Ladies and gentlemen, good day and welcome to the Zydus Wellness Q2 FY25 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to your host, Mr. Manoj Menon from ICICI Securities. Please go ahead, sir. Hi, everyone. Representing ICICI Securities, it's our absolute pleasure once again to host the management teams from Zydus Wellness for the Q2 FY25 results conference call. The management is represented today by Dr. Sharvil Patel, Chairman, Mr. Tarun Arora, CEO, Mr. Ganesh Nayak, Director, and Mr. Umesh Parikh, CFO. Over to the management for the opening remarks, post which we'll open the floor for Q&A. Over to you, sir. Thank you, Manoj. Good evening, everyone, and welcome to the post-results teleconference of Zydus Wellness Limited for the Quarter 2, Financial Year 2024-25. Like Manoj mentioned, we have with us Dr. Sharvil Patel, Chairman, Mr. Ganesh Nayak, Director, and Mr. Umesh Parikh, CFO, on the call from our side. During the quarter, we continue to see robust demand across multiple categories, driving strong overall growth. While urban demand has been under pressure, the rural demand continues its gradual recovery. The organized trade continues to outperform expectations, with both e-commerce and modern trade channels experiencing sustained upward momentum. On the input cost side, the sequential rise in commodity prices for certain key inputs led to increased costs. This was actively managed through operational efficiencies and strategic sourcing, as well as calibrated price increases. As a result, the company registered consolidated net sales growth of 12.1% year-on-year, the basis of which 8.4% is due to strong volume growth. The personal care segment registered strong consumer demand, driving a double-digit growth of 26% for the quarter and continuing its upward trajectory over the last few quarters. At the same time, food and nutrition segment also posted a growth of 9.7% for the quarter. Complan, Sugar Free, and Nutralite showed positive value and volume growth. The company's research and development capabilities continue to be at the forefront, helping the company launch new products and extensions, namely Complan's foray into the adult nutrition space, delivering high-quality protein with pre- and probiotics to support gut-muscle axis with its offering, Complan ViMax. Nutralite plant-based spread is a 100% plant-based buttery spread now available in two delicious variants: olive and garlic and herbs. Nutralite Professional enters the cheese category and launched a few variants of mayonnaise and fat spread. Following strong positive response from international markets, the company has launched Sugar Free D'lite cookies in India as well. Amidst the headwind of rising commodity prices, the gross margin has remained resilient, showing its upward move of 261 basis points on a year-on-year basis, which outlines operating efficiencies and strengthening of product portfolios to absorb input prices inflation. Let me take you through other highlights of the consolidated financial performance for the Quarter 2, Financial Year 2024 and 25, and subsequent events. Net sales grew by 12.1% to ₹4,907 million. EBITDA grew by 16.7% year-on-year to ₹196 million. Net profit after tax grew by 254.2% to ₹209 million. Adjusted PAT grew by 154.2% on a year-on-year basis after eliminating exceptional items from current quarter. As one of the growth pillars, the company keeps on evaluating the business and assets, which has the potential of fostering future growth with the product pipeline to meet evolving consumer preferences. As a result, the company entered into a definitive agreement to acquire Naturell (India) Private Limited, a leading healthy snacking company with a turnover of approximately INR 119 crores for the financial year 2023-24, as per Ind AS. Naturell (India) Private Limited is engaged in the business of manufacturing, research and development, marketing, and selling of nutrition bars, protein cookies, protein chips, and health food products under brands RiteBite, Max Protein, Protein Pure Healthy Snacks, and RiteBite, which is a fiber-enriched snack. The transaction is proposed to be funded by cash. It is expected to be EPS accretive for Zydus Wellness from the very next year post-acquisition. The transaction is proposed to be consummated within 60 days. We believe the product portfolio is innovative enough to meet the rising needs of consumers preferring balanced and nutritional diet. With that, let me share some of the highlights of operations for the quarter gone by, which will also cover category growth and market share numbers as per MAT September 2024 report on Nielsen and IQVIA. On the personal care front, Nycil brand has witnessed robust growth, favorable summer season, and consistent media visibility. The prickly heat powder category has grown by 21.6% at MAT level. Nycil has maintained its number one position with a market share of 34.3%. Everyuth brand continues to outpace category growth and has registered a strong growth. The face scrub category has grown by 17.3% at MAT level. Everyuth scrub has maintained its leadership position with a market share of 46% in the facial scrub category, which is an increase of 355 basis points over the same period last year. The peel-off category has grown by 26.4% at MAT level. Everyuth peel-off maintains its number one position with a market share of 77.9% in the peel-off, which is an increase of 189 basis points over the same period last year. Everyuth brand holds the fifth position with a 6.9% market share in the overall facial cleansing segment as well. On the Glucon-D front, Glucon-D continues to maintain its leadership position in the glucose powder category with a value market share of 59.4% at MAT level. The glucose powder category has grown by 20.8% at MAT level. On the Complan front, nutrition drink category has continued showing signs of revival across key metrics. Complan has added 9 lakh households over last year as per MAT August 24 reports of Kantar panel. The category has grown by 2.8% at MAT level. Complan market share stood at 4.1% at MAT level. On the sweetness front, the Sugar Free maintained its dominant position with a commanding market share of 93.9% in the sugar substitute category, which has grown by 5.4% at MAT level. Sugar Free Green continues to experience strong double-digit growth driven by increasing volume uptake. On the Nutralite front, Nutralite showed positive value and volume growth, contributing significantly to the overall performance of the segment. As we move forward, we remain confident in our strategy and deeply committed to ongoing innovation, ensuring that we stay aligned with evolving consumer preferences. Thank you, and we will now start the Q&A session. Over to the coordinator. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Abneesh Roy from Nuvama. Please go ahead. Yeah, thanks, and congrats on the good revenue growth. My first question is on Complan. So you have seen good penetration growth for three successive years. So if you could comment on specific growth numbers YOY revenue terms. Now, milk, which is the key requirement in terms of adding this, has also seen a lot of stability and, in fact, many markets' correction also. So would you say that in terms of outlook, in terms of growth, here things could improve a bit? And what is your sense on growth of market? Because market leaders continue to struggle here. So what would be your take on the overall growth for the industry in this market? Thanks, Avnish, for your questions. Thanks for your questions as well. Overall, if we look at nutritional beverages, or HFD as it's been called traditionally, I think we've seen some growth coming back on the category, maybe because the milk inflation is more stable and not growing so much. But largely also, I think the right actions will drive it, which is that the consumers are looking at new segments, and there are different products coming to meet those needs. And if we focus on that, that's the best chance to grow this segment. At an overall level, our view is over a medium to long term, 5%-6% growth is fair for this category, which is close to a billion, as we understand. But our view is that we can grow much faster than that if all the initiatives play out. We have seen good recovery of growth for us in the recent past, but we are very conscious that we'll have to demonstrate consistency over a period of time to be able to do that. But the nutrition needs stay consistent from a consumer point of view, and therefore positive growth is what we will. 5%-6% is a fair expectation on that. I don't know if that answers your question. We have also launched because we believe that since there are multiple segments, we need a full play in nutrition, and that's why we were largely playing in the main part of the category, which is the kid segment, 7-17. We launched a few years back the toddler segment with Complan NutriGro. We have launched for the adult, which we did not have any play in, Complan ViMax. Early days, just a couple of months in the market. We'll have to see how that plays out, but that should help us play this overall well. Last question. Again, 26% growth in personal care is a good number. Is there any one-off here? And in terms of the urban slowdown, which I think every company is mentioning, which category will be most worried on in terms of the H2, in terms of urban slowdown impact? So there are two parts to it. I think, first of all, personal care doesn't have any one-off. If you look at the last six quarters since we've been reporting segment-wise food and nutrition and personal care separately, you will see that consistently over six quarters that we've reported, we are showing a good double-digit growth. It's not an exception, but more of a trend for us, and both our brands have consistently demonstrated that. So just to rest assured that there is nothing one-off, hopefully, and we'll continue our momentum. As far as the urban growth is concerned, when we look at our internal numbers in sync with the market, we find that urban growth is lower, and the sub-segment which caters to rural and suburban. There is a clear difference. But part of urban is also going to Q-commerce or e-commerce as well. But I'm not particularly worried about any segment as we stand today because most of our very urban products, other than Nutralite, which is only urban, most of our other products are seeing good rural momentum also in the recent past, including Sugar Free and Complan. Glucon-D and Nycil, anyway, have a very large urban rural exposure. So I think I'm reasonably comfortable with the way it is. It'll be good for us to get both the markets growing, both the consumers responding. Just one small follow-up on the urban slowdown. So if you combine general trade and quick commerce, e-commerce, modern trade, then for the sector, is there a real issue, or is it more of a seasonal impact of, say, rain or whatever other issue? Because the food inflation is a real thing, right? Everything is so expensive in terms of food currently, and obviously, then the customer does cut back. So if you could comment on totality, how challenging is the urban demand for the sector? I think for you, it may not be that challenging. Yeah. So I think the reality is it's quite challenging in urban. And if you look at multiple segments beyond us, both staples and discretionary, you'll find that everyone's struggling. So we believe it's real. It's just that we've been able to overcome this better. We'll be not sure on that. Sure. Thanks. Thank you. Thank you. The next question comes from the line of Manoj Menon from ICICI Securities. Please go ahead, sir. Hi, Tarun. Just continuing on this macro bit, it does appear a case of snakes and ladders. Now, in the rural bit, you mentioned that there's a bit of momentum for you currently. So could you elaborate on, let's say, what exactly you're doing in terms of any specific projects, either new rural expansion, which is selling, etc.? Not really. It's just that we've been executing. We've had a set of products which we have focused on. We have a product architecture which caters to specific markets. But just I think the team has executed better, and we're getting better traction on this. Let me put it this way. So let's say of this 8% volume growth, is there a number which could attribute to, let's say, sales execution or, let's say, additional number of outlets or selling anything, any quantification possible? So we've seen very good growth both from rural and e-commerce and modern trade. But traditional trade has also not been done better than urban trade. Traditional trade has also done reasonably well versus the market. So I would find that our growth is, especially last quarter, has been well rounded. Understood. Just on the urban facilitation comment in your presentation as well, is there something which you are seeing in parts of your portfolio specifically, or is it a generic comment? Sorry, I didn't understand, Manoj. No, no. So is there any parts of your portfolio which actually is basically, is it a macro comment, or is it something you're already finding in your portfolio, let's say, but for this urban deceleration, you could have grown faster? No, I think we are seeing a very consistency across in personal care, like you mentioned, is seeing a fairly good traction. So I think what Tarun said earlier, I think only because of food inflation, we have to worry about what happens going forward. But because we are sort of category leaders in many of the areas we are in, I think we are okay. But the food inflation is something we need to worry about. And the other impact I'm a little worried about for future is the palm oil substantial increase because for Nutralite and food service, it becomes harder to pass on. It may give us growth, but it just becomes that much harder to deal with the market because it's quite price sensitive. So we deal with it. We've done it well in the past, but those are a few challenges that we foresee. Understood. Thank you. Secondly, could you elaborate a bit about a little more on IMLI, actually, let's say the activities or some medium-term targets, etc., or ambitions? So, we are now most of the places that we were doing the traditional trade specific markets, for example, East India was responding very well. We are well entrenched. E-commerce has started picking up. Some of the chains like D-Mart, etc., have done well. So, it's not unreasonable numbers, but it is picking up well. So, we are quite hopeful that it will keep inching up. We've also upped the price. So, it's working in the right direction. So, it should be okay. Understood. Long-term, we obviously believe it is a much larger opportunity. Understood, sir, and lastly, on international, again, what is the template? What's the process? Is it the Indian diaspora you would target or international ambitions? Indian diaspora will never be able to meet my ambitions on our international business. We're clearly seeing that Sugar Free D'lite range being accepted across consumer segments and across geographies. Typical Indian diaspora in the Middle East was an earlier customer. Now, with this Sugar Free D'lite, we are able to cut across all kinds of segments, whether it's local population, European population. We've seen Middle East, Hong Kong, Singapore, where we have introduced gaining traction. Similarly, Complan is getting traction in Nigeria, which is a local population. For us, we are looking at doubling every three years kind of growth, and we are looking at doing innovations which are relevant to each of the focus markets. Even Bangladesh, which we are building, we believe the local population will be relevant. So being local-focused around those specific markets, especially around two lead brands, the sweeteners and nutrition, but also tactically other brands also to widen the scope. That's how we're going to be looking at it. Sure. Thank you, and all the best. Thank you. Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and one. The next question comes from the line of Ajay Thakur from Anand Rathi Securities. Please go ahead. Hi, sir. Thanks for taking my question. I wanted to understand a bit better on the food segment. So we have seen quite a bit of a slowdown for many of the companies in the food segment, but we still are kind of growing more like a 9%. So if you can share some bit of a detail or more color in terms of which segment is driving this and what is kind of leading to a better growth for us in the food space, that would be helpful. So we've had a very good traction both with the sweeteners and nutrition spaces last quarter. Even Nutralite has had a reasonable growth. Glucon-D is small and was a little bit under pressure because of the heavy rains, but otherwise, it's been a well-rounded growth. Understood. And sir, you have already launched a ViMax. If you can share some bit of color around ViMax in terms of the pricing, what kind of differentiated proposition we have in ViMax, and what kind of revenue targets we are having for ViMax in the first year. Maybe some kind of a detail around the same will be helpful. Yeah. So it is focused on adult nutrition, where we are saying that adults' sarcopenia on muscle. And because we have a high protein content due to the presence of prebiotics and probiotics, which help better absorption of nutrients that the ViMax offers. So it is a great way to deliver on the gut-muscle axis. And that is the differentiator we build around. And our pricing is about INR 900 for one jar of 400 gram, which is in sync with similar high-quality products that the nutritionals have. We will focus in the top states which are on adult nutrition and Complan, which is largely around East, South, and part of North, where we will use the HCP route, healthcare professionals route, to promote our products. We are not planning to launch any advertising. That is a broad play that we are looking at. Our revenue targets are not very huge. We believe we want to do the seeding right promotions first, and then we'll build it as we go along. Understood, sir. Sir, last question was on more of the natural products that you have actually acquired. If you can share some bit on their EBITDA margin and what kind of benefit we can accrue from this logistics benefit from the acquisition. Since the fact that you mentioned about the kind of help that we can be accretive in terms of the acquisition can be accretive within the next year. So if you can share some details around the same, that will be helpful. First of all, to give you a big picture, I think we've always said that we look at only bolt-on acquisition. We believe food and nutrition is an important portfolio for us. Nutrition, we already have a presence. We were looking for a category which has high growth potential, good tailwinds, and meet the nutrition requirements. We've talked a lot about focus on protein and other micronutrients as well. This is exactly in the space that we are focusing ourselves on. Therefore, this RiteBite and RiteBite Max Protein brands fit into our portfolio. This business has seen good high double-digit growth momentum in the recent past, and we believe that's what will help us build it forward. From a business scale point of view, like we mentioned, it has done about INR 119 crores in the last financial year as per Ind AS. It has got a small EBITDA positive, which for a scale of this size, I think is a great thing because most of the companies we have evaluated at this level typically tend to be substantially negative, and that's what we really liked about this, that the current owners have run it in a very disciplined way, building it on the right reasons and the right ways of working. We are hopeful that with our actions in place, we will continue to drive the growth and also make it EPS accretive by the next financial year. Understand. Quite helpful. Thank you, sir. Thank you. The next question comes from the line of Mayur Parkeriya from Wealth Managers (India) Private Limited. Please go ahead. Good evening, sir, and thank you for taking my questions. Again, congratulations on a good set of top-line growth. Sir, given the top-line growth of 12%, volume growth of 8%, which is reasonably much better than other peers even in the food side or on the general category of consumer side, would you say that while our EBITDA has increased by 16%-17%, but the margin expansion only 20 basis points compared to? I understand this is a low quarter for us, but do you believe that margin expansion could have been better? Or if yes, then what led to this slightly muted in terms of the growth margin expansion trajectory? While it is higher, I understand, but is it lower than your expectation, or could it have been better in the light of the macro or specific company situation? Hello? Sir, hello. Yeah. Sir, in terms of that expansion, we actually last year were at 1.3. Now we are at 4.2. So there is a margin expansion. So there is an impact of the exceptional item. But if we take that out, still there is a margin expansion that has happened. Secondly, margin expansion is lower than the expected because of the high investment that we made in the advertisement and some of the other expenses, including some expenses which are made by the consultant fees, etc. How do we see the? I think our trajectory is consistent. I think we will, like we've mentioned in the past, we will continue to increase our gross margins and continue to deploy as is required based on advertising as required because we had cut it when the gross margins were under pressure. So it's a balanced approach of trying to focus on growth and development of the business as well as improve our profitability as well. Sir, in the same light, given that we have seen a good gross margin expansion over the last couple of quarters, now we are at a stage where the base of the gross margins have been higher, and we are now seeing some inflation seeping in in terms of a couple of categories. So do you believe that the best of gross margins is behind us, or do we believe we have more levers for expansion as premiumization and other trends continue, especially from a next one-year perspective? One year is a little hard to predict at this stage, but in, I would say, next one or two quarters, we still believe there is room for us to keep pushing it. That's really what we are working on. Over a period of time, if things work out, we'll continue to push further on gross margin and high. Okay. That's great to hear. Sir, last question from my side on the acquisition which we made. Sir, we have seen who has been in the right health and fitness side. They would have surely tasted or had exposure to the Max brand. The point which I just wanted to understand, from the seller's perspective, what was the key reason to sell this brand? It's a little longish question in terms of, so is it the distribution which they wanted to expand, which we can add to it? Is it the product which is there, the R&D part, or what is it that led to their moving out? Is it some management which they want to push it to the professional or to us? And finally, in terms of valuation, it's attractive in that sense when we look at the positioning. So given the market share of this protein bar and where Max spends, what led to seller selling at this, and what were the key reasons behind them? If you can highlight, it will help us understand. And it's a great positioning from a long-term perspective. So congratulations on that. Thank you very much. I think largely it is scale-up challenges. The business has done rather well. But for the next level of growth, they felt it would be better fit for a large strategic company to help them support both from an infrastructure and expansion point of view. And it covers all the points that you said. So all those things made sense to them. And there was a fair amount of time we have spent talking to each other and working on this. So there's a good reason they've mentioned it. Sir, do we see 15%, 17% kind of percent or even a higher kind of growth than the company for this specific acquisition given the runway which it has? Or how do we see just a broad qualitative understanding? Is it mid double digits? Is it high double digits? How do we see this, sir? We are hopeful to do more than that. Their track record is even better than that. So we intend to, in the next couple of years, at least stay on that zoom. Great, sir. Thank you and wish you all the best. Thank you. Thank you. Ladies and gentlemen, a reminder. If you wish to ask a question, please press star and one. The next question comes from the line of Karan Bhuwania from ICICI Securities. Please go ahead. Yeah. Good evening, sir. I have a couple of questions. Firstly, on Naturell acquisition, right? If you could highlight a few things in terms of what is the geographical mix, channel mix, etc. for the brand, right? And also in terms of what is the distribution needs for the brand and how can we leverage our own distribution to expand the footprint for the brand? So from a geographical mix, they are the top cities contribute. Top 10 cities will be, I guess, 70%-80% of the business. So it's a very high top urban-centric brand. They are largely traditional trade and e-commerce focused. These two contribute to about 80%-90% of the business, substantially. E-commerce and that too specifically quick commerce and traditional trade in these markets. For us, the leverage is not just distribution, but the focused distribution. And that's why we'll work with them and have a specific plan to do the right things with the business and not just look at because we have a larger infrastructure and just put it in our regular infrastructure, but what is right, fit for purpose, distribution, and grow the category along with them, they being the leaders in this space. So that's really how we're going to be working with them on this. Got it, sir. And any brand extensions, category extension that you're thinking with this kind of positioning for the brand right now? So they already have bars, which is their mainstay. They've launched chips. They also have cookies, protein cookies. So protein chips, protein cookies. That itself is, and granola bars. So they already have enough in the portfolio. We can launch one or two more products, but I think enough to grow on this and some of the products in the pipeline, which we are working with them and figure out what is the right way to expand. But enough room for this, a lot of SKUs to expand on and making all of them available at the right place. That itself is a good opportunity for us. Got it. And secondly, in terms of margins, if you could highlight what would have been the margins excluding the consultancy fee that they're paying, right? If you could just highlight that, I'll be able to understand the margin expansion story much better. So I think it's because we use consultants in different programs and there is different activities going on. So I think some of this, we cannot call it as one-off because we will continue to have different programs that we run. So I think it's difficult to give each consultant one-offs. Okay. Thank you. Thank you. The next question comes from the line of Mayur Parkariya from Wealth Managers (India) Private Limited. Please go ahead. Thank you again for taking my question. Sir, one slightly 30,000 feet above the question on a very macro side and not with a negative, but just to understand the thought process from a slightly of the management on a slightly different. Sir, Nutralite the presence in dairy, cheese across the product lines. Sir, here the elephant in the room is Amul and doing reasonably and very strongly across this. Sir, do we believe that at some point, and when we look at this segment, the capital which we deploy in terms of resources, bandwidth, monetary, and otherwise, do we believe that there is a case at some point in time to look at Nutralite differently and look at because the competition also remains very strong and there's a very big elephant who's doing phenomenally well in this category, and it is becoming difficult. Then there is a pricing pressure also which keeps coming every few quarters, if not longer. Sir, any thought on that side, sir? So Nutralite Brand has built some of the segments or categories that it exists in, namely the fat spread. It's an extremely efficient business. It needs a certain kind of management because the consumer or the customers involved are price sensitive. But I think we have demonstrated that we have made the so-called big elephants to dance for what actions we have taken in the past. So I think we know reasonably well how to do it. The opportunity is much bigger, and we are reasonably efficient on it. So today, I don't see the reason for us to reconsider our position. But at some point in time, where we feel that it is taking more than what it adds, we will obviously relook at it. Okay. Thank you. Thank you very much. I got my answer. Thank you. As there are no further questions, I will now hand the conference over to the management for its closing comments. Thank you, everyone. And we'll see you next quarter. Thank you, sir. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.