U.S. Markets close in 2 hrs 53 mins

Edited Transcript of MARICO.NSE earnings conference call or presentation 25-Oct-19 12:30pm GMT

Q2 2020 Marico Ltd Earnings Call Hosted By Axis Capital Ltd

Mumbai Oct 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Marico Ltd earnings conference call or presentation Friday, October 25, 2019 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Saugata Gupta

Marico Limited - MD, CEO & Executive Director

* Vivek Anant Karve

Marico Limited - CFO

================================================================================

Conference Call Participants

================================================================================

* Abhijeet Kundu

Antique Stockbroking Ltd., Research Division - Analyst

* Amit Sinha

Macquarie Research - Analyst

* 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

* Krishnan Sambamoorthy

Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG

* Percy Panthaki

IIFL Research - VP

* Tejash Shah

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

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, good day, and welcome to Marico Limited Q2 FY '20 Investor Conference Call hosted by Axis Capital Limited. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Gaurav Jogani. Thank you, and over to you, sir.

--------------------------------------------------------------------------------

Gaurav Jogani, Axis Capital Limited - Assistant VP [2]

--------------------------------------------------------------------------------

Good evening, everyone. On behalf of Axis Capital, I would like to welcome you all. From the management team today, we have with us Mr. Saugata Gupta, MD and CEO, and Mr. Vivek Karve, CFO.

Before we get started, I would like to remind you that the Q&A session is only for institutional investors and analysts. And therefore, if there is anybody else who's not an institutional investor or analyst, but would like to ask questions, please directly reach out to Marico's Investor Relations team.

With that, I would like to hand the call over to the management for the opening comments.

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [3]

--------------------------------------------------------------------------------

Yes. A very good evening to all those who have joined the call. We would like to start with a quick commentary on the quarter 2 performance and our outlook for the balance year. Our performance in Q2 was a mixed bag, disappointing in terms of domestic volume growth, while being satisfactory on the margins and market share front as well as to an extent, International business. There was a significant slowdown this quarter versus both [MAC] and quarter 1, in both the coconut oil and the VAHO category growth. This slowdown was far significant in rural. And a similar trend has been witnessed in some of the other large categories in FMCG this quarter. A large part of it was due to consumption slowdown, especially in rural and also because of channel liquidity issues, especially in wholesale, further aggravated by stress in urban GT systems, owing to lower demand and pressure from newer channels.

Offsets for us grew ahead of primary and secondary growth, which indicates a lower stock holding in trade, especially in wholesale and rural. While we've gained share in both of these categories, we have reasons to believe because of the trends in category growth in branded coconut oil and Value Added Hair Oil, especially in rural which has been slightly negative, that there is a certain slowdown in upgradation from unorganized to organized in certain cases. There could have been a case of down gradation from branded to loose in our core categories.

In line with the overall FMCG trends, the food business bucked the trend in terms of growth while premium personal-care and business exhibited slow growth. Overall, for half 1, our volume growth is 4%. While being lower than our medium-term aspiration, this growth is broadly in line with the average sector volume growth in HPC and offtakes. We continue to be invested behind A&P, A&P increased 12% and capability, and we'll stay on course on our strategy for the balance year, other than some pricing intervention, which we'll talk about later to boost growth.

In the International business, Bangladesh continuing to exhibit robust growth, while the rest of the businesses are flattish. The diversification of portfolio and capability driven growth will continue in Bangladesh. While there are some demand issues in MENA and South Africa, we need to bring Southeast Asia business back into growth for H2. All this should ensure a steady profitable growth for the International business for the balance year.

Let me now get into some details on the India business. We started this quarter with a in-line growth in July and that was the time we spoke to you some time in the first week of August,

(technical difficulty)

the previous Board meeting, post the call and the previous Board meeting. In the first week of August, we experienced significant disruption due to floods in our high-contribution markets of Maharashtra and South, which further accelerated the slowdown, and we had a decline in August. During July, we also had the lowest copra prices, which accelerated some of the down gradation or slowing of the upgradation because we hadn't taken any pricing correction.

We had a slight recovery in September in the overall volumes and the trend continues in October. While Parachute declined 1% this quarter, half 1 volumes are in line at 5%. We're in the process of looking at some focused pricing calls to make the conversion packs more attractive amongst heavy consumers to encourage a [switch] back in some of our core markets, which we should be able to implement in the next couple of weeks.

This should get us back slowly into our medium-term growth numbers for this quarter and the next quarter. The slowdown, especially in rural, along with our tepid performance in some of our premium brands have slowed our growth in Value Added Hair Oil. The silver lining is a share gain in our performance in Amla, Aloe Vera, and the initial encouraging signs in our Almond Plus Walnut oil, which we call Dry Fruit Oil. We are expecting some recovery in H2, and some of the work we have to do in some of our premium brand equity. Saffola continues to be an issue. Saffola, as you know, operates in the premium niche of refined edible oil that got further impacted due to being slightly discretionary given its price premium. At the same time, we have had better mix during the quarter, which led to a value growth of 5% as opposed to volume growth of around 1% or 2%.

We are in the process of sorting out our assortment strategy across channels, and we are also simultaneously planning a significant distribution drive in our 1-liter packs to get back some incremental volume growth in H2. Male Grooming got impacted, especially in LUP packs. As you know, that category is discretionary and most of the LUP packs are sold in semi-urban and rural towns and therefore it got impacted. We are, therefore, focusing on premiumization with wax and male serums in H2, which should lead it back to growth.

However, Foods and Premium Hair Nourishment did well considering they are more urban and alternate channel-driven categories. We have started key large initiatives in our go-to-market by redeploying things. First, improving partner profitability in GT, especially urban; secondly, converting nonperforming trade schemes into consumer advantage pricing to drive offtakes instead of channel loading because, as you know, the channel liquidity is a problem; and thirdly, having driving differentiated assortments across channels to reduce channel conflict and drive incremental sales in alternate channel instead of cannibalistic sales. All these initiatives, along with our continued focus on new channels, will help in improving our performance in Urban.

We're also expanding our rural infrastructure of distributors and stockists and we'll continue to invest behind rural distribution efficiency. And once the consumer sentiment improves, we should be able to leverage this for rural growth.

In our International business, we're confident of maintaining the momentum in Bangladesh while getting us here back into decent growth in the second half. We expect a very moderate growth in the balanced market. While margins continue to be healthy a constant currency growth of high single digits to 10%-plus is possible in the second half.

While immediate consumer sentiment continues to be weak, along with liquidity crunch, and the fact that some of -- while the monsoon has been good, some of the late phase might have had some impact on some of the crops. We expect to stay invested in both innovation and GTM. We will obviously redeploy some of our spends into pricing at the bottom of pyramid and to the core brands to get them back into growth. We also expect at least 3 new products, mainly Dry Fruit Oil, the new food, which is FITTIFY and Coco Soul and Kaya Youth to get -- exit critical mass year-end. We hope to get back into mid-single-digit growth in H2 in India if the consumption situation improves and clock at least 8% to 10% constant currency growth in the International business. We will continue to invest beyond A&P and the A&P is expected to grow. The input cost situation is comfortable and hence a 19%-plus margin appears achievable.

Thank you for your patient listening, and we're happy to take questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question is from the line of Amit Sinha from Macquarie.

--------------------------------------------------------------------------------

Amit Sinha, Macquarie Research - Analyst [2]

--------------------------------------------------------------------------------

My first question is on the overall segments. And if I look at all the 3 key segments in India, broadly if I look at Parachute, in the last 3 years, you have delivered the intended volume numbers. Similarly in Saffola, while there have been problem, but it has been clearly called out. But what kind of -- something which I'm not able to understand is VAHO, which clearly has struggled in the last 3 years and there has been different reasons. But versus what we expect and what has been your guidance even for the medium term has not been achieved in the last 3 years. Just wanted to understand, has there been a significant change in the segment dynamics or the competitive intensity in the segment, which is leading to lower growth compared to what is the guidance in the sustained period of time?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [3]

--------------------------------------------------------------------------------

Okay. So I think you're absolutely right. I think the last 2 years have been average growth of 4% to 5%, 5% growth in VAHO and which has fallen short of guidance which we have given. Now while not getting into specific reasons, I think both in '17, '18, we had 1 significantly bad quarter, first with demonetization; secondly, on in terms of GST; and then there was obviously competitive action at the Bottom of Pyramid, which led us to a certain growth pattern, which was lower than our obviously guidance of double digits.

The second thing which happened, as I said, is some of the premium brand did not fire, which is basically other than Aloe, some of things in hair fall and some of the premium brands like Hair & Care, which didn't do well. If you look at the last 3 years, I don't think we have lost market share. The only thing that has happened is, unlike the broad-based 3, 4 brand-driven growth that happened. And if you take -- to keep aside the quarters of GST and demon, the growths have been 7 instead 12%, 13%-plus is because of the fact that a significant portion of the growth has been only led by Amla and to an extent by Aloe, which has been in the 2 years versus 11 to 17 while Amla had a significant growth, you have 3 other bands which have been growing at a rate which was almost nearly double digits. So I think that is the issue, which has got -- was compounded by the fact that even this quarter, I'll just wonder, VAHO growth, especially in the category growth, especially rural, as you know, Value Added Hair Oil has a rural skew. And if you look at the recent numbers of the categories and FMCG growth, the biggest affected rural has been the area of North and East, which has been also our VAHO stronghold. So VAHO, I think that is the reason why we have got impacted in terms of the fact that our impact has been mostly in the rural of the North and East.

Having said that, I think we have a task to do in getting some of our internal issues in 1 or 2 brands, which is our participation and lack of participation in hair fall in most of the other part of the country, other than South. And 1 or 2 other brands which have not been doing well. They are essentially not just external issues, but some of the petty issues which we are going to solve.

So I think, having said that, we know what to solve for it. I think we know most of the answers to solve for it, and we need some, obviously, tailwind in market growth because, just to give you a perspective of the VAHO growth -- VAHO market category growth, I can share with you some of the numbers.

The math growth of the category was 8%. In terms of the April, May, June quarters, the category growth was 5%. The July, August, September category growth has been 0%. And actually, rural, it has been, actually, minus 1.1%. So I think some of the factors are external, and we have to do certain things which are internal. So that should lead us back into some growth. Yes, I think in terms of the medium-term guidance, I think, in the last 2 years, we have failed to deliver that medium-term guidance. But I would think that, if the category growth gets back into 6%, 7%, there is no reason for us to start growing ahead of the category because we have been growing share. And secondly, now we are participating in both Bottom of Pyramid and also, the top end in Aloe and some of the initial [sounds] in Dry Fruit Oil, which is the Walnut Plus Almond oil being reasonably satisfactory.

--------------------------------------------------------------------------------

Amit Sinha, Macquarie Research - Analyst [4]

--------------------------------------------------------------------------------

Okay. Sir, thanks a lot. And second question is on the overall growth. And basically, just wanted to understand that even Nielsen has called out a number, which is close to around 6%, 7% for the market. And broadly -- now the other companies are broadly around that kind of a number. Just wanted to understand, is it a very, very quarter-specific issue where in our growth rate, or I mean, the categories where in obviously you've gained market share, so there is no market share issue.

But the category growth rates where we operate in, they have grown significantly slower compared to the market. So just wanted to understand, is it a quarter-specific issue because the pipeline pending which you kind of indicated in the opening remarks, I think, has it been more for you guys compared to the markets overall? Some color on this will be very, very helpful.

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [5]

--------------------------------------------------------------------------------

So just to give you on this one, I'm talking volume growth and not value growth. And these are the Nielsen number, the HPC volume growth rate for -- which is the July, August, September quarter, has been 2% and the rural growth is even lower. Now you have to look at from an overall H1 point of view, the H1, our volume growths are still in the region of 4%. Number two, even in quarter 2, our offtake growths are in the region of higher than what the category growths I spoke about. Anything is in -- I will -- I can broadly tell you we are in the region of 3%, 4%.

Now coming to the -- what I say what is unique, you have look at from a H1 point of view. Secondly, I think, perhaps, in our case one of the things we have to do better and we're started doing is our open GT has got affected significantly because also our -- we have to sort -- we are sorting out our channel assortment strategy. Unlike some of our companies, we don't have such a strong premiumization portfolio, but our alternate channel contribution has been significant.

And therefore in the absence of what I call significant inflation-led growth, the urban GT thing has got significantly challenged, and there has been some infrastructure imbalances and issues in urban GT. So as a result, if you look at it, while yes, the rural thing has reduced significantly versus quarter 1, where we had a significant rural contribution, the urban GT number has been negative 11%. I think that has been one -- if you want to ask me what is different versus other organizations in terms of this one and (inaudible) urban GT number of minus 11%, we have had -- we are looking at some alternate models of distribution in terms of supply chain and zero this one. So we are taking some time and that has been a single discriminatory number, which is perhaps different.

--------------------------------------------------------------------------------

Amit Sinha, Macquarie Research - Analyst [6]

--------------------------------------------------------------------------------

Got it, sir. I think before GST implementation also, I think there was some higher kind of channel pipeline pinning for Marico compared to rest of the industry probably. Yes, I mean -- that answers my question.

--------------------------------------------------------------------------------

Operator [7]

--------------------------------------------------------------------------------

The next question is from the line of Percy Panthaki from IIFL.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [8]

--------------------------------------------------------------------------------

My question is on Parachute pricing. Copra price has fallen quite a lot, and we are enjoying huge gross margin benefits here. And our volume growth is sort of -- our volume has actually declined by about 2%. The decline is actually a little more sharper than what we've seen in VAHO, which is flat.

But on the other hand, VAHO, which does not have such a big decline in the input costs, market has seen a 6% pricing decline this quarter Y-o-Y, and Parachute had seen only about a 3% decline Y-o-Y. So my question is, in this context, wouldn't you have been better off passing on some more pricings in Parachute Coconut Oil to the consumer and getting a better volume growth there?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [9]

--------------------------------------------------------------------------------

Yes, okay. First, let me just -- you're absolutely right. First I think let me just explain the Value Added Hair Oil before I talk to you about Parachute. The Value Added Hair Oil is because of the fact that last year this quarter, we have taken a price increase, which was anticipated because of crude going up and all that. And then we took a price drop in June of around 5%. And that is the reason that there is a difference of minus 6%. It's more of anniversarization not happening. So it is not a -- it was a price drop of the last quarter and a price increase that was taken this quarter, which is Q2 of last year.

You are right on Parachute. I think we perhaps underestimated because of the fact -- I think we took that call because we said in our post-GST scenario, local players are disadvantaged, and the fact that they didn't have liquidity, enjoyed a very significant growth rates of 9%, if I'm right, in quarter 1. And therefore that is the reason still the H1 growth is 5% in line with medium-term growth aspirations.

We also had this situation, as I talked about, during around 40 days in this quarter while actually the copra prices had gone further down. It was sometime in July first week -- June second week to around August first week, which ensures that a lot of -- we were priced to certain advantage in some of these markets. Thirdly, if you look at the pattern of floods, which led to supply chain and other disruption, a significant portion was in Parachute strong markets of Maharashtra, South Maharashtra, Pune belt, Karnataka, Kerala are not Parachute-strong markets.

So yes, had we taken a pricing action, we would have got back volumes. We are taking some actions, very selective actions, which are basically not to -- not for loyalty packs but for high for high -- for heavy consumer upgradation packs.

So we would be taking some action in the next couple of weeks. And as for current trends, also, we think we should get back Parachute volumes up into this medium term trend this quarter.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [10]

--------------------------------------------------------------------------------

Okay. Okay. And just to clarify on the VAHO part, so I understand the dynamics of the last year price increase and the recent price put in all that. But just to confirm, all that put together, how it plays out? Is that -- if you currently keep the prices unchanged, that is unchanged from today for the next 3, 4 months, then in the December quarter also on a Y-o-Y basis, the VAHO pricing would be negative by about 5%?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [11]

--------------------------------------------------------------------------------

Yes, 5%. So there'll be a 5% negative only if you drastically increase the mix. I think out of which I think the extra 1% is because we are now pushing a little bit of Bottom of Pyramid back while we are not really succeeded so much in our premiumization.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [12]

--------------------------------------------------------------------------------

Understood, understood. And can you give us an update in this kind of slow market environment? You had several initiatives, both in food as well as in skincare, hair care; you have the Kaya skincare range, which you're planning or have rolled out outside Kaya stores as well, then you have True Roots and then you have all the food initiatives. So how are all these things performing?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [13]

--------------------------------------------------------------------------------

So as I side, I think, in terms of performance, Aloe continues to do well. We believe that we will get critical mass on all types of new food, which is FITTIFY, Coco Soul, Dry Fruit Oil and Kaya Youth by the exit -- which is the exit mass. We should be able to get critical mass. In Male Grooming, I think the way to drive growth -- since the fact that as I said that we find styling and the slowdown discretionary in a lot of LUP packs, which are being sold in rural has got impacted. We will use waxes. It's a category which is growing, thanks to Gatsby. We'll be pushing that.

The rest of the things, which is True Roots and Crème Oil, we have been prototyping the -- we have not yet -- we believe that we have not yet met action standards in terms of getting the right mix to extend it. So as far as this one is concerned, I think, these 3 we are good to go. And in terms of Male Grooming, wax. So these are the things which are good to go. The rest is still in WIP, and we will continue doing. So the kind of trend which we're seeing in A&P growth, I think we'll see that A&P growth. And the fact that even if we take some pricing action, we'll be able to maintain that 19%-plus market.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [14]

--------------------------------------------------------------------------------

Right, sir. And any comments on what strategy you are going to adopt for the Kaya skincare range?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [15]

--------------------------------------------------------------------------------

So it's just available in modern trade in 1 or 2 cities because we are prototyping this along with our new-age GTM new channel, which is a dedicated channel of chemists, cosmetics. They are online only. They are being done in only 3, 4 cities right now. It's a limited GT thing. We are slowly trying to expand it. So as I said that, it will have some critical mass this year. The other capability, which we don't, 2 things, which we are building, which we don't have is one is, the top-end premium skincare visual merchandising and promoter beauty adviser promoter-based selling. And these are the capabilities we are driving. It takes time to develop this capabilities. So, therefore, I believe that for the next 6 months, we will develop this capability. Independent of that, I don't think we need to reduce our investment. And as I said, the one of the things we have done in terms of redeployment of investment, which will partially fund the Parachute price decrease is that when there is a liquidity crunch and the fact that wholesale basically channel stocking is low, doing disproportionate fake schemes to drive, trade -- stocking of trade is something which we don't want to do and give everything towards consumer advantage pricing.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [16]

--------------------------------------------------------------------------------

Understood. And this 11% decline in GT, which you mentioned that is across all product categories or?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [17]

--------------------------------------------------------------------------------

No. This is urban GT and as I said across all categories and that is because we are -- there are 2 reasons: One, it has been, in terms of, as I said that we are now taking steps to protect partner ROIs in cities where we have significant E-com and Modern Trade growth, and there has been no volume growth. Again, partner ROIs have got impacted. Number two is, we are experimenting with alternate supply chain models to -- for delivery, to retail outlets because that's a significant cost our partners take and that model, which we are trying with professional supply chain firms in Mumbai and Delhi to start with, that process is also taking time to stabilize.

So this is -- one is the change management and the other is partner ROI instability, which is also leading to then lower stocking and other thing. So we are, as I said, we have taken steps to ensure, coming from this next month onwards to ensure that we improve partner profitability and viability of urban GT.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [18]

--------------------------------------------------------------------------------

Right. So this 11% is a primary number, right?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [19]

--------------------------------------------------------------------------------

That's right.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [20]

--------------------------------------------------------------------------------

So the corresponding secondary number -- urban GT, but on a secondary basis, how much would that be?

--------------------------------------------------------------------------------

Vivek Anant Karve, Marico Limited - CFO [21]

--------------------------------------------------------------------------------

Percy, we report primary numbers, so I think, beyond this we may not be able to answer.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

The next question is from the line of Krishnan Sambamoorthy from Motilal Oswal.

--------------------------------------------------------------------------------

Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [23]

--------------------------------------------------------------------------------

Vivek, this is regarding the working capital. Now, I understand that there are problems with GT, but how do we look at the structure. I know -- hello...

--------------------------------------------------------------------------------

Vivek Anant Karve, Marico Limited - CFO [24]

--------------------------------------------------------------------------------

Yes, yes. We can hear you.

--------------------------------------------------------------------------------

Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [25]

--------------------------------------------------------------------------------

(inaudible) written in Y-o-Y. I mean I know there has been problems on the GT front. But on a steady state basis, is this likely to keep on increasing given that most of your new launches are urban and premium? And also, the alternates are likely to grow faster. And if so, then how do you mitigate that at the net working capital level?

--------------------------------------------------------------------------------

Vivek Anant Karve, Marico Limited - CFO [26]

--------------------------------------------------------------------------------

Yes. So you are right because if the Modern Trade and E-commerce business keeps growing and typically the receivable number of days would be higher there. So we are looking at some increase in the overall receivable days. But having said that, what we are also trying to do is, can we mitigate this impact through doing some innovative supply chain financing solutions, which is what we have been doing over the last 2, 3 quarters, which has a compensating impact on the overall working capital of the business.

--------------------------------------------------------------------------------

Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [27]

--------------------------------------------------------------------------------

Okay. See, we just -- what you pointed out has led to the increase in the trade payable days.

--------------------------------------------------------------------------------

Vivek Anant Karve, Marico Limited - CFO [28]

--------------------------------------------------------------------------------

You are right.

--------------------------------------------------------------------------------

Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [29]

--------------------------------------------------------------------------------

Okay. And anything on the inventory front that you could do?

--------------------------------------------------------------------------------

Vivek Anant Karve, Marico Limited - CFO [30]

--------------------------------------------------------------------------------

No. So as you know, on the inventory, we keep some strategic positions on some of the commodities that we buy. And that philosophy will continue even in the future. But quite separately the quest to reduce inventory on all other items is a continuous one, and we will keep at it.

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [31]

--------------------------------------------------------------------------------

And just to add, I think, we're also looking at, and as Vivek said that especially in our -- some of the -- even in post-GST scenario, there are opportunities for network optimization and different way of supply chain. You don't need to stop all the small SKUs and all the 26 nodes which we have and all that. So we are simultaneously working on it. We are aware of the fact that there would be things in our Modern Trade and maybe Modern Trade E-com growth. Having said that as far as other channel partners are concerned in traditional trade, our job is to make their ROI improving without just managing credit. There are other ways to improve their ROI.

--------------------------------------------------------------------------------

Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [32]

--------------------------------------------------------------------------------

Okay. And Saugata, the other question is regarding rural. You had outlined a 1.5 years ago of targeting 40% of sales from rural from about 30% then. I know there has been a slowdown in rural. But in terms of infrastructure building, how are we progressed on this front?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [33]

--------------------------------------------------------------------------------

Yes, I think we're continuing to target in some of the market. Especially in the north, we are still under-indexed. Our strength in rural is still continues to be in the South. So therefore that investment we are not cutting down.

See, we believe that this is a temporary. It's not a cyclical or a structural slowdown in the sector. It is a temporary. And therefore, if you continue to invest behind the efficiency of distributions and direct reach, in fact, you will continue to gain market share and tomorrow, you will be a source of competitive advantage. But the one channel which we are worried about long term is actually wholesale. And therefore in that process, just to give you some number, we have added actually 1,500-plus stocking this year, especially in the North and East, where, as I said, we are under-indexed.

And to an extent, it is also going to mitigate, as I said that, our biggest -- if I want to talk about our urban decline in minus 11%, the wholesale decline would have been slightly higher. So this is 1 channel which actually has got impacted because of both the combination of demand and liquidity.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

The next question is from the line of Tejash Shah from Spark Capital.

--------------------------------------------------------------------------------

Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [35]

--------------------------------------------------------------------------------

Sir, just for seeking a broader sense from your read of the ground reality of rural slowdown. So usually, we associate the rural slowdown with deficit rainfall scenario. But this year, that is not the issue. So we understand liquidity crunch at trade level. But why is rural consumer so much under-consuming?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [36]

--------------------------------------------------------------------------------

I think there is, in terms of money in the hands of both consumer and trade, it's less. And therefore, it is I think -- that is one of the things. If you look at some of the CAGR in terms of rural income, in terms of agriculture income, I think that is the issue. Second one, which, actually if you look at real wage growth in rural, the second one, while we have had a good monsoon in terms of volume of range, in terms of spread and especially the fact that the last September rain, which you've had actually can have an impact on some of the crops, especially in MP, Gujarat and some of the other, I think, markets where there were some unseasonal rains. So I think it's a real wage growth, real money in the hands and real money in trade. I think the combination of all 3, and I think as the government is taking steps in terms of some of the subsidy, which they're giving as a direct benefit transfer, it keeps on increasing. And some of the impact in the last week, MSP prices and all that and if you see the first signs of some inflation coming in, which will be some part is food inflation, which will be MSP-led, we hope there will be some kind of a gradual recovery.

--------------------------------------------------------------------------------

Vivek Anant Karve, Marico Limited - CFO [37]

--------------------------------------------------------------------------------

And Tejash, Vivek here. It appears that the rural slowdown is far more broad-based across FMCG and (inaudible) sector, so it's just not our category.

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [38]

--------------------------------------------------------------------------------

The only thing I want you to keep in mind and that is something which was a interesting insight we have done from -- in the case of coconut oil category, there is an always an alternative of still a 35% loose pool in a slowdown for a person to downgrade to. In some of the other categories, in the case of VAHO in the North, there could be a down gradation to mustard or something like that. So that opportunity is there, which might not be there in some categories also.

(technical difficulty)

--------------------------------------------------------------------------------

Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [39]

--------------------------------------------------------------------------------

Does this mean that the channels are also carrying lesser inventory than the optimum level? Or as our liquidity scenario improves, we'll have both the deltas coming that consumption also picks up and channel will also start stocking it up?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [40]

--------------------------------------------------------------------------------

Okay. So let me give you perspective. I think, if, I look at, and we've done these analytics of -- we had 1 channel de-stocking during demon, one channel de-stocking during GST, do we recover 100%, the answer is no. We don't recover 100%. And it's fine because one of the other things which we are doing is forcing us to change the way we do business because if you know that, a lot of investment in FMCG happens in trade spend, and therefore, that gives us a feedback to actually check that whether that -- and I think some of the companies have already done that is that the percentage you spend between trade spends and pricing, can we keep on increasing that component towards pricing and direct consumer advantage and bring infrastructure rather than trade spend? Because if your offtake doesn't increase other than price point packs, which are very, very distribution read, I think if you do direct -- invest behind direct distribution, it's okay even if -- wholesale especially currently has a lower kind of, what I call, stocking.

--------------------------------------------------------------------------------

Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [41]

--------------------------------------------------------------------------------

And sir, you mentioned in your investor update that your Modern Trade and E-commerce now contributes to 15% and 5%, respectively, of domestic business. What would be the same number for your urban revenue, the same contribution?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [42]

--------------------------------------------------------------------------------

So it will be, I think, mostly urban. So I think, it's -- therefore, if you really look at, it will be urban, so therefore the entire thing -- while it's difficult to say because, again, some of the B2B Modern Trade and B2B E-com and [subject] would be going to rural. So it's very difficult, but you can take a significant portion in urban.

--------------------------------------------------------------------------------

Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [43]

--------------------------------------------------------------------------------

So sir, in that context, do you think that the problem in urban GT is now structural because if MT and E-com are now lion share of your urban revenue and that is where the value migration is happening also from consumer perspective. So the intervention which we are planning to revive GT in urban is kind of lost cause from a structural perspective?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [44]

--------------------------------------------------------------------------------

Not really. I'll tell you, why because, I think, the question is 2 things, one is as I said that as you premiumize what kind of assortment you are selling into alternate channels versus GT. Number 2, I think what has also happened is that all the new products which we have launched -- we have invest -- I think disproportionately selling through alternate channels, we are now investing behind creating a chemist, cosmetic and specialty food, GT urban infrastructure to drive where we are completely under-indexed because our GT is, actually, technically a lot of groceries and a wholesale bias in our current GT.

--------------------------------------------------------------------------------

Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [45]

--------------------------------------------------------------------------------

And sir, lastly, on looking at copra prices sequential movement. Do you see any risk to your annual guidance on margins coming from copra movement?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [46]

--------------------------------------------------------------------------------

As I think Vivek mentioned, I think, 2 things: One is, we are more or less, is as you know, we have some reduced strategic position building. Number 2 is even our current forecast doesn't indicate any subject to some -- any natural calamities or anything. We don't -- there are no indications of any significant inflationary situation over the next 6 months at least, which gives us comfort to take some, as I said, pricing action to get back volume growth in Parachute without investing -- without compromising on margin.

Number two, as you know, that, I think, we will continue to have significant efficiency driven, we want great spend which will start funding some of these pricing calls.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of Bhakti Thacker from Investec.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

This is Harit from Investec. Just 2 questions. Firstly, you spoke about price interventions in Parachute, which will be selective. Any other pricing interventions we expect on the balance hair oil portfolio as well?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [49]

--------------------------------------------------------------------------------

No. So as I said, that the hair oil, we have taken a pricing intervention in July -- this June and July, so that pricing, I think, we have already taken. We don't see any pricing intervention. We might take selectively something on Parachute.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Okay. So apart from Parachute, there is nothing. The second question was because there was a period of time where copra came off quite sharply and then it's moved up back, again, a little bit. Do you believe that this significant, say, price reductions or whatever promotions or low pricing is happening at the unorganized or loose level or even at the regional level, that could kind of turn around very quickly as the price has kind of moved up to a slightly more sustainable base. So do you see some of -- my quick question is, do you see some of these issues kind of settling down on their own itself?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [51]

--------------------------------------------------------------------------------

Yes, you're right. I think, obviously as I said that in terms of this, as I said that July, August, was the time where 2 things happened. One, as I said, there was a flood in most of our Parachute strong market with a supply chain and a combination of market lowering of rates. So some of the problems, if I have to see the visibility of October has got sorted out by itself, you're absolutely right. Having said that, I think we need to accelerate growth. And since we don't have any stress on margins and the right pricing, this one, I think, it will be important that we actually use it to drive back growth because our first point of call is to do 2 things: One is, get back Parachute growth into the medium term. It's actually 5% still H1, Q2 is perhaps a little bit of an aberration. Second thing, getting back on VAHO growth. So these are the 2 big things. And as I said, focus on alternate channels for premiumization and the fourth focus is what I talked about, getting critical mass in -- besides Aloe, getting critical mass in DFO, Foods and Kaya Youth by exit mass. So these are the 3 -- couple of things which we are looking at.

--------------------------------------------------------------------------------

Harit Kapoor, Investec Bank plc, Research Division - Analyst [52]

--------------------------------------------------------------------------------

Perfect. Last question, very quickly, was on the new product portfolio. You spoke about the critical mass very clearly. But so do we see at least for the second half of this year a lot of the brand investments to go behind these new brands that you have put out and probably not too much more, which could come in because you've done quite a few things in the space over the last, say, 12 months or so. Is that the right way to look at it?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [53]

--------------------------------------------------------------------------------

Yes, yes, I don't think -- I think we have enough on our plate. It's important that we get success on what we do. And having said that, as I mentioned that, you will continue to see quarter-on-quarter, increase in A&P spend so that is something which we are not sacrificing.

--------------------------------------------------------------------------------

Operator [54]

--------------------------------------------------------------------------------

The next question is from the line of Kaustubh Pawaskar from Sharekhan Limited.

--------------------------------------------------------------------------------

Kaustubh Pawaskar, Sharekhan Limited, Research Division - Senior Research Analyst [55]

--------------------------------------------------------------------------------

Sir, my question is on the International market. We've seen Bangladesh is consistently performing well for you, and some of the other markets are yet to recover. Though Southeast Asia did well for you, but now, again, in Q2, we've seen muted kind of a growth. So -- and in your initial comment you mentioned that you're looking at recovering the growth in the Southeast Asia market, so what exactly you are planning to do in this market?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [56]

--------------------------------------------------------------------------------

So if you look at even Southeast Asia, I think, H1 growth is at 5% to 6%, and it has been something which there is nothing wrong in the market. I think Vietnam, especially which is our bigger market, so the Southeast Asia, significant portion comes from Vietnam, which is the GDP growth is more. I think there are some issues in some of the categories and this quarter. So we should be getting it back on growth. If we look at last year also, the growth to the -- quarter 1 growth had been around 8%, 9%. So I think, this is the -- I would say it's a slight aberration, but we're reasonably confident that we'll get back some of the growth.

--------------------------------------------------------------------------------

Kaustubh Pawaskar, Sharekhan Limited, Research Division - Senior Research Analyst [57]

--------------------------------------------------------------------------------

Right. And sir, some of the other markets like MENA and South Africa?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [58]

--------------------------------------------------------------------------------

As I said, that demand situation is not that encouraging in these markets, and therefore the growth will be low in these. But having said that, if you look at between Bangladesh and Southeast Asia, I think we get around 70%, you add another 6% of the new country development, which is also growing. So I think, 76%, 77% of the business should be definitely in a good growth mode and that should lead us into a high single-digit, at least 8%. And if we do -- I think if you can get a little bit more out of Southeast Asia, it should inch back into a 10% growth in the International business constant currency. As of now, certainly, 8% to 9% is more or less in sight. But if Southeast Asia recovers a little more, we should get back into [a tangent] constant currency. And without any dilution of operating margin, International business continues to be robust and healthy.

--------------------------------------------------------------------------------

Kaustubh Pawaskar, Sharekhan Limited, Research Division - Senior Research Analyst [59]

--------------------------------------------------------------------------------

And sir, in your initial comment and answering to one of the earlier questions, you have emphasized on the point of efficiency in channel trade space. Could you elaborate on that point?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [60]

--------------------------------------------------------------------------------

I think 2 things. One is as I said, if there is liquidity issue, and it makes much more sense to give consumer the advantage versus trying to stock up trade because ultimately stocking up trade doesn't necessarily offtake, especially it makes perhaps more business sense to invest behind direct distribution and reduce channel spends in terms of trade spends and spend where consumer advantage. I think that is what we are talking about and the second thing we are talking about is efficiencies in having differentiated assortment between alternate channels, new channels and existing channels.

--------------------------------------------------------------------------------

Operator [61]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of Abhijeet Kundu from Antique Stockbroking.

--------------------------------------------------------------------------------

Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [62]

--------------------------------------------------------------------------------

I just have a small thing on -- in case of Parachute, the decline in realization, if you see, and when I look at the pricing action you've taken, you have given consumer offers in Parachute Rigids to 100 ml free on 500 ml. So have you taken any price reductions because in your pricing, the MRP that you shared, I'm not really seeing anything there which explains the decline. So were there any promotional?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [63]

--------------------------------------------------------------------------------

No I think, it's -- it must be the quantum of promo versus last year; and one, it could be sometimes a mix of small packs, large packs, so it's a combination of both.

--------------------------------------------------------------------------------

Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [64]

--------------------------------------------------------------------------------

Okay. Because the value growth is about minus 4% against volume, so it is about growth it's pretty large that way.

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [65]

--------------------------------------------------------------------------------

No, it's a combination of promo and mix, where -- if you ask me, the smaller packs could have impact (inaudible) packs could have had better -- more growth, especially in a slowdown.

--------------------------------------------------------------------------------

Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [66]

--------------------------------------------------------------------------------

And the other part was that, the issue in urban GT has been -- would have been there for some time, I mean, because Modern Trade has been growing at a strong rate for quite some time on a very consistent basis. While is that in this quarter itself that kind of decline was seen because did the initiatives by Marico start right before the quarter or by start of the quarter?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [67]

--------------------------------------------------------------------------------

No, no, there are 2 things. I think, one is we must realize last year because of inflation, there are a lot of these distributors got value growth. We had around, I think, if memory serves, we had around 9% to 10% inflation last year.

--------------------------------------------------------------------------------

Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [68]

--------------------------------------------------------------------------------

Right.

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [69]

--------------------------------------------------------------------------------

We have 16%, I think almost the top line with a 6% to 7% volume, 8% inflation last year. So when the distribution system gets that inflation-based growth, the costs gets supported and the ROI gets somewhere -- now here there was a situation of their own liquidity is an issue. We are not getting value growth because; one is volumes are getting down and number 2, there is no inflation. I think it's the compounding effect of both and we have I think the Modern Trade platform contribution also growing. So these are combination of that. We started some of the processes, as I said, of trying to manage, but we have -- we have started taking significant steps and some of them will start getting classified over the next couple of months.

--------------------------------------------------------------------------------

Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [70]

--------------------------------------------------------------------------------

Okay. So -- and third question was on copra prices. So getting into the second half, the copra prices have slightly firmed up. What is your general outlook on copra prices?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [71]

--------------------------------------------------------------------------------

Copra prices, I think, we don't see any significant inflation in the near term right now.

--------------------------------------------------------------------------------

Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [72]

--------------------------------------------------------------------------------

Okay. So to a great extent that (inaudible) that cushion on gross margin is there, which can be used up in higher ad spend?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [73]

--------------------------------------------------------------------------------

Actually, one, if you go specifically to the quarter, in quarter 2 last year, the inflationary value was actually 14%, in fact -- so that -- I mean, if you ask me what is the difference. So last year quarter 2, India had a volume growth of 6% and a value growth of 20%.

--------------------------------------------------------------------------------

Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [74]

--------------------------------------------------------------------------------

Right.

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [75]

--------------------------------------------------------------------------------

So the system would have enjoyed that versus this year when there is a negative. So that would have also impacted in terms of the amounts of -- people cost would have got increased with a liquidity problem with no commensurate increase in the rupee value of absolute money they were taking with the same margins.

--------------------------------------------------------------------------------

Operator [76]

--------------------------------------------------------------------------------

The next question is from the line of Anubhav Sahu from MC Research.

--------------------------------------------------------------------------------

Anubhav Sahu, moneycontrol.com, Research Division - Research Analyst [77]

--------------------------------------------------------------------------------

Questions is on the medium-term strategy for the company given that they say there was slowdown in the hair oil category. And some of the smaller players are facing issue and that's why we are also gaining some market share. Do you think there is a scope for consolidation in this category and helping the (inaudible) opportunity for us and making hair oil portfolio more diversified? Or do the strategy remains that we have enough of hair oil category, and we would rather focus on non-hair oil category for [health condition]?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [78]

--------------------------------------------------------------------------------

I think given the slowdown, our first job is to get back core into the growth. So what are we doing? I think we are first getting, as I said that, if there has been some deviation in the Parachute pricing in some packs, get it right, get Parachute back into growth. Second, and as far as Value Added Hair Oil is concerned, there are opportunities in the Bottom of Pyramid. Shanti continues to do well and gain share. Some of the, I would say, in the premium pack, which is currently dominated while we don't participate in pooling, there are enough in the non-sticky hair oil, there are brands, and we have not necessarily got growth in that part.

So can we get -- participate and perhaps be aggressive in that part and grow share? I would say, the significant portion of our investments and time will get into this. As far as the new categories are concerned, I think, as I said that Aloe has already delivered, and I think it should be -- it's definitely next year, this can deliver to become INR 100 crore brand. I believe that Dry Fruit Oil also has potential to get critical mass. I think we have to participate maybe more aggressively in hair fall, which is something which we have not done other than South. So I see that's happening. I don't see any new big initiatives coming. Whatever we have on our plate, I think we have to premiumize and succeed in driving them through the alternate channels and the new-age GT, which we're just about starting to invest in selling cosmetics, food reserve, we are a separate distribution channel in the urban GT.

We have to get these 3, right. I think when our infrastructure and our portfolio is right, we believe moment there is some tailwind, the growth will come back. I'm not concerned either with infrastructure or portfolio as far as rural is concerned.

--------------------------------------------------------------------------------

Anubhav Sahu, moneycontrol.com, Research Division - Research Analyst [79]

--------------------------------------------------------------------------------

Okay. That was fair enough. So I mean just to follow up on that. Sometimes the sales, like there has been a slowdown like this also source of some inorganic opportunity as such. So would we be looking for those kind of opportunities and if so, in which category?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [80]

--------------------------------------------------------------------------------

It is the hypothetical question, I think, inorganic is something, it's obviously we continue to evaluate. Having said that, our focus right now I think is to get back organic growth. And perhaps, as I said, that organized players in our category and bigger players have an opportunity as the work in the category comes back to get a disproportionate share.

--------------------------------------------------------------------------------

Operator [81]

--------------------------------------------------------------------------------

The next question is from the line of Percy Panthaki from IIFL.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [82]

--------------------------------------------------------------------------------

As such, thinking about this point you mentioned about you're reducing trade spends and putting that into consumer promos. Just one thing, if this is the right time to do that because as you said there is a huge liquidity issue with the trade. You also mentioned that there is a issue with urban GT, and you are actually looking to improve your ROI. So in this kind of a scenario, if you cut trade spend, isn't it going to be counterproductive?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [83]

--------------------------------------------------------------------------------

So let me tell you, trade and distribution. Distributed ROI is different. When I talked about trade spend, what I talked about is that a lot of -- this is basically the kind of spend you do on a wholesale to do incremental (inaudible). When there is no -- there is a lack of liquidity, ultimately, if there is no -- and also there is no uptake. And the liquidity, as I said, is not just a problem with the wholesale channels, the liquidity problem is a small retailer who comes to the wholesaler to buy.

Now they're both buying to do stuffing in the wholesale by doing inventory behind it when there is an offtake enough throughput issue. That is what we are talking about. Instead, if I can give consumer advantage and the fact that we are anyway investing beyond direct distribution, I would rather get more growth by giving the consumer advantage because by just giving a trade load is just buying advancing shares.

--------------------------------------------------------------------------------

Percy Panthaki, IIFL Research - VP [84]

--------------------------------------------------------------------------------

I understand that part, that there is no use of stuffing inventory into the trade. But just as there is a issue with distributor ROI, there might be an issue with the wholesalers ROI also. And if the trade loads are reduced, that directly has an impact on the wholesaler ROI. So while it's good not to stuff, but at least some amount of sales which is happening because we found this product to be a good ROI product. And if that ROI falls, maybe some amount of sales through the wholesale channel might be lost. Don't you think so?

--------------------------------------------------------------------------------

Saugata Gupta, Marico Limited - MD, CEO & Executive Director [85]

--------------------------------------------------------------------------------

If the brand liquidity pool is there, I would rather give a consumer advantage rather than just giving a trade advantage. I don't think there is empirical evidence to show that ultimately consumer advantage is far higher than trade advantage. Just giving a trade advantage on something which is -- so as I said, the first thing, can I invest behind Parachute pricing? Can I invest behind direct distribution? I think it's a question of redeploying of the price. I'm not saying I'm reducing to create discount. There are trade spend which won't give (inaudible); there are trade spend which don't reduce. I think that leads to wastages. What I'm trying to say is that given there is a slowdown, can I use, and we have invested significantly in analytics capability to say that can I invest behind things that work versus invest behind things that don't work. So I will not -- just to answer your question, Percy, in fact I'm not going to reduce and become less competitive than competition. Whenever there is an instance, let's put that behind actually with the consumer.

--------------------------------------------------------------------------------

Operator [86]

--------------------------------------------------------------------------------

Ladies and gentlemen, that would be the last question for today. I now hand the conference over to the management for the closing comments. Thank you, and over to you.

--------------------------------------------------------------------------------

Vivek Anant Karve, Marico Limited - CFO [87]

--------------------------------------------------------------------------------

I would like to thank all of you, once again, for joining today's call. While our top line performance during Q2 was rooted in India, international performance. Our EBITDA performance was also satisfactory. We remain hopeful of H2 recoveries given good monsoons and renewed thrust on spends by the government.

I wish you all a very happy Deepawali festival ahead and good night.

--------------------------------------------------------------------------------

Operator [88]

--------------------------------------------------------------------------------

Thank you very much. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.