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Edited Transcript of EMAMILTD.NSE earnings conference call or presentation 6-Nov-19 11:00am GMT

Q2 2020 Emami Ltd Earnings Call

Nov 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Emami Ltd earnings conference call or presentation Wednesday, November 6, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Mohan Goenka

Emami Limited - Wholetime Director

* Rajesh Sharma

Emami Limited - SVP of Finance & IR

* Sushil Kumar Goenka

Emami Limited - MD, CEO & Executive Director

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Conference Call Participants

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* Abhijeet Kundu

Antique Stockbroking Ltd., Research Division - Analyst

* Abneesh Roy

Edelweiss Securities Ltd., Research Division - SVP

* Aditya Gupta

Goldman Sachs Group Inc., Research Division - Associate

* Anubhav Sahu

moneycontrol.com, Research Division - Research Analyst

* Gaurav Jogani

Axis Capital Limited - Assistant VP

* Harit Kapoor

Investec Bank plc, Research Division - Analyst

* Kaustubh Pawaskar

Sharekhan Limited, Research Division - Senior Research Analyst

* Kunal Vora

BNP Paribas, Research Division - Analyst

* Naveen Trivedi

HDFC Securities Limited, Research Division - Research Analyst

* Percy Panthaki

IIFL Research - VP

* Prakash Kapadia

Anived Portfolio Managers Pvt. Ltd - Principal Officer

* Riken Gopani

Infina Finance Private Limited - VP

* Shirish Pardeshi

Centrum Broking Limited, Research Division - Senior 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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Ladies and gentlemen, good day, and welcome to Emami Limited Q2 FY '20 Earnings Conference Call hosted by IIFL Securities. (Operator Instructions) Please note, this conference is being recorded.

I now hand the conference over to Mr. Percy Panthaki of IIFL Securities. Thank you, and over to you, sir.

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Percy Panthaki, IIFL Research - VP [2]

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Hi. Good evening, everybody. Welcome to this Emami Q2 conference call. To take us through the quarterly performance are Mr. Mohan Goenka, Director; and Mr. Rajesh Sharma, VP, Finance.

So without further ado, over to you, Mr. Goenka.

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Mohan Goenka, Emami Limited - Wholetime Director [3]

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Yes. Thank you, Percy, and very good evening, friends. I welcome you all to this conference call on Emami's event for the second quarter and half year ended 30th September 2019.

We are happy to inform you that despite challenging liquidity and consumption environment, especially for discretionary products, the company posted 5% growth in quarter 2 FY '20, with consolidated revenue of INR 660 crores. Our international and CSD business both posted good growth during the quarter, leading to an overall 3% volume growth.

During the quarter, Domestic Business, including CSD channel, grew by 2.5% with 1% volume growth. BoroPlus antiseptic cream grew by 39%, pain Management grew by 4%, and 7 Oils in One grew by 25%. However, health care range posted flat growth, and Navratna declined by 3%. The slow down in discretionary consumption admist prevailing macroeconomic conditions impacted our Male Grooming range and Kesh King, which declined by 32% and 11%, respectively.

Although sales growth was lower in some of the key brands, offtakes were ahead of their respective categories, leading to market share gains. Balms volume shares were at 54.7%, which grew by 120 basis points; BoroPlus volume market share at 75.2%, grew by 200 basis point; kesh King volume market share at 26.6%, grew by 140 basis points; and Fair and Handsome grew its volume market share at 66.2%, grew by 130 basis points. Navratna Cool Oil maintained its leadership position with a volume market share of 65.5%.

International business grew by 20% during the quarter led by satisfactory performance in Bangladesh. Excluding the new acquisition, Creme 21, international business grew by 7%. In this quarter, modern trade grew by 4% and e-commerce by 53%.

During the quarter, gross margins at 69.7% grew by 110 basis points. EBITDA at INR 193 crores grew by 3% due to a 19% jump in other expenditures, which includes a onetime provision for disputed tax liability impacting profits by INR 5.5 crores and other costs for various strategic initiatives. PAT at INR 96 crores grew by 16%, and cash profit at INR 178 crores also grew by 8%.

For the first half of this financial year, our revenues were at INR 1,310 crores, which grew by 5%. Gross margin at 67% declined by 50 basis points due to increased raw material costs. However, EBITDA at INR 328 crores grew by 6%, and EBITDA margins at 25% increased by 20 basis points. PAT at INR 135 crores grew by 24%, and cash profit at INR 301 crores also grew by 10%.

We're also pleased to inform that the Board of Directors have declared an interim dividend of 200%, that is INR 2 per share. Recent economic measures by the government and RBI to add stimulus to market liquidity, even this has boost the demand occurred during the second half of the financial year. Fastening of raw material prices and cost-control measures are also likely to hit margin improvement. On both midterm and long-term basis, we stay committed to focus on our brand-building initiatives.

With this brief, I now open the Q&A. Thank you so much.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a first question from the line of Abneesh Roy from Edelweiss.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [2]

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My first question is on Kesh -- on BoroPlus, actually. So you have seen a 39% growth on 7% dip between 32% growth, and 2 years back also there was strong beta of around 32%. So is there any learning you can take from BoroPlus, which can be applied to rest of the business? Because BoroPlus also is reasonably discretionary, right? It's not that it's a necessary item, especially in a September quarter, it's not a winter quarter. So any learnings? Is the business -- that has led different or we are doing some technical thing different? Could you discuss that?

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Mohan Goenka, Emami Limited - Wholetime Director [3]

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So Abneesh, BoroPlus is not at all discretionary. The season is about to start. This is the peak season. It is a problem-solution brand, and it is -- as you know, it is mostly sold in winters. It is a necessity during winter months. So we don't term it as a discretionary. Discretionary, we call it as Fair and Handsome and Kesh King. These are the only 2 discretionary products in our portfolio. So because October month we had so many holidays, so I think we had to fill in the pipelines in the month of September because of the holiday season coming in. That's why we had to put the pressure on BoroPlus cream, and you saw this 39% growth.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [4]

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On Kesh King, what has happened because discretionary slow down was there here also?

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Mohan Goenka, Emami Limited - Wholetime Director [5]

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So Kesh King has come the base -- I know that Kesh King, there has been a decline of almost 10%. But going forward, I think we would be able to maintain our numbers. It is -- now the base has also become bigger from this quarter. So the impact is mostly on discretionary items. We have been able to maintain -- if you would see, almost all the products we have been able to maintain our numbers, whether it is balm or it is BoroPlus or Navratna or others. The 2 brands which have got impacted is -- this Fair and Handsome and Kesh King.

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Operator [6]

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Next question we have the line of from Tejash Shah from Spark Capital.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [7]

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Sir, first, just extending the question on Kesh King, during the rise of Patanjali, we were impacted by -- Kesh King as a brand was impacted by that. Now as we are picking up in many other categories that Patanjali is actually residing in. And then why Kesh King is not benefiting from the, say, moderate, just a general slow down is overwhelming and not helping us on that count?

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Mohan Goenka, Emami Limited - Wholetime Director [8]

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And so overall, Tejash, as I explained that the brand has last year, now it has come in the base, okay? Overall discretionary spends are really impacting the market. It is an expensive product from INR 60 per 100 ml, so we are also getting impacted only because of that. Otherwise, there is no other reason. I agree that the head from Patanjali has come down significantly. So yes, there is not the kind of growth that we envisage, but at the same time, I don't think there would be decline also in this category. It is a challenging -- oil has always been a challenging market, so it takes a while for brands to pick up.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [9]

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And sir, in that parlance, 7 Oils in One is actually doing phenomenally well. So is it that the positioning or the target audience is materially different and the base is also very low, I believe the same must be reflected in retail offtakes as well.

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Mohan Goenka, Emami Limited - Wholetime Director [10]

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Yes. Absolutely. The target audiences are different. It's a new category in itself, which we are trying to create. So the price points are very, very different in both these things. So because of the new campaign by Katrina Kaif also we are seeing some offtakes in Kesh King -- this 7 Oils in One. So overall, because of the price and everything, we are not seeing the same momentum in Kesh King at this point of time compared to 7 Oils in One. And you are right, 7 Oils in One is a very low base compared to Kesh King.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [11]

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And sir, just an observation here. In the choice of brand ambassador's here for 7 Oils in One versus Kesh King, is it that Kesh King is targeting slightly linear bracket of consumers and...

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Mohan Goenka, Emami Limited - Wholetime Director [12]

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Yes, yes. Absolutely, absolutely. There's no doubt. This is mostly for hair fall. it is almost -- most of the consumers are almost 50 years plus.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [13]

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Okay. And sir, if I can squeeze in one more. The gross margin expansion was very good at that time. Was it largely led by RM correction or the mix change also have helped it? And how's the outlook there on, on that count?

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Mohan Goenka, Emami Limited - Wholetime Director [14]

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So we have been saying from last quarter that there is selection in the raw material costs, and I think the same momentum should continue in the second half also. So...

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [15]

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Improving?

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Mohan Goenka, Emami Limited - Wholetime Director [16]

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Yes. The trend is improving, yes.

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Operator [17]

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We have next question from the line of Aditya Gupta from Goldman Sachs.

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Aditya Gupta, Goldman Sachs Group Inc., Research Division - Associate [18]

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My first question is on Male Grooming category. here you said the category has declined 32%, but Fair and Handsome cream grew by 4.6%. So what led to the large decline in the quarter?

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Mohan Goenka, Emami Limited - Wholetime Director [19]

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So what's happened Aditya is, medicine takes overall brand. What has happened in Fair and Handsome, we had given substantial quantity as free offers with other brands. So if you club both, it doesn't come in our revenue, right, what we give free as consumer promotions. But we can take it in their offtake. So if I combine the 2, then internally also, the brand has grown at 4%.

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Aditya Gupta, Goldman Sachs Group Inc., Research Division - Associate [20]

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I understand.

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Mohan Goenka, Emami Limited - Wholetime Director [21]

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If I been able to explain it to you?

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Aditya Gupta, Goldman Sachs Group Inc., Research Division - Associate [22]

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No. I understand. So basically, it is that the majority of mutual offtake is also calculating, basically...

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Mohan Goenka, Emami Limited - Wholetime Director [23]

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That consumer offer, the consumer offer, yes, right? Right absolutely. So good quantum of consumer offer was given in this quarter, which led to this decline also.

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Aditya Gupta, Goldman Sachs Group Inc., Research Division - Associate [24]

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And with what products was this likely offered?

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Mohan Goenka, Emami Limited - Wholetime Director [25]

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It was offered with -- for cooling talc.

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Aditya Gupta, Goldman Sachs Group Inc., Research Division - Associate [26]

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With the cooling tab. All right. I understand. In terms of -- the second question is on the international business. Here, you've seen a much stronger growth. What has driven this growth?

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Mohan Goenka, Emami Limited - Wholetime Director [27]

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So it is mostly led by Bangladesh. And there are 2 parts. One is the Creme 21. And if you combine Creme 21, then it is 20%. And otherwise, it is 7% growth. And this 7% also is led by Bangladesh.

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Aditya Gupta, Goldman Sachs Group Inc., Research Division - Associate [28]

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And what would be the growth in the other markets, say, the UAE or...

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Mohan Goenka, Emami Limited - Wholetime Director [29]

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That we can give you the details. If you want geography-wise, you have to give me a moment, yes? More or less what I can say is other geographies are mostly flat. Yes, Bangladesh is where we have grown at almost 30%. And Middle East, we have grown at almost -- just a moment, it is minus 3%, yes. Africa, we have grown at 10%, yes. And CIS, we have declined 10%.

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Operator [30]

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We have next question from the line of Kaustubh Pawaskar from Sharekhan.

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Kaustubh Pawaskar, Sharekhan Limited, Research Division - Senior Research Analyst [31]

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Sir, my question is margin trend. As you said that gross margins expected to see -- is expected to improve going ahead. So at the operating level also, should we see margins improving? Or should we expect more -- the sales to be passed on to the -- in terms of advertisement and promotional spendings?

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Mohan Goenka, Emami Limited - Wholetime Director [32]

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I think, Kaustubh, there could be some improvement because we are also doing all around cost reduction in many other areas. One is the gross margin. One is also other administrative costs. So I don't think that would be passed on, that would be spent on advertising or other costs. This could be an expense on our margin.

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Kaustubh Pawaskar, Sharekhan Limited, Research Division - Senior Research Analyst [33]

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Right, sir. And sir, my second question is on the health care range of products. Pancharishta, the growth was 13%. So the Nityam range, before the friendly launch at Chyawanprash, what kind of growth this particular range are achieving? And when can we see high base from this particular product so that barring Pancharishta, your growth would continue to remain in double digits?

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Mohan Goenka, Emami Limited - Wholetime Director [34]

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They're still very small cost. It could take some time because Pancharishta still takes almost 60% to 65% of the revenue. And Pancharishta is not growing, but then it has declined in this quarter also. So I think it would take a while for these brands to reflect on the overall growth.

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Operator [35]

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We have next question from the line of Bhakti Thacker from Investec.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [36]

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Harit from Investec. Just few questions from my end. Firstly, just want to understand how the winter placement has been for you? I understand that BoroPlus you have there little early. But how you're seeing it overall? How you're seeing the offtakes for the quarter?

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Mohan Goenka, Emami Limited - Wholetime Director [37]

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So Harit, winter has just set in, in North because October months has mostly this Diwali and Dusshera festival season. So unfortunately, the products could not be loaded in the market so much. It has just started going in the market. So we will only be knowing in the month of November now.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [38]

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Okay. That's fair. Second question is on the new margin profile for the second half of the year. Now obviously you are -- have a low base of gross margins and you have the benefit of material cost in the second half. I just wanted to get your sense on how this will be worked out? So first half, you have a kind of a flattish advertising growth. Do you see higher redeployment in terms of ad spend in the second half of the year to drive growth? Or do you still see that market is not conducive enough for us to increase the spend?

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Mohan Goenka, Emami Limited - Wholetime Director [39]

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So I had just answered that. I don't think the savings would go into much on advertising because we are also trying to save on the advertising cost front due to the negotiations and all. So that -- as I said, there could be some margin expansion. The market also are not very, very conducive, but you can't wait for very long also. We are trying to see how can we start now launching some of the new brands. So yes. So overall, I think in -- maybe in the fourth quarter, we would be rolling out some new brands, and it would not increase our advertising budget, obviously.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [40]

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Okay. Okay. And on the Male Grooming side, you have said that you want to switch strategy that you're kind of reworking. By when can we expect that to start to kind of fortify in the market? Or will you come out with something that you should be doing at the end of this year or into next year?

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Mohan Goenka, Emami Limited - Wholetime Director [41]

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By fourth quarter -- yes, in the fourth quarter.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [42]

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Got it. Got it. And on the other expansion, you said there is a onetime of INR 5.5 crores and other strategic costs that you kind of undertook. Could you -- can you talk about that? Or...

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Mohan Goenka, Emami Limited - Wholetime Director [43]

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So those are mostly on the consultants or the cost-reduction measures that we are taking in.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [44]

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So that BCG...

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Mohan Goenka, Emami Limited - Wholetime Director [45]

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Sorry.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [46]

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Sorry, sir. Go ahead, sir.

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Mohan Goenka, Emami Limited - Wholetime Director [47]

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Yes, it is also the BCG and other cost.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [48]

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Yes. Understood, understood. And also this should largely be booked into this quarter? Or you should see some of that going forward as well?

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Mohan Goenka, Emami Limited - Wholetime Director [49]

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It would come also in the next 2 or 3 quarters.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [50]

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Last question, sir, was on the CSD side. You have seen a bit of a pickup this time around, and this kind of double-digit growth hasn't been there for 4 quarters or so. Could you just comment on if you see that channel kind of having the turnaround or it's pretty much...

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Mohan Goenka, Emami Limited - Wholetime Director [51]

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I really cannot comment to be very honest because this was also loading of our winter products in CSD. So that I really don't know whether it would be consistent or -- that is beyond our control honestly.

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Operator [52]

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We have next question from the line of Gaurav Jogani from Axis Capital.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [53]

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In terms of this health care decision, we are constantly seeing that the performance has been up and down, and that's mainly because of Pancharishta. So sir, what's your strategy there? And when does a base hits in Pancharishta because Pancharishta has been seen impacting the growth rates in the past quarters as well?

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Mohan Goenka, Emami Limited - Wholetime Director [54]

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So Gaurav, I have mentioned that because we can't overly rely on Pancharishta, we are trying very hard to see how can we revive it. Despite best efforts, the brand is not growing so much, okay? So we are trying to push-in the other brands, which are the Nityams or many other brands, so that least the health care doesn't decline. So we have also launched a new campaign on Pancharishta very recently. The last campaign did not work, so we have reworked on our campaign, which I think would hit the markets very soon or it -- yes, they are already in the market. So let us see how do we get the response. But as I said because 60% of the revenue is Pancharishta, 50%, to 55%, if that doesn't grow, I cannot really grow the whole health care.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [55]

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Exactly, sir. What's been the problem with the product? I mean...

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Mohan Goenka, Emami Limited - Wholetime Director [56]

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That we have discussed many times. Honestly, I don't have a clear answer.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [57]

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Sure. And sir, second question is on the overall macro demand trend. I mean do you have seen the demand hitting a base or maybe the worst is over for you? And anything on that front that you could comment on?

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Mohan Goenka, Emami Limited - Wholetime Director [58]

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See, I won't say that the demand has bounced back or something like that. Still, we have to struggle to get the growth numbers, okay? So we have to wait and see because this time, it's very, very erratic. One month we see good growth, and suddenly, we see decline. There's no clear trend that, okay, this growth has come back, okay?

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Gaurav Jogani, Axis Capital Limited - Assistant VP [59]

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Yes. Sir, just last bit. Are you also, I mean, doing any additional promotions in the trade channels per se to incentivize the offtake or something of that sorts?

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Mohan Goenka, Emami Limited - Wholetime Director [60]

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Yes. Absolutely. Yes, yes, absolutely. We have been absolutely hands down on promotions. Without that, the growth is impossible.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [61]

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Sir, so both kinds of promotions, either it is modern trade and it is a general trade or it is a consumer-led promotions, incentivizing, These are all part of the overall strategy, right? But sir, has that increased? I mean my point is has that increased?

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Mohan Goenka, Emami Limited - Wholetime Director [62]

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Yes. It has increased, it has increased, yes.

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Gaurav Jogani, Axis Capital Limited - Assistant VP [63]

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Any number, sir, you would like to put on that as a percentage?

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Mohan Goenka, Emami Limited - Wholetime Director [64]

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Not, not really. But look, I don't have the numbers right now also, but overall, I know that promotions have increased.

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Operator [65]

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We have next question from line of Shirish Pardeshi from Centrum Broking.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [66]

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I have 2 questions. The first question is we have seen the investments has gone up. So if I look at the balance sheet, you have borrowed about INR 108 crores, and cash has decreased by INR 100 crores. So there is net investment of INR 200 crores. What is this investment is for?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [67]

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Shirishji, The investments are mostly into mutual fund liquid investments.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [68]

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My question is why we have borrowed? I mean if you see that, even interest cost has gone up.

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [69]

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Right. So mostly, we borrowed for some arbitrage benefits and requirement in our working capital. So there is surplus talk that surplus funds go some time in the liquid investments of mutual funds.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [70]

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Okay. Okay. That's helpful. And the second question I have is, we have been listening that there is an incremental liquidity pressure in the trade, and most of the companies have resorted by extending some credit lines. So is the company -- Emami has also done that? Or how are we looking at it?

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Mohan Goenka, Emami Limited - Wholetime Director [71]

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Yes. Shirish, we have also extended very small credit to few of our dealers for 7 days, so just to see how do we get the response, what response do we get, okay? And we have extend some bit of credit.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [72]

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Sir, is it because we have a large winter portfolio that's what -- because in past years, you have always said that we will never ever at all get into the credit cycle?

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Mohan Goenka, Emami Limited - Wholetime Director [73]

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I agree. This was primarily because we wanted to load the winter products.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [74]

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And on ground if you can help us to understand which region, I mean, the South and West to myself is doing better. But this credit facility or the slow down is more pronounced in the North and maybe to some part of East?

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Mohan Goenka, Emami Limited - Wholetime Director [75]

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Also -- Shirish, our winter portfolio also sells in the North and East, so it was primarily, as I said, to load our winter products because October month was too many holidays, almost I think 14 or 15 days were holiday.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [76]

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Yes. The next question is if you can give some color of where we are in terms of wholesale contribution and distribution expansion? And where we are seeing next 2 quarters we will pan out in terms of distribution?

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Mohan Goenka, Emami Limited - Wholetime Director [77]

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Distribution, I had mentioned that we are done with our distribution expansion. We are at 950,000 outlets now. We have put a stop at 950,000 for the time being. And wholesale contribution presently is that almost 33 -- almost 38% to 40%, it hasn't changed much. So...

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [78]

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So my question was more when we have seen that pre-GST or pre-demonetization, it's was much higher. And right now, we're at 40%. So does that mean, the wholesale trade is still struggling to come back or there is some consolidation in the wholesale trade is happening?

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Mohan Goenka, Emami Limited - Wholetime Director [79]

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So what is happening, Shirish, that there is this cash and carry also is disturbing some of the wholesale markets because of the price. So it is -- I don't think it is more GST, it is more the modern trade, which is disturbing the wholesale trade. So -- but overall, yes, there is still some pressure at the wholesale level.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [80]

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So do we deal with this cash and carry? And what is the percentage for you to be get out of this?

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Mohan Goenka, Emami Limited - Wholetime Director [81]

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No. We can't get out of this because these are emerging channels. We will have to deal with it. We only have to see how can we balance it out.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [82]

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No. What I'm trying to get a sense that earlier our wholesale -- traditional wholesale is to contribute roughly about 55% to 60%. And this new cash and carry is replacing, becoming as a organized wholesale. What kind of share you would have got it where we have lost from the traditional wholesale? Is that helping us? Or is that a worrying us?

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Mohan Goenka, Emami Limited - Wholetime Director [83]

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So this cash and carry would be about 4% to 5% of our sales, okay? But even that small 4%, 5%, it disturbs the overall wholesale market because of the price.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [84]

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Okay. And largely, what kind of -- I mean, do we have difference in pricing the way we sell the modern trade and e-commerce and promotions and activity to make this organized?

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Mohan Goenka, Emami Limited - Wholetime Director [85]

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We don't have much differential pricing, Shirishji. But at times because we have to give some promotions and offers and displays, so that will get discounted in those channels.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [86]

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Okay. Okay. Okay. Just last one bit on international. I mean we have seen that CIS country, and then we have seen some pressure in others parts of Africa. Do you think from last -- first half perspective, the second half would be similar or would be painful or would be better?

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Mohan Goenka, Emami Limited - Wholetime Director [87]

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No. Second half in international would be even better than what we have delivered in the first half.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [88]

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That is because of winter portfolio.

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Mohan Goenka, Emami Limited - Wholetime Director [89]

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Yes, yes, yes.

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Operator [90]

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We have the next question from the line of Naveen Trivedi from HDFC Securities.

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [91]

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Sir, my question is on your -- you mentioned that consumer offtakes were higher than your primary number. So is it possible for you to give us some sense about how the consumer offtakes for your key brands? And can we expect it will drive your primary in third quarter?

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Mohan Goenka, Emami Limited - Wholetime Director [92]

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Sorry, how your consumer...

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [93]

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You mentioned that consumer offtakes for most of the brands were higher than your primary number.

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Mohan Goenka, Emami Limited - Wholetime Director [94]

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Market share. Yes, market shares were higher, right?

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [95]

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When you say consumer offtakes, it means the primary growth -- subsidiary growth was higher then your primary growth, correct?

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Mohan Goenka, Emami Limited - Wholetime Director [96]

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Yes. I've quoted the Nielsen numbers. The market shares have gone up in almost all the categories as you would see.

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [97]

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Okay. So it's not that consumer offtakes have grown faster than the primary numbers. I'm trying to understand maybe the retail offtakes have grown faster than your primary numbers and it might be supporting for your third quarter performance.

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [98]

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So yes, Naveen, so the point is that within our categories, we have not underperformed. So within the category, we have grown better, so we have gained market share from most of these categories, balms, even Kesh King and BoroPlus, which you mentioned, even Fair and Handsome. So we gained market share across, so -- because the macro environment was not favorable, our primary offtakes were lower. But as per Nielsen, we have gained market share across in these categories.

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [99]

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So you outperformed the market, but I was trying to understand from the offtakes point of view.

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Mohan Goenka, Emami Limited - Wholetime Director [100]

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No, but categories also got impacted because of the overall little discretionary environment.

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [101]

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Fair point. And you also mentioned that other expenses had some one-off of INR 5.5 crore. So even if you exclude that number, the other expense is still up by 12%, which is much stronger than your revenue growth. So any comment on that?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [102]

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So which -- Mohanji mentioned earlier that we had also spent some of the strategic initiatives, which is for some consultants on cost rationalization project and some other marketing initiatives.

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [103]

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So is it possible for you to share those numbers? Because I think since last 1 or 2 quarters, we are paying this many to consultants.

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [104]

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So the cost to these various consultants would be in the range of around INR 5 crores, INR 6 crores for this quarter.

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [105]

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Okay. And do you think it will continue in the coming quarter also, Rajeshji?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [106]

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Yes. It would continue in next 1 or 2 quarters at least. Next year, we have to plan everything. This is what benefit you will see this year.

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Naveen Trivedi, HDFC Securities Limited, Research Division - Research Analyst [107]

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Fair point. And sir, is it possible for you to share how has been your urban-rural growth this quarter?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [108]

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So urban and rural were mostly similar this quarter. First quarter -- in the first quarter, we have seen urban growing at a faster pace than rural, but in the second quarter, both urban and rural have grown at a similar pace.

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Operator [109]

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We have next question from the line of Kunal Vora from BNP Paribas.

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Kunal Vora, BNP Paribas, Research Division - Analyst [110]

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Just one question. Last quarter you had mentioned you expect the growth rate about 9%, 10% for the remaining 3 quarters, this quarter, although still a little bit lower. Can you share your thoughts on the next 2 quarters? How do you see things? Any green shoots you are seeing, any pickup in rural demand that you're seeing?

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Mohan Goenka, Emami Limited - Wholetime Director [111]

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So Kunal, as I said, it's early for me to comment because we are now oddly dependent on the winter season, okay? So if the season works out to be very good, then I'm sure we would be able to achieve the 9%, 10% growth in the second half. But if the winter doesn't set in, then we would have to struggle, everybody struggles. So let's wait. I think the winter has just started in North and in the East, just have to wait for some time.

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Kunal Vora, BNP Paribas, Research Division - Analyst [112]

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And what's the contribution from sachets now? It used to be 25%, 27% 2 years back.

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Mohan Goenka, Emami Limited - Wholetime Director [113]

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Still the same. It is still the same.

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Kunal Vora, BNP Paribas, Research Division - Analyst [114]

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Still the same. Okay.

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Mohan Goenka, Emami Limited - Wholetime Director [115]

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Sachets, yes, you were -- good that you raised. So I think sachets demands are increasing, I'm seeing that in the last 40, 45 days.

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Operator [116]

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We have next question from the line of [Neha Dhoot] from ICICI Bank.

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Unidentified Analyst, [117]

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Sir, wanted to know are we placed in reducing the current promoter pledge situation?

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Mohan Goenka, Emami Limited - Wholetime Director [118]

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So Neha, from the last that we had published, our pledge was almost 68%, 69%. As on date, it is almost 63%, so 63.5%. So you consider this a good reduction in the pledge levels. And as I have always mentioned, we are committed to bring it down to 0 levels. And hopefully, we'll get to hear some good news in the next 2 quarters.

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Unidentified Analyst, [119]

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Great sir. Sir, just one more question. Sir, if you can give me some sense on the CapEx, which is lined up for the next 2 quarters or next 1 year.

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Mohan Goenka, Emami Limited - Wholetime Director [120]

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Now there is hardly any CapEx. It is only ongoing CapEx because the big CapEx are almost done.

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Operator [121]

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We have next question from the line of Harit Kapoor from Investec India.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [122]

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Yes. My question has been answered.

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Operator [123]

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We have next question from the line of [Vishal Duniya] from Nirmal Bang.

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Unidentified Analyst, [124]

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This quarter we had seen a very sharp growth in CSD channel. So excluding CSD, what would have been our growth in domestic value as well as in volume terms?

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Mohan Goenka, Emami Limited - Wholetime Director [125]

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So in -- overall, the revenue growth was 2%, and volume was flat.

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Operator [126]

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We have next question from the line of Riken Gopani from Infina Finance.

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Riken Gopani, Infina Finance Private Limited - VP [127]

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I just wanted to understand with regards to these consultants that were appointed, and we have some costs related to, apart from cost reduction, what are the outcomes which we are trying to work with from these consultants?

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Mohan Goenka, Emami Limited - Wholetime Director [128]

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So there are many. We are trying to improve -- on the supply chain side, we are working with one of the consultants. On BCG, we are working on Male Grooming and on Kesh King and all these brands. With A.T. Kearney, we are working on cost reduction. So there are multiple consultants working for different projects.

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Riken Gopani, Infina Finance Private Limited - VP [129]

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Okay. And then sir, if you could highlight sort of what duration projects, and when do you see any material outcomes to be measured from (inaudible)?

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Mohan Goenka, Emami Limited - Wholetime Director [130]

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So some projects have just started, just kicked off in the last month only. So I think in the next 2 to 3 quarters, we would see some reduction on the cost side. That's why I'm saying we are optimist that there could be a margin expansion if everything goes on well.

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Riken Gopani, Infina Finance Private Limited - VP [131]

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Okay. Okay. Got it. And sir, the second question which I had was with regards to Navratna, there also you've seen a decline in revenues. So if you could share some thoughts on what is driving the same, and you've not highlighted that as the discretionary category. So in that sense...

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Mohan Goenka, Emami Limited - Wholetime Director [132]

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It is hardly -- sorry, you are Vishal, right?

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Riken Gopani, Infina Finance Private Limited - VP [133]

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Riken.

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Mohan Goenka, Emami Limited - Wholetime Director [134]

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Yes. So see, the decline was 3%, and it was mostly because we pushed too much of the winter products, so it (foreign language). Otherwise, I don't think it is much of a worry. If everybody stocked BoroPlus and BoroPlus grew at almost 38%, 39%, the orders of Navratna came down slightly.

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Riken Gopani, Infina Finance Private Limited - VP [135]

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Okay. Okay. So that you -- you expect that to normalize?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [136]

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Yes, yes. It is very normal. It's not much of a botheration.

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Riken Gopani, Infina Finance Private Limited - VP [137]

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Okay. But did the higher stocking of BoroPlus this year in this quarter compared to this would have probably happened in Q3, has a positive impact on your operating performance as well? Because I would assume, BoroPlus would have a relatively better operating margin structure. If you could share your thoughts on that.

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [138]

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(foreign language) BoroPlus has good margins. So -- and we have -- we got these numbers, but let us see. If the winter sets in nicely, then the stock will really go. October month was a weak month as far as the country is concerned because there were too many holidays in the October month. That's why we had to put the stocks because Diwali was falling of the last days on October, you understand?

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Riken Gopani, Infina Finance Private Limited - VP [139]

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Right.

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Mohan Goenka, Emami Limited - Wholetime Director [140]

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So most of the billing happens in the last week. So we had to put it in the last month. Otherwise, winter is a very short period, no? We have to put all our stocks in the market, which would happen in October, we had to put it in September. Yes. Otherwise, we would have lost INR 20 crores, INR 25 crores of business.

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Operator [141]

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We have next question from the line of Anubhav Sahu from MC Research.

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Anubhav Sahu, moneycontrol.com, Research Division - Research Analyst [142]

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A couple of questions. One is a follow-up on the promoters pledge holding. So wanted to know if there's any plan under discussion to further reduce the same in terms of maybe stake sale or monetization of group companies? Anything under discussion which you can comment on?

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Mohan Goenka, Emami Limited - Wholetime Director [143]

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I can't discuss what exactly we are doing. I have been very clear. We are committed to bring the pledge down to 0. As I have maintained that things are progressing very well to monetize some of our noncore assets. Whenever that happens, as I said, next to -- in the next 2 quarters, hopefully, we'll get to hear some positive numbers, okay? Pledge had also come down from 69% to 63%. There is no question of any further stakes sale as far as Emami is concerned, okay?

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Anubhav Sahu, moneycontrol.com, Research Division - Research Analyst [144]

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Okay. Okay. Got it, sir. Sir -- and when we look at the general trade channel level, so wanted to understand that -- could you tell us what is the growth in urban and rural areas, just looking at the general trade level? Overall you have...

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Mohan Goenka, Emami Limited - Wholetime Director [145]

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Flat because there has not been much growth. Company only we have grown at 1% or 2%. Yes, the growth has been very similar in urban and rural.

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Anubhav Sahu, moneycontrol.com, Research Division - Research Analyst [146]

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Okay. So I mean, I wanted to understand from -- basically I am coming to this point that if I well understood that liquidity crunch has been a reason behind the slowdown or drag in general trade channel. And -- but want to understand that if the urban trade channels also disproportionately impacted by the role of cash and carry kind of format. So in that sense, probably urban trade channel is more -- a larger issue of slow down compared to rural ones.

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Mohan Goenka, Emami Limited - Wholetime Director [147]

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Yes, but it happened in the last quarter where urban grew faster than rural. In this quarter, the growths are similar. So our rural has caught in up a little bit to urban. It is a good sign. If rural bounces back, we would see some good numbers coming forward and in the coming quarters.

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Anubhav Sahu, moneycontrol.com, Research Division - Research Analyst [148]

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Got it. And sir, as of now, how much would be share of rural, say, from an -- it used to be around 40%, 45%?

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Mohan Goenka, Emami Limited - Wholetime Director [149]

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No. Rural for us was almost 54%, 55%.

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [150]

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54%, 55%.

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Mohan Goenka, Emami Limited - Wholetime Director [151]

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Yes. Rural is slightly more than urban for us.

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Anubhav Sahu, moneycontrol.com, Research Division - Research Analyst [152]

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Okay. And sir, how much is the modern trade channel?

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Mohan Goenka, Emami Limited - Wholetime Director [153]

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Modern trade now is about 9%.

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Anubhav Sahu, moneycontrol.com, Research Division - Research Analyst [154]

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9%, okay.

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [155]

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Driven by 4% discount.

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Mohan Goenka, Emami Limited - Wholetime Director [156]

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Yes, yes, yes.

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Operator [157]

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We have next question from the line of Abhijeet Kundu from Antique Stockbroking.

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Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [158]

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Mohanji, from this floods happened in Bihar, Jharkhand, any impact of that in your sales, any disruption in the distribution, anything on that during the quarter?

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Mohan Goenka, Emami Limited - Wholetime Director [159]

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Not very material, no.

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Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [160]

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And what are...

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Mohan Goenka, Emami Limited - Wholetime Director [161]

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(foreign language). It happened in October, not in quarter. (foreign language).

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Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [162]

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Secondly, effective tax rate for the full year, what could be that?

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Mohan Goenka, Emami Limited - Wholetime Director [163]

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It will be roughly about 19%. Yes, 19%.

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Operator [164]

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We have next question from the line of Shirish Pardeshi from Centrum Broking.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [165]

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Rajeshji, I have a question for you. Since we have got the fiscal benefits which has been announced in the corporate tax rate, Mohanji, you just mentioned that it is about 19%. But I'm sure we have the MAT credit, and these other things. So can you guide the future how the tax rate one should look at and what we should factor in?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [166]

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So yes, Shirishji, we do have good amount of MAT credit. And also our major plant, which is Pacharia in Guwahati enjoys tax holiday for another 6, 7 years. So we expect to be -- remain in the MAT for at least 5 years plus, so which means if you would pay 17% of tax on our standard on profitability. So overall, lower tax rate going ahead for 5, 6, 7, I think should be around 19%, 20%, including our subsidiaries?

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [167]

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That's on consol basis?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [168]

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Yes, on consol basis.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [169]

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Sure. Sure. And is there any plans that because government has announced some new capacity where we can get the further benefit? So now I believe that we have chosen that because we have a MAT credit, we will take the benefit of MAT and not get into the new capacities?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [170]

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Right. So new capacities, we have to plan it out. As of now, we have not -- we don't see any need for new capacity immediately for -- in next one or 2 years, but we have to plan it out. So we have to see -- and these plants are also are for new companies. The listing companies which opens new plants will not get tax benefits. So those moralities you would also have to see.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [171]

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Last one question. I mean I heard Mohanji talking about there is a pessimism and there is a slowdown, which is there in hair oil category. But is that per se the premium which we have seen that it is happening -- the slowdown is happening in noncoconut segments much faster and then amla is growing much faster. Is that specifically for us in terms of 7 Oils in One, which is not affected yet because of the low base, but this is more pronounced on the cooling oil?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [172]

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Because 7 Oils in One is a very, very young category and a very new brand, very small base in India. So I think on a smaller base, we are not getting that impact and then it still manages to grow despite this challenging environment.

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Sushil Kumar Goenka, Emami Limited - MD, CEO & Executive Director [173]

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What I'm trying to get a sense Rajeshji, that I can see that Navratna oil is very strong. It will be Central India and U.P., Bihar. But then South, I don't think there is a slow down in the hair oil. So is that your experience that even Navratna is also slowing down in South Markets. I mean for us South market is not that big but I'm saying from the consumption perspective, you said that there is a challenge for discretionary items offtake.

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [174]

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Yes. Shirish, you are right that Kesh King because of the price, we are seeing the pressure. Navratna, I'm not seeing much of a slow down in any of the markets.

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Mohan Goenka, Emami Limited - Wholetime Director [175]

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And so sachet demand is on the rise for almost all the brands.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [176]

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So maybe what you are trying to say that people have not stopped using the brand but they're downscaling the size of the product what they are buying.

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Mohan Goenka, Emami Limited - Wholetime Director [177]

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Yes. Absolutely. Not at all they have stopped using the brand. We are seeing (foreign language) people are shifting to some cheaper options that is -- definitely down trading is happening. Kesh King would get impacted in these times when consumer cut cost.

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Operator [178]

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We have next question from the line of Prakash Kapadia from Anived Portfolio Managers.

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Sushil Kumar Goenka, Emami Limited - MD, CEO & Executive Director [179]

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Yes. You've seen a spike in other income. Any one-offs there?

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [180]

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So if you look at our interest costs also, they've also gone up, so both interest paid and interest received in other income has gone this quarter.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd - Principal Officer [181]

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Is it because of the arbitrator that you mentioned? So...

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Rajesh Sharma, Emami Limited - SVP of Finance & IR [182]

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Yes. Yes. That is one reason. And also we have sold some of our land parcel, so there is some profit on the sale of assets also to the tune of roughly INR 3 crores.

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Operator [183]

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(Operator Instructions) As there are no further questions, I now hand the conference over to Mr. Percy Panthaki from IIFL Securities for closing comments. Sir, over to you.

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Percy Panthaki, IIFL Research - VP [184]

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I would like to thank Rajeshji and Mohanji for giving us the opportunity to host the call. Best of luck, sir, for coming quarters and your future endeavors. Over to you, sir, if you would like to add any more comments.

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Mohan Goenka, Emami Limited - Wholetime Director [185]

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Thank you, Percy. Thank you, IIFL, for arranging this call. And I thank you all the participants for joining us for this -- our -- on our second quarter earnings call. Thank you.

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Operator [186]

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Thank you very much, sir. Ladies and gentlemen, on behalf of IIFL securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.