Tuesday. I had to travel on a urgent meeting. Therefore, I had to cancel the call. There was no other reason. So sorry about that last minute thing.

I would just like to give you an overview of what's happening in the company, as you might have read and seen, the promoters have sold 22% stake couple of days ago, in the secondary market. With that, the money has come yesterday. We have repaid our entire personal debt yesterday, and the pledge, there's no more personal debt at the promoter level. And with that, the pledge -- all pledges on the stock will go away. So that is one development.

Second commitment is, that no further debt will be taken at the promoter group level. And no more pledges of Bajaj Consumer Care stock will be done going forward.

Three, so that's one thing I would just like to put it on record. For us, in the Bajaj family, reputation is much more important than money because reputation is built over generations. And once lost, can never be regained, but shareholding once fallen can also through creeping acquisition be regained over time. And I assure investors neither -- none of us in the promoters are interested in selling the company to any third party. On the contrary, as liquidity in the group improves, over a period of time, as per the laws of the land, we will increase our shareholding to at least 51% through the creeping acquisition route.

Second, the question which everybody has is on the search for the CEO. We are almost on the verge of finalizing between 2 people. And hopefully that new person should join by January of 2020 in the role as CEO. That doesn't mean that Sumit Malhotra is going anywhere in the near term because there will be a handholding period, and which is required, both from Sumit's end and from the new person's, who's going to be joining as CEO, from his end. The final modalities of compensation, et cetera, are being worked out. But by and large, there is a meeting of minds. We have met this gentlemen for at least 5, 7 times between Sumit Malhotra and myself. And hopefully, the final compensation issue and the timing of joining should be finalized very, very soon.

Even if -- 99.9%, this will work out, but say, one in a million, this would not to work out, still Sumit is here, until a replacement for Sumit, a new incumbent is found, and there is no risk on continuation of business. Let me state that very, very clearly.

Third, as you know, we had appointed Bain consultants to look at strategy and growth. We had taken one state, it's there in the presentation, which has been uploaded on the website. And that one state, which we had taken was West Bengal. We started the whole execution strategy in the month of July, exactly on the 11th of July. Just like to give you what had happened over there. The West Bengal market for the total hair oil segment has de-grown in terms of value, has grown at 2% in the month of July, minus 3% in August and minus 6% in September. This is West Bengal, urban and rural together. This is value growth. Volume growth, in West Bengal, was for the industry, for the total hair oil industry was minus 6% in July, in August minus 9%, and in September minus 11%. So this is data for the industry as per Nielsen.

We, in those 3 months, have grown -- our primary sales have grown at 19% in July, vis-à-vis 2% for the industry. In August, we grew at 15%, again, primary sale against minus 3% for the industry, and we grew at 10% in September against minus 6% for the industry. This is all like-to-like comparison, compounded primary sales grew 14% against minus 2% for the industry in West Bengal.

Our secondaries were much higher than our primaries in West Bengal with the new strategy in place. Secondary is against 14% compounded for 3 months was at 19%. So this has been done. Actually, we have reduced inventory in the pipeline, even though our volumes have been disproportionately higher. So our secondaries in July in West Bengal were 20%, in August 22% growth, and in September 17% growth. So this is not euphoric. We can't say that we have succeeded in our strategy, but the initial signs are very, very positive and inspiring because in a category -- in a state where the category is degrowing in terms of volume, which is, again, very, very rare. We haven't ever seen that for the category, at least in the last 5, 7 years. We have grown at double digits. So obviously, we have done some of the right things in terms of our strategy with the help of Bain.

We would now continue to push in Bengal, and we would be taking up when -- from 1st of November, a very large state, which for hair oils, for total hair oils, and we'd be following the same Bain strategy over there from 1st of November. If that state also performs -- outperforms significantly the industry growth then we would implement this pan-India sometime in middle of first quarter 2020. So that's the strategy going forward. I think our emphasis is very clear on growth and getting market share.

And let me emphasize, this would mean that we would be significantly increasing our A&P spends as we go forward in go pan-India. Today, we spend between 16% to 18% on advertising and sales promotion, we could up it to as much as 23%, 24%, which could mean that once we go pan-India, which could mean that we would sacrifice on margins in the short term, maybe for a year or so. But we are okay with that as long as we get increased market share. And we are assuming that over the next 4 to 6 quarters, industry growth will be flat, will be 0, and in spite of that, we want to grow in double digits to gain our market share. So that is where we are on our strategy.

Let me be reemphasize, strategy is to grow double digits. We have done it in one state, West Bengal. Second, the results for last 3 months have been quite encouraging. We can't say it's a home run or we have completely succeeded, still too early. We would be implementing it in a very, very large hair oil state from 1st of November, and then we would wait for 2, 3 months results over there also. Once we have that confirmation in terms of actual volume, then we would go pan-India with the same strategy. Obviously, the strategy is to identify gaps and then form separate execution plans for each state, not even each state, even within the state, we are breaking up the states also into different geographies, and for each geography, we are having different strategies.

So the emphasis is to gain market share, as stated in the May presentation, from 10% to 20% as soon as possible. And for that, we would be significantly increasing advertising and sales promotion spends, even though the economy is slowing down, even though the category is growing -- slowing down and should remain slow -- at least slow in the short to medium term. But our emphasis on growth, capturing market share. So that even if it means reducing margins by a couple of percentage points over the next 12 to 18 months. But the idea is that, at some point, the economy will start growing again and if on a larger base, we have a larger market share than the delta to earnings will be significantly disproportionately higher. So that's the third thing that I would like to highlight.

On the cost-cutting front, we have been quite successful in implementing some of the cost-cutting initiatives that we had taken. And hopefully, by June of next year, the entire target that we had set out for cost-cutting would be fully implemented. We have also initiated automation. The next step, AI automation in terms of -- we already have handheld devices. But now there is an AI tool, which is available. It's only for salespeople, which makes -- which is available on handheld, which we are implementing and that tool will basically make it easier for the sales officers, the ISRs and the lowest salespeople in the organization, make it user-friendly for them, exactly what they need to do for the day or for the month and what they have done, where are the gaps in the market in terms of the people whom they are selling to or the SKUs, which are slow-moving, fast-moving, et cetera. So it basically makes it very user-friendly. And it's an app. So we are in the process of implementing that.

Two, we are in the process of implementing SAP across the organization. And hopefully, by March, SAP should get completely from production, all the way to sales, it will be fully automated. So we are doing that exercise. And as I said, from the cost side, we had initiated a target of about INR 16 crores of cost saving. I think we've achieved INR 4 crores or INR 5 crores as of now. And the rest will come by June of next year. So that's on track. This cost-saving includes manpower reduction, out of about 500 people, we have almost downsized 89 people already, other than -- this includes sales as well as general support, which includes all other departments.

So basically, now, the whole strategy is growth, even in a slowing category, slowing economy, and we will leave no stone unturned to achieve that to get that growth.

With that, I would like to all wish everybody a Happy Diwali, and a very prosperous New Year, and hand over the thing to Sumit Malhotra to take the matter in it, if he has anything further to add, and then we'll open up for question.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [3]

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Good morning, all of you. After the initial comments by our Chairman, I'd just like to add 1 or 2 things that has been concerning most of you, which is the actual slowdown in the industry. And there are 2 or 3 points to be noted in the slowdown. At least, ever since I've been in this industry, I've never seen hair oil growth so gloomy.

In the second quarter of this year, the volumes are flat, that's a big cause of concern. But the bigger cause of concern is the growth engine which used to be the rural growth is, for the first time, negative. So in the second quarter, total hair oil has de-grown by 2%. The third thing that really concerns all of us is that urban is actually now outgrowing rural. And if this continues, you'll see a longer term period of 0 to flat growth in the coming quarters.

I think this is something that all of you have been quoting in your various reports, and we see it in figures that we are getting from Nielsen and from other agencies like Kantar, IMRB. That's the first point.

The second point that people have been talking about is cost. And fortunately, the cost has not gone up for us. And this is a statement on our effectivity in sight of maintaining cost. And like you have seen over the last 3, 4 years, even in bad times, we have been able to maintain or better our margins. And this quarter also, we have been able to do it quite successfully, which is available in your investor presentation that we have done is, despite increase in my A&P by around [160] basis points, my EBITDA has not gone down.

The third thing, I'd like to talk about is that the Bain experiment, as we call it, has done quite well in the state that we piloted it. And this has given us a lot of confidence, and we are well into implementation -- in implementing it in the second state, and we'll keep you all informed as we go along.

With this small synopsis, I'll now like to hand over the mic to you all to ask your questions as you feel like.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of [Lakshmi Narayan from TN Capital.]

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Unidentified Analyst, [2]

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I have 2 questions. The first question is, with respect your direct coverage scheme, which you've actually increased substantially over the last 3 years. Now what is the growth you're getting from the new direct coverage? What is the mix between the old and new? And what is the cost of increasing the distribution? That's my first question. My second question is related to the uptown property, which we acquired in 2011. What is the plan for that? Do you intend to infuse more capital into that? And what is the end plan for that? So you got 2 questions.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [3]

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I'll -- I'm Kushagra Bajaj, I'll answer the second question on uptown, because I would like to just nip that question in the bud permanently. We are building our own office building on that premises. We are waiting for final approvals from BMC. It's a mess in BMC to get approvals. We are not asking for extra square feet, it's just but BMC being BMC, so we are waiting for final approvals, and we will start construction on building our office building on the uptown property. And obviously, that would require capital to be put in to build that property. So as and when we get approvals, we will then go about in building that building.

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Unidentified Analyst, [4]

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What's the kind of outlay you're expecting for the next 3 years for towards this?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [5]

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I think over the next 18 months, it'll be about INR 25 crores, INR 30 crores for basic civil works, and then the interiors and things like that. But over the -- we have a projection of about 18 months. After that, the interiors will cost us significantly more. But about INR 25 crores, INR 30 crores over the next 18 months. Once we get permission. We still haven't got the final approvals. So hopefully, we should get this final approvals in the next 2, 3 months, and then we should start civil construction work, should be digging and piling and things like that. And then we will start the civil work. And then once the civil work is complete, then the interiors can start.

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Unidentified Analyst, [6]

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And it just house Bajaj Consumer Care or it's [still a] larger premise?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [7]

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No, it will have all the group company offices. So from promoter offices to part of the energy business, part of the sugar business and the consumer business. And if there's any extra space. We haven't exactly planned the interiors as yet. But that's how we plan to do it. But it will be only for Bajaj Group and not for outsiders.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [8]

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Okay. Answer to your question on distribution. Currently, our direct distribution has gone up to around 513,000 outlets and you would remember that when you started tracking around 3, 4 years ago. It was a little under 3 lakhs, right.

Now to your second question which, how much has it added to business. Actually, there's a little bit of background that I have to talk to you about, because one is that these outlets are obviously the smaller outlets that you get to it. So actually, addition in terms of turnover, prima facie would be much less than the other outlets that we used to cover earlier on. But the second part is something that you need to understand is that we used to depend on wholesale to the extent of 55%. That has come down to around 34%. If we hadn't increased our direct coverage, actually our overall reach would have shrunk. So it's not only increase in outlets that you're looking at, but also the necessity of moving to direct from indirect because of the strain in the wholesale market. And if you look at wholesale, it is still under strain and largely because of the liquidity crunch, but also because of the de-mon and GST pressure that were applied on all kind of cash that were being there in the informal [bucket.]

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Unidentified Analyst, [9]

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Okay. And what is the cost of this distribution increase? Is it something which you have worked out? Like we just want to understand that for your every 10,000 outlets you increase, what is the cost or because...

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [10]

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Calculation is very simply, [Lakshmi,] every person you add, adds around 400 outlets, right? And the person normally costs at the lowest level between INR 10,000 to INR 12,000 per month, right. But the big question mark is what kind of outlets are you adding. For example, in the pilot state that we are doing the Bain study, we have actually added 10,000 outlets, so from around 38,000 to 48,000 we have moved, right. But this has only given us a 1/3 of the growth that Mr. Bajaj was talking about, which is we grew around 19%. 1/3 of that got added because of the new outlets that we -- the remaining came from the existing outlets. And we go along, you will see this mix existing in new outlets moving towards more delivery from existing outlets because of more pull and higher market shares.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [11]

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One of the things [Lakshmi,] that we have put as a target in this -- say in West Bengal, our target is that we should, over the next couple of quarters hit 20% of the total retail outlets as direct coverage, and that is what we plan to do as we go to the second state also where the number is much lower and eventually do that pan-India. So it may take 2 or 3 years to do, hit 20% direct outlet, but that's what we plan to do. I think that's also necessary because the wholesale sector because of the liquidity crunch is just hand to mouth and there is -- in some places, it's even de-growing the wholesale. So it is better to have a direct reach with the customer. And as you get volumes, then it more than offsets the increase in cost of adding manpower and distribution cost.

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Operator [12]

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Next question is from the line of Amit Sinha from Macquarie.

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Amit Sinha, Macquarie Research - Analyst [13]

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Firstly, my question is on the new strategy. And is it possible to share more details on the new strategy, apart from the things that you have already mentioned that you know you're spending higher A&P spend and more regional stuff, and also the direct distribution is kind of taken up. Is it possible to share more details of things which are happening on ground?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [14]

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I think a lot of details have been shared in the investor presentation. If you go through it, it's been quite exhaustive and quite transparent. So I would request one to go through that. But answering your question, yes, the whole idea is to go more direct, to go, for example, in Bengal, we've already made a special ad in Bengali, with a Bengali actress in the Bengali language, after doing -- after seeing what the requirement, what they were looking at in hair oil and things like that. We've come out with a new price point, which is a fast-moving price point. We've increased direct coverage substantially by -- through van operations. So these are multiple things that we've done. All of them, most of them, if not all are there in the presentation, which I've already repeated. And then we significantly, our share of voice has significantly gone up in terms of spend vis-à-vis our market share in Bengal. So it's a combination of everything, not just one thing that we've done. So increasing the share of voice on advertising, increasing direct distribution, new price points, improving per man return, launching a new ad in the Bengali language with the famous Bengali actress and things like that, without obviously giving any credit. The whole thing is on cash-and-carry basis. And so I think those are the -- broadly, the major things that -- the initiatives that we've taken.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [15]

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Amit, I think you should appreciate that, we have been transparent in just about everything we do. So here, also on the call, if you need any theoretical insight into this, you're free to contact me, I can help you with, there's nothing to hide in all of this. And I don't think any company will be as transparent as we are.

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Amit Sinha, Macquarie Research - Analyst [16]

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No, sure, sure. I'll take in detail later from you. Secondly, on the cost-cutting plans in the initial statements, I mean, you mentioned that there has been a significant cut in terms of number of employees. Just wanted to understand what are the areas where you have cut employees? And when you say that this is further going to go up in terms of the cost savings, what are the other areas apart from the employee cost, where you see meaningful savings coming from?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [17]

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Amit, I'd first like to talk to you about the whole idea of cost-cutting, it's not cost cutting, it's basically, we call it cost optimization. And when the strategy moved from diversification, providing option value to focus on hair oil, you did not meet such a widely distributed set up in each of the department. So what we have done is we've optimized each department. And this is not only sales, not only some of the support, it's each and every department, keeping in mind the new strategy and you have already seen that the employee cost to total cost has gone down by around 200-odd basis points. And you've just seen only a part of it because, as you know, employee reduction doesn't happen overnight, you'll see more of it. And the other departments will also start pitching in towards reduction in costs and improving efficiencies in their delivery because now the target is very, very crisp, which means that focus on the hair oil industry don't start focusing in on many other things like international business, merger acquisitions, other categories you would like to go in and so on and so forth.

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Amit Sinha, Macquarie Research - Analyst [18]

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Okay. Okay. But you would still say that the larger part of the employee reduction happened in the sales force, right?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [19]

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Obviously, out of 500-odd, 300-odd are sales people. So which is the largest part of your organization.

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Amit Sinha, Macquarie Research - Analyst [20]

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Okay, sure. Lastly, when you say that you have to take up the market share from 10% to 20%, what goes under that assumption? I mean, you have been launching a host of product in the last 1 to 2 years. So firstly, I wanted to understand if the main market share gain going to come from ADHO? Or the plan is for having a bigger set of portfolio and the bigger market share will come through that route?

And second is, in the last few presentations, there have been no mentions of some of the earlier product launches. So while you have given some details of the cooling oil, which you launched recently. Just wanted to understand what has -- I mean, the updates on some of the earlier product launches in the last 4, 5 quarters?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [21]

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I think -- this is Kushagra Bajaj here. I think it's very clear that we didn't have really clear focus strategy before we launched anything, and it was more trial by error kind of a thing. So the whole emphasis now is that to have -- to identify the gaps in a state and even within a state go micro management. So say West Bengal could have different strategies, Central Calcutta could have completely different strategy for the city, metro, northern, the hills, Darjeeling and things could have completely different strategies. Southern part has a different strategy. So we're not looking at even one state as one state. And then within that, also, you could have rural separate, urban separate, things like that. So that's one.

Second, the growth can come from almond, it can from cooling, it can come from amla, it could come from coconut. For us, we are not a light hair oil company anymore. We are a hair oil company. Hair oil consists of everything and not just light hair oil. And therefore, we are not talking about market share gains in the light hair oil, we are talking about market share gains in total hair oil from 10% to 20%. So depending on what the gap is, what sells in a particular region, in a state, we would then focus our strategy on that.

For example, cooling, this is not the season to sell cooling oil, right? We have cooling oil sell only 4 months of the year, primarily in summer. It doesn't sell in some parts of the country, even within a state. Some part of the state it doesn't sell even in the summer. It's only in a particular region within the state that it sells. So we need to be very -- so that's the focus that we have right now, that's the strategy because it's all data-driven, and it's not gut feel-driven. So it's all data-driven with actual numbers and seeing competitive analysis. Why say a Himgange doesn't do any advertising, but does only a trade push whereas the Navratna and cooling oil does lot of advertising. So what is the right strategy to do, when to do it, how to position your product. I'm just saying, for example, in cooling oil and when to do it because right now, there's no point doing anything. This is not the season for cooling oil, at all. It's a very -- 100% of sales almost comes in 4 months for that product. So our whole thing is to have -- potentially have focused products across the value chain in the hair oil segment. And then see as and when whatever the gap, whatever the requirement based on the particular region, we will then form a strategy for that region and push that product. Sumit?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [22]

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Amit, just to sum up what Mr. Bajaj has been talking about, one answer to your question directly, it will not come only from almond, because our ambition is not to move from 10% to 20% in almond. Because even today, 10% is not almonds market shares in total hair oil. It's 9.6%, 0.4% comes from the other marginal [brands]. That's number one.

The second thing is, like we launched the products nationally. We will not be launching a product nationally. For example, what you've seen is cooling oil or Brahmi, we launched nationally. And it did well in some of the point -- places, it didn't do well in the other places. And therefore, to support that kind of strategy, we never had a clear allocation of resources. Now we will do a micro segmentation within states, even within states in which we will identify products, and therefore, the kind of resources, those products need in that particular state. The third thing is, yes, we have talked about some of the launches. But as we go along, we are focusing on trying to update you on the new strategy, which doesn't tie up with the strategy we had up till around 2 years ago, which was launching products nationally. I hope I've answered your question.

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Operator [23]

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(Operator Instructions) The next question is from the line of Sameer Gupta from India Infoline.

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Percy Panthaki, IIFL Research - VP [24]

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Hi, sir, this is Percy here from India Infoline. Basically, I just wanted to understand some historic perspective to your pledges. I was just looking at data from the stock exchanges. As of end of June, the number of shares pledged were 53.8 million and June end price was INR 3.25. So if you multiply these two, the value of the shares pledged was about INR 1,750 crores. But as of September 2019, the number of shares pledged were 55.6 million and the share price on that date was INR 2.45. So the value of the shares pledged came down to about INR 1,360 crores. So about a INR 400 crore reduction in the value of the shares pledged would mean that the security available with the lender has gone down to that extent. So in that period, did you repay some part of your debt through some other means? Or it's just that the lender was okay with a lower security?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [25]

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So yes, we did repay from other group companies in the promoter level, we repaid, plus -- now we are fully repaid with the stake sale. So now there is no more pledge going on. So no more pledge as on today.

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Percy Panthaki, IIFL Research - VP [26]

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Okay. Okay. So as of June 30, sir, can you just tell me what was the promoter level debt as of June 30?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [27]

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Off hand, I don't remember now. It should be INR 640 crores, INR 650 crores, which was there, I don't -- INR 643 crores.

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Percy Panthaki, IIFL Research - VP [28]

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Okay. And as of September...

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [29]

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Which was there -- today -- which was there as of today also.

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Percy Panthaki, IIFL Research - VP [30]

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Yes, which was there, as of September end, but as of June end, it would be higher, right? Because you mentioned that between June and September, there has been some repayment of debt.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [31]

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No, March, we sold shares. If you remember, we sold 6% in March. And INR 643 crores was in June end and on September end. Am I right, Mr. Maloo?

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D. K. Maloo, Bajaj Consumer Care Limited - CFO [32]

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Yes.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [33]

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And now it is nil.

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Percy Panthaki, IIFL Research - VP [34]

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Okay, INR 643 crore was the same between June and September. But the value of the shares pledged fell by about INR 400 crores. So the lender was okay with a lower security by the end of September?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [35]

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Yes, honestly, I don't look into that. The other team does that. So I don't know why that was done. But...

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Percy Panthaki, IIFL Research - VP [36]

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Okay, sir.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [37]

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I'm not even aware that was reduced. Frankly speaking, I thought it would have increased.

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Percy Panthaki, IIFL Research - VP [38]

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Okay, okay. Sir, secondly, just wanted to understand the Bajaj Energy, you've filed for an IPO. But in case because of bad market conditions or whatever the IPO does not go through and there is a substantial debt in that company. What is the plans to reduce debt in that company, sir?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [39]

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Sorry, this is a conference call for Bajaj Consumer Care. I would not be answering call -- answering anything on Bajaj Energy.

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Percy Panthaki, IIFL Research - VP [40]

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No, no, just from the point of view that it might have sort of, sure.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [41]

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Please let me complete. You asked a question, give me time to complete.

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Percy Panthaki, IIFL Research - VP [42]

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Sure, sir.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [43]

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Second, that company is -- I can't talk much because heavy restrictions are there, legal lawyers are there, because the DRHP has been approved. So I'm not allowed to speak much, but it's a profitable stand-alone company, extremely profitable. It has been in operations and profitable for the last 8 years, which is mentioned in the DRHP. So there is no overhang of that on this business, whether the IPO happens or doesn't happen. That business by itself is profitable, and the debt over there is much more than sustainable to from its own cash flows.

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Operator [44]

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Next question is from the line of Shirish Pardeshi from Centrum Broking.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [45]

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Yes. Good afternoon, Kushagra and Malhotra. I have few questions. First question is on the CSD. In the investor presentation, you have said that after a long time, we have supplied to CSD. So I hope the name change issue has got sorted out. But if you actually look at last 5 quarters, CSD has been very, very volatile. So is that shipment, which has happened will give the benefit saying that another 2 quarters, there will be some further more shipments?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [46]

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Shirish, there are 2 parts of it. One part is, obviously, the 0 sales in the first quarter of this year because of the issues CSD raised because of our name change from Bajaj Corp to Consumer. That has been sorted out. But the bigger problem, Shirish, is the way CSD themselves and the government is looking at canteen stores. They don't want to make it a hotbed of stock flows into the local, general trade market. And therefore, they've been constraining the amount of stock in the canteen stores as well as the kind of number of outlets, the products that are there in CSD. And that's not going to change. So third, if you're asking me, will this kind of invoicing continue over the next few quarters? Yes. But I don't think you will see major growth in canteen stores from now on.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [47]

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No, my only question was, you have reported 1.45% saliency which has [come] so approximately INR 6 crores [stuff, which had got.] So my only question is that, is that go into 1 shipment or it was multiple shipment, which is...

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [48]

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It's multiple.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [49]

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It was 2 months.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [50]

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So fair to assume that...

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [51]

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It will be a steady state, 2%, 2.5% of our total business as we go along.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [52]

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Okay, all right. We have seen the substantial improvement in the international business. Is there any new markets we have gone and what kind of number we should look at for full year?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [53]

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No, we have not gone to any new markets, if at all, we are actually constrained -- constraining our expansion plans into new geographies. We are concentrating on basically 5 markets, and that is what is giving us our growth. And we're happy with that. We are not -- because we have to look at a new strategy in the international business itself because consequent to our change in strategy from diversified to hair oil or hair care directly. Our strategy in the international business will also change, which will be formulated as we go along.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [54]

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Okay. Last question on the GT growth, this growth, what we have seen is reflected into the volume growth also? So I assume that the volume growth on ADHO would be sub 1.5%, 1.6%?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [55]

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You're right, it's 1.3%.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [56]

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1.3%. So if you can help us, because if I look at, we are very strong in the northern markets, I mean in some specific markets. The whole question is that which part of GT, is it urban GT is slowing much slower? Or is the rural GT is growing much slower?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [57]

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If you remember Shirish, Mr. Bajaj...

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [58]

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You're talking for our product or you're talking for the hair oil category?

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [59]

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No, I'm talking about ADHO per se.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [60]

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Actually, if you look at the industry and also ADHO, our growth in the urban is higher than the growth in the rural areas. And this is -- this sort of mirrors what's happening in the total hair oil industry.

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Operator [61]

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Next question is from the line of Sachin Shah from Emkay Investment Managers.

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Sachin Shah, Emkay Global Financial Services Limited - Fund Manager [62]

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Thank you so much for this opportunity. What I would like to know is that after this Bain experiment that we've done and with the success that we've tasted over there. Will it be fair to assume that for the next 2, 3, 4 years, our focus to grow will be largely on the organic growth and not too much through inorganic. And where I'm coming from here. This question is also -- is that in the last 3, 4 years, we've had a very, very high dividend payout ratio. Do we expect that to continue? Or we might have some other options of using the cash flow?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [63]

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Thank you for your question. I see it as 2 parts. One is the, whether we'll actively look for mergers and acquisition in the next 2 to 4 years. And the second is the dividend payout. Answer to your first question, I think, 4 years is a long horizon that you're looking at. And I would like to [tweak] it out and say that, I think, we have enough on our plates in the next 2 years that we may not need to do any acquisition of a hair oil because we have enough scope, enough products, enough understanding of the hair oil to be able to do organic growth, whether it'd be through our current lead brand, Almond Drops or new categories or new products in different categories that may need to be sort of worked on in particular geographies as per the micro segmentation plan that we are doing state-by-state.

In terms of dividend, since like Mr. Bajaj said that we would be increasing our investments and you could probably see the profits come down over the next 2 years, you could possibly see a reduction in the kind of dividend that we have been giving, because you would agree with me that we have been giving very high dividends in the past 3, 4 years. You could possibly see a reduction because of the extra investment we are giving behind brand-building and getting organic growth.

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Sachin Shah, Emkay Global Financial Services Limited - Fund Manager [64]

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All right. But will the dividends, so profits may come down and that's why dividend may come down from this, which is fine. But will the dividend payout be as high as 70%, 80%?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [65]

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May not be.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [66]

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May not be because we will keep cash, one, because we don't know how much more we're going to be spending on organic growth and how aggressive we will need to be on that because our whole strategy is to just gain market share. And if that market share, is a gap identified then we may need to acquire something. We would also like to keep cash for that. And second, obviously, as I -- as we mentioned earlier, we are also going to be starting to spend on building our own office premises for which we will require money, although for the next 18 months, the amount is much less. But eventually, it will be a much higher number over a 4-year period. So the dividend payout will be as a percentage and in absolute value, lower than what it was.

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Sachin Shah, Emkay Global Financial Services Limited - Fund Manager [67]

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Okay. But we already have a decent amount of cash on the balance sheet, isn't it at this point in time?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [68]

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Yes. But if you look at an acquisition, for example, suppose the Bain strategies throws up that there's the requirement to do, fill in a gap through an acquisition of a particular brand in a particular segment of the hair oil, then what do we do at that point? And as you know, the valuations are prohibitively expensive in India to acquire anything. And at that time, then we would not like to further sell equity either through primary or secondary means to acquire something. And it's better to then have cash on the table.

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Sachin Shah, Emkay Global Financial Services Limited - Fund Manager [69]

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Okay. And if I can just squeeze in one more. With this strategy of growing organically, I would say that from the organic growth, and I am saying a little longer time frame, say 4 to 5 years. Can we have a goal or is there a goal of say doubling our profits from INR 250 crores to say INR 450 crores, INR 500 crores in the next 4 to 5 years, will that be a fair thought?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [70]

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[If] that's the target that you should increase market share as you then, as mentioned in the presentation in May. But that had assumed that category will continue to grow at the historical growth rate. Now obviously, that was 12% or 14% in the presentation. Now category is flat growth, but the whole idea is that you should more than double your profits if it were to continue to grow at 12%, 14%. And I don't believe that over the next 5 years, the category is not going to grow at all. Yes, they may be 12 months, 18 months, 24 months of very little growth. But if you say that the economy just going to collapse, I don't think -- I don't see that happening. I see the no growth or very little growth within there for at least the medium term. But long term, I'm still very bullish on India and the Indian economy because it's very resilient.

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Operator [71]

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Next question is from the line of Tejash Shah from Spark Capital.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [72]

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Thanks for the opportunity and thanks for a very detailed opening remarks on a lot of issues pertaining to the business. Sir, one, a couple of questions. First, on pertaining to the new CEO that you spoke about. Now in terms of our long-term vision, we have just diverted and committed to a new vision. And so how important is that the new CEO should be aligned to this vision? And it is nonnegotiable. Or we are open to pivoting again if the new CEO has a new vision on the business?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [73]

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Kushagra Bajaj here. He has to be completely aligned and that's nonnegotiable, and that has been explicitly discussed in great detail, over 4 or 5 sittings, each of 3, 4 hours, both with me separately and with him, with Sumit separately, so that is nonnegotiable. The strategy is this, [new] strategy is there is a 100% buy-in of the new CEO, then he comes in. If he has a completely different strategy then he is not the right fit for our organization. But the persons that we are -- the 2 people that we have shortlisted, both seem to have 100% buy-in on the strategy that we are implementing as we speak.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [74]

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Sure, this explains. And sir, second, this is for Sumit sir. Sir, in your quarterly presentation, organizational charts, IB position is, international business position is missing from this chart. So is there an attrition or there's a rethink on the international business as well under a new strategy?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [75]

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That was an attrition, but post attrition, we are looking at how to handle it.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [76]

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But international business will be part of this strategy, right? Or...

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [77]

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We don't have a strategy for the international business as yet, right? And therefore, under the new scheme of things, we are looking at Bain for India-only, but we are sitting and looking at our strategy for the international.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [78]

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I think, first, we need to get growth and market share gain in India. And we're still far away from that. Once we have that in place, strategy for all the states, and then implement it, get the execution right, get the growth there over a couple of quarters, then we will look at how to do, replicate -- look at it for the same thing, how we can replicate it internationally.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [79]

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Sure. And lastly, this is for Mr. Bajaj. Sir, I agree that you -- or you did not want -- or you don't want to speak on Bajaj Power IPO on this call. But just from Bajaj Consumer Care's perspective, when you say that you will defend your holding at this level, are you building a contingency of let's say -- all the contingencies, including that Bajaj Power IPO, because of markets [indiscernible] are getting delayed by 2 years or more. Are you building that contingency in that guidance?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [80]

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Well, the only overhang was promoter debt, which has been completely taken care of and I have addressed it upfront. Other than that, there's no overhang. If the IPO doesn't happen, nothing changes. Consumer business continues to do the way it is. The power business will continue to behave the way it is. And the sugar business will continue to behave as it is. Any of them will not have an overhang on each other, even if the IPO doesn't happen.

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Operator [81]

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Next question is from the line of Rohan Samant from Multi-Act.

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Rohan Samant;Multi-Act Equity Consultancy;Assistant Portfolio Manager, [82]

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My question is with respect to the pilot project that we have done. So have we seen any sort of a reaction from the competitors or have they kind of increased their A&P in that state? So where I'm coming from is, our competitors also have a lot of headroom in terms of increasing the A&P. So shouldn't kind of lead to a zero-sum kind of a game. Are we going into that kind of a thing? So that is my question.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [83]

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I think, let's look at it very pragmatically. This is INR 13,500 crores category, hair oil industry. 62% or 63%, if I remember my data, market share is by 3 players, Marico, Bajaj and then Dabur. That means there's 38% or 37% market share still to be gained from 13 other -- 1,300 other local mom and shop brands, okay? There is no international competition in this category because of the nature of the category, which is hair oil. So you have 3 guys. In the second, in the 13,500 category, INR 13,500 crore category, which is the second largest personal care category. So even if all 3 were to spend money, they can -- they still have 1/3 of the market share to gain from the other 1,300 brands, point number one.

Point number two, if everybody starts spending disproportionately, they can grow, they will definitely grow the category. Third, over and above this INR 13,500 crores, there is another INR 3,000 crores, INR 4,000 crores of unorganized segment, which is not captured in this INR 13,500 crores and within this 1,300 brands. So there is ample scope for growth for all 3 of the top players to grow. And in fact, rather than cannibalizing each other, I would wish that all of them actually disproportionately spend and grow the category.

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Rohan Samant;Multi-Act Equity Consultancy;Assistant Portfolio Manager, [84]

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Okay. And so far, we haven't seen any reaction from the competitors in that particular state?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [85]

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No, we have, we have seen -- it's not that we haven't. Obviously, nobody is going to be sleeping. We have seen competition. But we are prepared for that. That is the basic thing that we have to take before we even start executing our strategy that this is how competition is going to react. At least the big players, yes, the local players, obviously, they don't have the financial muscle to hit back dollar for dollar.

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Rohan Samant;Multi-Act Equity Consultancy;Assistant Portfolio Manager, [86]

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Okay. And my second question is with respect to the royalty. So we shouldn't expect any change in the royalty structure, right?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [87]

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No, it's been locked in for how many, 99?

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D. K. Maloo, Bajaj Consumer Care Limited - CFO [88]

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99 years.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [89]

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99 years at 1%, and that won't change.

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Operator [90]

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Next question is from the line of Arshad Mukadam from Vibrant Securities.

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Arshad Mukadam, Vibrant Securities Private Limited, Research Division - Research Analyst [91]

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My first question is, I want to understand the volume growth in terms of cases for probably both ADHO and total products.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [92]

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See, like I said initially, ADHO has grown at 1.3% and total volume is flat.

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Arshad Mukadam, Vibrant Securities Private Limited, Research Division - Research Analyst [93]

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Okay. My second question is in terms of the Bain agreement, the Bain partnership that we have. So where exactly does -- I think you said that the costs [would be gone up] on our income statement from this quarter onwards, which is quarter 2. So have you seen that impact currently?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [94]

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I don't know where you got this that [is] coming. We are engaged with Bain from April, and therefore, all our income statements from April includes the impact of Bain. Because this is not something you can amortize. You have to take it as an expense.

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Arshad Mukadam, Vibrant Securities Private Limited, Research Division - Research Analyst [95]

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Agreed, Agreed. Okay. And then, if I just look at the income statement also. I see that the sequential fall in other expenses in the IP. So is that something to do with the seasonality? Or is it just...

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [96]

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We said that we are looking at cost optimization. And one of the biggest cost is actually -- reduction is the cost of manpower. So other expenditure. Also, you're looking at the LR. So LR also includes wage bills and other expenses.

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D. K. Maloo, Bajaj Consumer Care Limited - CFO [97]

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And same for distribution costs.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [98]

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So everything, but the biggest drop is wages.

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Arshad Mukadam, Vibrant Securities Private Limited, Research Division - Research Analyst [99]

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But wages would come under employee expenses right? Or will it come under other expenses as well?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [100]

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No, in LR, it would be other expenses.

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Arshad Mukadam, Vibrant Securities Private Limited, Research Division - Research Analyst [101]

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Okay. Got it.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [102]

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If you look at the investor presentation, you will get that split.

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Arshad Mukadam, Vibrant Securities Private Limited, Research Division - Research Analyst [103]

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Okay. Got it. Thank you.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [104]

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You're looking at 2 different things.

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Arshad Mukadam, Vibrant Securities Private Limited, Research Division - Research Analyst [105]

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Sorry.

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Operator [106]

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Next question is from the line of Saptarshi Chatterjee from Centrum Broking.

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Saptarshi Chatterjee;Centrum Broking;Analyst, [107]

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Sir, my question is again on the pilot. So basically, I want to know the criteria for choosing this state for pilot. So how easy or how difficult it was to run the pilot and compared to other states through A&P spend and micromanagement?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [108]

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No, we haven't done it in any other state. So we don't know how it will be in any other state. We took Bengal simply because it's an isolated market, we could from an advertising perspective isolate it and it's the third largest market for hair oils. So it's a pretty large market to do a strategy over there. So you could see meaningful gains. So how it will pan out for other states at this point in time is very difficult to say. We are hoping for the best, and we're giving it 100%. So that's how...

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Saptarshi Chatterjee;Centrum Broking;Analyst, [109]

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Understood. Okay. And secondly, when you said that this kind of micromanagement you've done city wise and you have used like languages -- local languages and actresses, the similar kind of thing, are you going to do for the other states or pan-India? And how do you think how feasible will it be like to expand it to pan-India, what kind of time lines you are looking at?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [110]

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Can I? As we progress, we will answer this question. At this point, it's too premature to say whether we need to -- depends on the size of the market, whether there's a requirement or not and things like that. Obviously, there's a cow belt, which is the Hindi-speaking belt where only the Hindi language ad can do, and that will be in multiple states, it will benefit. But let us go state-by-state and see, whether there's a requirement to do a specific ad in the local language. It's too premature to say whether that will happen or not. We are completely open to it. If need be, we will do it. If need be, we will not do it.

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Saptarshi Chatterjee;Centrum Broking;Analyst, [111]

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Understood. And any kind of time line you are having for this, like 2 to 3 years? Or like any kind of time line for this?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [112]

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I already mentioned at the beginning of the call that we will be taking up the second state which is a fairly large state from 1st of November, waiting for the results to see over the next 2, 3 months after November and then go out with a pan-India strategy.

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Saptarshi Chatterjee;Centrum Broking;Analyst, [113]

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Okay. And sir, thirdly, for -- as you have said, our strategy is not only light hair oil, but the entire hair oil market. So are you having -- and for other segments, are you having any new product? Or are you thinking of inorganic expansion?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [114]

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I think we've already answered that question on the call already. So I would suggest that you go through the transcript because it will be repetitive for everybody else.

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Operator [115]

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Next question is from the line of Srinivas Seshadri from Mirabilis.

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Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [116]

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The first question is relating to this Nomarks. So until last quarter, we were launching say the sunscreen, et cetera. So in the new strategy, like where does Nomarks fit in, if at all? And what are the plans with that sub-brand?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [117]

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Yes, Nomarks was a part of our diversification strategy that we had. Under the new strategy, we are focusing on hair oil, which basically means that we will not be overinvesting in Nomarks as of now. At this point of time, we would like to continue selling Nomarks and making money and not taking money from the hair oils to Nomarks.

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Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [118]

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And if the opportunity presents, we would look at some kind of a sale also -- or...

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [119]

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I can't answer ifs and but. But if it happens, we'll decide at the top between the Board whether it makes sense to divest or not.

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Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [120]

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And Sumit, just regarding this entry of the other categories of hair oil. So one you already kind of are doing. And then there are potentially more on the way over the next few quarters. So we used to have a portfolio of products spanning several hair oil categories until a few years ago, where, of course, Almond Drops continue to be a market leader, while the other categories we're not able to kind of challenge enough. So just what are the learning from that? And how would we do things differently now compared to the past, which can lead to a better measure of success.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [121]

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Again, I thought I had answered it, but let me repeat it while boring maybe the other people. The strategy earlier on used to be one strategy for the whole nation. And therefore, if you have a strategy on, let's say, amla brand for the whole of the country, you would have some parts that did well, some parts that didn't. But you would be spending all over the country. And therefore, you could never get the impetus that brand needed. Now the big difference is, you will do micro segmentation. And therefore, you will push one brand in one part of the country or one state or within 1 state, one part of that state. And therefore, the strategy is one of focus. And pushing the brand where it will -- it has a better chance of gaining market share because now it's not just about getting volumes all over the country, it's about getting market share in each small segment of the country. That's one big difference that you have to realize. So you will maybe end -- be ending up getting a bouquet of brands, but not all the brands will be sold all across the country.

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Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [122]

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And we used to have like the presence in some 5, 6 hair oil categories.

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [123]

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We still have on paper, we still have.

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Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [124]

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You still have, but will that aspiration still remain that we want to be sizable in each of these or that we like more spaced and we will discover things as we...

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [125]

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We want to be where the hair oil sells. So if in a place like, let's say, Jharkhand, cooling oil sells, we want to be there. But if in Jharkhand, amla doesn't sell, you will not be there in Jharkhand. So it's not about having a big size all over India, it's having a market share in the particular subsection of India.

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Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [126]

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Okay, okay. And sir, just a final question on the A&P, which earlier you referred to on the call. In what time frame should we expect a substantial increase in the advertising program for the company as a whole? Are we looking at 6 months or 12 months or...

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [127]

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Haven't you already seen it? I think I also said that our ASP to sales has already gone up as a percentage. And this is only one state that we are looking at. Once you get into other states, you will see this increase much more apparent. And that is why...

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [128]

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Increase in spend has already started, you see the full impact once we roll out pan-India.

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Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [129]

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Okay. That's the time frame I'm asking about, is it a 12-month or...

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [130]

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So that's why I said first quarter of next year, we plan to roll out pan-India.

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Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [131]

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First quarter.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [132]

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End of first quarter next year.

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Operator [133]

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(Operator Instructions) Ladies and gentlemen, due to time constraint, we will take the last question from the line of Sarvesh Gupta from Maximal Capital.

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Sarvesh Gupta, Maximal Capital - Founder [134]

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Given that you're planning for a high-growth strategy going forward, any guidance that you can give on your EBITDA margins going forward, basically, will revenue and expenses grow in tandem? Or you see that the growth...

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [135]

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One, we don't give out guidance per se, but I've already stated that we will significantly be increasing our A&P spends. Second, over the next year or 2, we don't mind taking a dip in our EBITDA margin, if it requires just so that we get growth and increase in market share. But what the exact quantum will be, will be very difficult to say. And we don't give out guidance on that.

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Sarvesh Gupta, Maximal Capital - Founder [136]

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Okay. And secondly, sir, related to the pledging issue. So why the company, which was the promoters holding company for the -- for Bajaj Consumer would be de-pledging all the shares. But is that valid for -- is the promoter level debt gone from the other nonoperating companies of the group as well?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [137]

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Yes, absolutely. There is no more promoter debt from all other group companies at the promoter level.

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Sarvesh Gupta, Maximal Capital - Founder [138]

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Understood, sir. And finally, if I may.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [139]

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There was only debt in this company. There was no other debt. So there's nothing else to go.

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Sarvesh Gupta, Maximal Capital - Founder [140]

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Okay. So except for the operating companies, which will have some debt of its own.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [141]

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Yes.

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Sarvesh Gupta, Maximal Capital - Founder [142]

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There is no debt now at any of the operating companies [indiscernible] holding companies.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [143]

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Yes.

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Sarvesh Gupta, Maximal Capital - Founder [144]

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As well as at a personal level for the promoters?

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [145]

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Yes.

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Sarvesh Gupta, Maximal Capital - Founder [146]

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Okay. Sir, final question related to the pledging since the company had substantial cash on its balance sheet. So one way to manage this sale of promoter shares was, it could have announced a high dividend, which could have given some liquidity to the promoters to avoid selling?

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Sumit Malhotra, Bajaj Consumer Care Limited - MD & Non-Independent Executive Director [147]

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Can we do one thing, it is over and done with this question is irrelevant at this point in time. Share has been sold, the decision has been taken by the promoter to sell down the stake, not let any thing affect the company and its growth and its future. And that's the decision we've taken. This whole discussion now is meaningless. So let's -- I'm not even further answering this question.

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Operator [148]

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I will now hand the conference to the management for closing comments.

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Kushagra Nayan Bajaj, Bajaj Consumer Care Limited - Non-Executive Chairman [149]

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So as a sum up, repeating for us in the Bajaj family, reputation is built over generations and once lost, can never be rebuilt. So that is most important, much more than money or anything else. That's why the stake sale -- the stake sale took place, the 22% that we sold with that promoter level debt is 0 across promoters, their holding companies, nonoperating companies, et cetera. Two, and with the commitment that no further debt will be taken at the promoter level and no further pledges on Bajaj Consumer Care or any other group company will be done.

Two, we are on very -- almost close to finalizing between 2 people for the search of the CEO. And hopefully, you should hear in the first quarter of next year, you should hear the formal announcement of that individual joining. So there will be clarity on continuation even from a long-term perspective for the company. The strategy that we've adopted, the new CEO will be completely aligned to that. He will have a 100% buy-in, there'll be no change in strategy even when the new CEO coming in place.

Third, our strategy is to grow double market share as stated earlier in May. For that, if -- we will be increasing as we go along, as we've already started, but as we go along further increasing our A&P spend significantly, both in terms of absolute value and as a percentage of sales, which would mean that over the next 2 years, there could be a reduction in EBITDA margin and profitability, but we are okay with that, provided we get growth, and we will monitor that on a monthly basis as we go forward.

And that is what -- we know that the industry is slowing -- has slowed down considerably, something we haven't seen in many, many years. But in spite of that, we are confident -- we are very bullish with our strategy, and we hope that when the industry growth comes back after maybe 6 quarters, 8 quarters or more. If you have a higher market share on a higher base, that will disproportionately add to the bottom line in the future. But the medium-term strategy is to get growth, even at the expense of EBITDA margins.

So with that, I would like to close today's session and wish everybody a very, very happy Diwali and a prosperous New Year.

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Operator [150]

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Thank you very much.