Ladies and gentlemen, good day and welcome to Zydus Wellness Q3 FY 2025 Results Conference Call hosted by ICICI Securities Limited. As a reminder, all participant lines will be listened to only once, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhuwania from ICICI Securities Limited. Thank you, and over to you, sir. Thank you. It's our pleasure at I-SEC to host Q3 FY25 Earnings Conference Call of Zydus Wellness. From the management, we have Mr. Tarun Arora, CEO and Whole-time Director. We have Mr. Umesh Parikh, CFO. I will now hand over the call to management for their opening remarks, post which we can open it for Q&A. Thank you. Over to you, sir. Thank you, Karan. Good evening and welcome to the post-results teleconference of Zydus Wellness Limited for Q3, Financial Year 2024 to 2025. We have with me Mr. Umesh Parikh, CFO, on the call. During the quarter, amidst muted demand in the FMCG industry, we have observed green shoots of growth in some of the categories. While rural consumption continued to expand steadily, the urban demand remained sluggish. Notably, small unit packs are growing at a faster pace, while the trend towards premiumization remains strong. Inflationary pressures are impacting consumption patterns and driving input costs higher. However, these challenges were managed through operational efficiencies, strategic sourcing, and calibrated price adjustments. Meanwhile, organized trade continues to surpass expectations, with both e-commerce and modern trade channels experiencing sustained upward momentum. During the quarter, company successfully completed the acquisition of 100% equity share capital of Naturell (India) Private Limited. As a result, the financial results include about a one-month performance of the Naturell business. As a result, the company recorded a consolidated net sales growth of 12.7%, with volume growth of 4.8% year-on-year. Since the acquisition concluded in the later part of the quarter, few weeks of business contributed low single-digit share of top line and operated at break-even at EBITDA level. The personal care segment witnessed strong consumer demand, achieving a remarkable double-digit growth of 50.3% for the quarter and continuing its upward trajectory over the last few quarters. At the same time, food and nutrition segment recorded a growth of 8.8% for the quarter. Leveraging on company's strong research and development capability, few more product launches and extensions were introduced this quarter. Nutralite DoodhShakti professional range expanded into processed cheese category. Nutrition business introduced a choco-filled fiber bar, melting chocolate, along with two variants under the fruit-filled bar range, Blueberry Blast and Berry Delight, as well as Protein Bar Bites. Despite inflationary pressure, gross margin has held steady with a slight upward trajectory in both sequential and year-on-year basis. This stability is driven by effective hedging strategies, a favorable product mix, and well-calibrated price adjustments. Here are some highlights of the consolidated financial performance of Quarter 3, Financial Year 2024-2025. Our net sales grew by 12.7% to INR 4,508 million. EBITDA grew by 16.5% year-on-year to INR 148 million. Net profit after tax surged to INR 64 million. With that, let me share some of the highlights of the operations for the quarter gone by, which will also cover category growth and market share numbers as per MAT December 2024 report of Nielsen and IQVIA. On the personal care front, Everyuth continues to outgrow the category growth, maintaining a strong and consistent performance. Recently launched Everyuth Pink Clay and Charcoal Infused Anti-Pollution Range has received a good response in the market. Face scrub category has grown by 18.8% at MAT level. Everyuth Scrub has maintained its leadership position with 47.3% market share in the facial scrub category, marking a remarkable increase of 418 basis points over the same period last year. The Peel- Off category has grown by 29% at MAT level. Everyuth Peel- Off remains the market leader with a 77.8% market share, reflecting a 106.7 basis points increase over the same period last year. Everyuth brand holds the fifth position in the overall facial cleaning segment with a 7.2% market share. Nycil surpassed category growth, delivering strong and consistent performance. The Prickly Heat Powder category has grown by 20.3% at MAT level. Nycil has maintained its number one position with a market share of 33.9%. On the Glucon-D front, Glucon-D maintained its leadership in glucose powder category with a 58.9% market share at MAT level. The glucose powder category has grown by 18.7% at MAT level. On the Complan front, the nutrition category shows a sign of revival across key metrics. The category has grown by 0.9%, and Complan holds a 4.1% as a market share at MAT level. Sugar Free brand continues to maintain its dominant position, holding a commanding 95.4% market share in the sugar substitute category, which has grown by 6.3% at MAT level. Sugar Free Green is experiencing a strong double-digit growth driven by increasing volume uptake. In Q 2 of Financial Year 2025, the company extended Sugar Free D'lite cookies offering in the domestic market, which has received favorable feedback and continues to build on. On the Nutralite front, the brand launched an AI-powered recipe platform to tap into a digital food market, offering unlimited recipes at the touch of a button through various methods, such as uploading a photo to get a recipe or sending a message with a dish name to a WhatsApp number. Nutralite brand continues its upward trajectory this quarter, driven by well-planned digital and on-ground activations. On the Naturell business, engaged in the business of manufacturing, research and development, marketing, and selling of nutrition bars, cookies, chips, and other food products under the brand RiteBite and RiteBite Max Protein. This business continued to support the brand through digital media, e-commerce activation, and consumer engagement at marathons and other events. Looking ahead, we are confident in our strategy to drive sustainable long-term growth on the back of innovation and staying in tune with changing consumer preferences. We expect that the demand setback, especially in urban areas, is temporary in nature and anticipate a revival in the coming quarters. Additionally, supportive measures in Budget 2025 are expected to boost consumer sentiment and drive upward consumption trends. Thank you, and we will now begin the Q&A session. Over to the coordinator. Thank you very much. We will now begin the question and answer session. [Operator's Instructions]. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead. Thank you for the opportunity here. Sir, I wanted to understand, sir, what would be the margin differential or what percentage would be the margin lower for smaller parts which have grown at a faster rate? Typically, it varies from category to category. Some of the categories actually see a very similar margin. Some have a tendency to be lower because it's a low-unit price tag, so some of the categories will be lower, so on an average, we are able to balance between across the portfolio. S ir, what% of our revenue would come from smaller parts if I consider YTD and Year 2025? It's small. We don't share those specifics, but it's building up much faster. In some of the categories like personal care, we've seen a very smart uptake of that, which is driven by, like I mentioned, small packs being low-unit price, but also consumer behavior, which is shifting to one-time use packs for freshness and experience, so here, the share of the smaller packs is much higher than other categories. Thank you, Karan. Sir, when would we come to come to pay 21% taxes? When will the tax rate shift to that? From 2027 to FY 2027. Got it. Sir, we have guided that our margin should improve to 17-18% with some gross margin improvement as well as operating leverage. Sir, so we have already seen some improvement in our gross margin as well as, sir, so when can we expect this to improve from 15%, 1 7% to 18%? And what kind of operating leverage growth does it require? So right now, we are growing at mid 2020. So does it need to grow at mid-2020 to improve the margin? I think you got it right. We continue to focus on two drivers of our journey to our 17% to 18% EBITDA margins with a mix of gross margin and operating leverage. We are already seeing, like you mentioned, gross margins move up, and operating leverage is also moving up. Now, the specifics will vary because it's also a function of the quarter-by-quarter what is happening in the environment. But if you see last four quarters, I think we've consisted actually more than four quarters, about 5 to 6 quarters, our gross margins are constantly going up. And we have also been very sharp in cutting our operating costs. The only place where we are investing more aggressively is that since 2021 to 2023, FY2021 to FY2023, we saw a gross margin dilution, and we had cut some advertising. W e have invested part of the gross margins back into advertising, which will not necessarily continue to grow at that same pace. So it will be a balancing act where some of the gross margin improvements and operating leverage will translate into this. But most other things, we are very conscious of balancing our cost structures as we move forward. So in the next, I think, six to eight quarters, we should see us touching a much higher level of EBITDA margins. S ir, how is the Q4? This summer season, I think it's starting right now. So how is that panning out? It's early days. We can't share any specifics, but we remain optimistic given our last four quarters of how our business performance is. We remain optimistic on our numbers, and we've been able to demonstrate also over the last few quarters. H ere's a final question from my side. So in FY26, what would be our ballpark range of guidance where we see our revenue and margins going? Double-digit growth. I think we remain double-digit growth on our top line and EBITDA growth to be in sync or faster than our top line growth. T hank you so much on all the questions. Thank you. [Operator's Instruction]. The next question is from the line of Anshul Jain from Integer Consultancy Private Limited. Please go ahead. Thank you so much. I actually had two questions. So first one would be, can you give some insights on the sauces and condiments category like Heinz? We don't sell Heinz. We do a third-party manufacture for them, which is a very small portion of the business. So it's not something we can share. I mean, we don't have anything. It's not part of our business model. Like any broad high-level sense on the size or margin of growth for this category? No, we are not into that. That's not our business. Heinz ketchup is not our business. Sauces, condiments, that's not our business. I think we are just third-party manufacturer for them. That is, which is continuing since the acquisition, which is a very small portion. It's not being meaningful for any number. We're just a third-party doing work for them. That's all I have to ask. Thank you. Thank you. Thank you. The next question is from the line of Kinjal Mota from Banyan Tree Advisors. Please go ahead. I have two questions. First question is on the acquisition that we have done of RiteBite. If you could give some flavour on what would be the sustainable margin that we see moving forward once it turns profitable? So I think we can't share specifics, but what we can tell you is prior to acquisition, we saw 3%-5% kind of margins. But with synergy and scale and our work with them, we obviously expect the margins to grow to a much higher level. And we believe FY2026, we could have an EPS accretive on this business. T he second question is, given that our beauty and personal care segment is showing very good growth in the last couple of quarters, given the market is really suffering a lot on that part, if you could elaborate that what has driven this sort of growth? Is this a new product that has come in, or what has changed because Everyuth has been there for so long, and Scrub and Peel- Off have always been the market leaders and had a good chunk of market share. So what has led to this kind of growth? I'll just say that we've now reported the segmental numbers on personal care for now seven quarters, if I remember correctly. And you would see that we have consistently delivered a good double-digit growth. That has gone up further, specifically in recent quarters, because we've been very consistent with our strategy on building the categories, especially building around the spaces where we are market leaders, both in Everyuth and Nycil. Everyuth, particularly, since you asked about it, Scrub and Peel- Off, we are the market leaders. And as significant market leaders, our task is to grow the categories. And that focus on category building is helping us not just expand the categories, but also help us improve our shares. So we are getting the benefit of both of them coming together. And that really is helping us size up the whole personal care space. Got it. That's all from my side. Thank you. Thank you. [Operator's Instructions]. The next question is from the line of Aishwarya Mahesh from ithought PMS. Please go ahead. I wanted to ask you about your revenue share from all your brands. If you could give me a breakup of all the revenue shares coming from your brand, the segment shares. Unfortunately, we do not share brand-wise revenue shares. O ne question I had regarding Nutralite. I would love to know where are these markets where Nutralite is performing good? Which are Nutralite's markets? T here are two or three spaces where Nutralite is performing extremely well. One is the food service, where we are able to sell a lot of focus on both fat spreads. We're also building mayonnaise and now launching more products like cheese, like that I mentioned in my conversation. The other space we are seeing good traction is the CSD market, where we are able to sell this well, especially Nutralite Samrat. And these are the main markets. We're also seeing good traction now when the quick commerce is picking up the cold chain. We're seeing good traction there, though it's still very small, but we are seeing good traction on that as well. I t is mentioned that you have certain B2B, like you sell to restaurants, if I'm right? Food service is largely what is also called as Horeca, Hotel, Restaurant, Catering. So it could be a small dhaba sandwich guy. It could be a large five-star hotel. It could be a catering house, cloud kitchens, a whole lot of them. All varieties. There are various segments within that food service that we cover. W hy I'm asking this is because since Zydus Nutralite brand, the Nutralite is also from Gujarat. And Gujarat has Amul everywhere. If I see a small dhaba, Mahabebi, I see people making food in Amul, for example. So I just wanted to know what kind of what is the different thing that we are doing for distribution that we are doing good from other competitors? What is the different thing? I think this needs a little bit more conversation, but sufficient to say that if, especially on a fat spread, if Amul launches a product away from the dairy into their brand, Delicious, they obviously think we are doing something meaningful, impacting their business. Otherwise, why would they move out of dairy and get into a butter substitute with another brand? So that shows that we have a decent reach through our cold chain, which is pan-India, and we are able to do a good job in terms of reaching out to food service channel. O ne last question. Is it doing really good in the Southwest, Northeast? Where is it more? It sells across India. We are a pan-India distribution. We have more than 20 cold rooms servicing across the country, across states, from Northeast to Kashmir to Gujarat to right down to Kerala. Great. Thank you so much, sir, for answering my questions. Thank you. The next question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead. I wanted to understand when I look at our market share in most of the categories that we are, we are number one player. So that would mean that it will get consistently difficult for us to protect our market share as well as difficult for us to grow. So I wanted to understand how are we planning to either grow these segments or get market share from other players? And a complementary question would be, sir, why are we not focusing on launching extension brands or extension products of these brands that we have rather than going and acquiring brands and then turning it around? So these were my questions. Hello? So your voice is not audible. The management line got disconnected. Please wait till then we connect with the management. We have connected with the management. Over to you, sir. Yeah. Mr. Rathi, I think you had mentioned your question, but could you, if you could, because we lost you in between when you were saying that why are we not launching extensions? Yes, sir, a nd so I wanted to understand in most of our brands, either we are market leader or we have a majority of market share. So that would mean that it's difficult for us to grow this because the market is growing at a certain amount of speed for us to grow at a faster pace as well as to protect our market share. So I wanted to understand how are we protecting this or what are the strategies that we are following? And the second thing was, sir, rather than going and acquiring the brand with lower margin and then turning it around, why are we not launching extension brands? Thanks for asking this question. You're right. That's a good observation because if you look at it, most of our brands, with an exception of one, is actually a market leader. Most of the brands are market leaders. Therefore, you will see that all our conversations are focused on category growth and category development rather than just market shares. A good example will be on, say, Glucon-D, where I'm focusing on how do I grow the category, which is about 1,100 crores to 1,500 crores, rather than worry about a 1% market share gain because for us, that's a bigger opportunity. We have been able to demonstrate, and just now somebody was asking us about what is driving personal care. Over the last seven, eight years, we have demonstrated since we focused on Scrubs, Peel- Off, where we are a significant market player, where we have grown the segments and also strengthened our shares. So our focus remains on priority one to grow the segments we play because we do believe that penetration levels are still much lower than what the opportunity is and therefore expand through increasing penetration and also drive consumption. Having said this, the second opportunity obviously does exist in terms of extending our brands into spaces which are adjacent to us. A good example let me take you through is Nutralite. Now, Nutralite, till five to eight years back, was only a fat spread brand, which was basically a butter substitute. Over the years, we've been able to extend it into other spreads like mayonnaise, chocolate spread. We've also been able to extend it into dairy range, where we have ghee, we have butter, and we are also launching cheese. So clearly, the brand has got into a much wider presence and much larger scale. Having said this, there are opportunities where we are not able to extend everything. So acquisition comes, like we have explained even in earlier calls, more from a point of view as a bolt-on, where we believe there are gaps which the external opportunities can fill much faster than we'll be able to extend. But be assured that we are quite focused on growing the categories and segments, and therefore our investment is largely focused on category development, followed by making our brands much larger to leverage our brand presence, which is much larger than the category that we already operate in. Another example will be Sugar Free extending into chocolates and cookies, which is what we are doing. And within the Sugar Free portfolio, the sugar substitutes, we also launched Green, building that segment. So a lot of our work goes around this. And acquisition is clearly a bolt-on gap filling. And there also, we are very focused on being, should I say, financially prudent, where we see an opportunity of bottom-line expansion is where we are looking at. Got that answer. J ust a follow-up question. So what I understand is launching extension brands, what we are doing at Nutralite, but the market is already penetrated. There are a lot of competitors in either chocolate spread or mayonnaise. But when we think about the sugar-free cookies, maybe they are not. So how do we decide on which extension brands to follow? Yeah. So that was my last question. Likely, we look at differentiation. What do we bring to the table? If we are launching a new extension, how will we differentiate in an already crowded market? I don't think we can shy away from the fact that the market is going to be crowded. So I can't shy away from that. So if I have a differentiation, I have a new to the market, I will do it. A good example is while we are doing a lot of extensions, we realized we could launch a blended sugar. And that's all we have right now. We launched a sugar light. It got into some trademark issues, which will resolve at a period of time, but we launched I'm Lite, which is a completely new space, no players, and we are doing category building there as well. But existing spaces like cookies and chocolates, I think there are very few sugar-free, I mean, low-calorie players. And we believe that by replacing sugar with sugar-free, we are able to bring some differentiation, and finally, we have to deliver on the category codes of taste and experience. So we clearly look at what is extendable within our portfolio and how do we bring differentiation. Thank you and all the best. Thank you. The next question is from the line of Jay Modi f rom EML, please go ahead. I had a question around foods business. So while we've been growing really well in our other portfolio, how do you look at growth in foods and nutrition segments? Because if you were to consider the lower base of Q2 and Q3, the growth would be around 3% or 4%. So how are you looking to address the growth for those segments? No, no. You're talking about how are you calculating lower growth? No, B asically, my question is that if I were to adjust for the lower base in foods and nutrition, right, Q2 of last year had a decline of 1% and Q3 a decline of 5%. On that base, we've grown at around 10% and 9% respectively for Q2, Q3, right? So if you were to adjust for lower base, the growth would be around 4%-5% for this segment. So I just wanted to understand your views on this segment and the growth that we should look forward to. There are two or three factors when we look at food and nutrition. I think one of the factors that really impacts us on the growth from a food and nutrition part is that we have a low-growth sizable brand, which is basically the nutrition drink Complan, which impacts our mix. Now, we have launched some various initiatives that's building up, but that's a larger category issue which we are tackling and building on. So that's one thing that impacts us. And I think having said that, we have a few things which do very well. For example, Glucon-D becomes a very small portion of this business and a lower-growth sizable brand. So therefore, I think I don't have to look at it in isolation in one quarter, but at an overall level, if you look at moving averages, I think it's improving and moving faster. But obviously, there are opportunities for us to keep working at it in food and nutrition. And since it's a sizable portion of our business, we do aspire to improve our growth. It is also something which has got impacted by the consumption because of the inflationary impact on this category, where the consumption has got impacted. So we hope that we will build further on it as we move forward. Also, sir, the inflation for this. For spreads category, the input costs have been fairly stable for the past two quarters. Have you seen any improvement in demand with stability of prices? It 's still, if I look at a moving average thing, it's still a very low single digit is what Nielsen is reporting, as I mentioned earlier. And therefore, yes, we've seen improvement in the category growth, but they are still very small. And at MAT level, Nielsen is still reporting a 1% kind of growth, 0.9%, as I mentioned in my conversation earlier. We're seeing improvement. What I'm seeing improvement actually is better traction on organized channel, which is working for us. If I look at e-commerce, we are seeing good traction. We are seeing good traction in modern trade as well. In the general trade, we are finding that the low-price packs are driving much faster, which we are a little bit held back in our effort on because we are also conscious of a profitable mix of our portfolio. U nderstood. S ir, I know it is early days, but any read-through for protein chips and cookies that we've launched? How has the demand and acceptance been on ground? W e are quite, should I say, positive and optimistic on this category. There are good tailwinds given the fact that we are operating in the protein range and Max Protein as a brand fits in very well for it. So we remain optimistic and bullish about the prospects of it. We've now had it for a couple of months, and we're seeing a good build-up. We'll have the full quarter results at the end of this once we report our quarter four, January, March results, and we'll be able to share more color to this. Last bookkeeping question. Have you recorded any consultant expense for the quarter and nine months? And if so, could you give the numbers if possible? W e have recorded consultant expense, but we won't be able to share that number because of the specific engagement confidentiality-- But we've recorded those numbers. Great. Thank you, sir. Thank you. Thank you. [Operator's Instructions]. The next question is from the line of Akshay Krishnan from ICICI Securities Limited. Please go ahead. T hanks for the opportunity. So FY 2025 till date, it's been a great quarter on quarter with double-digit growth. But given the current macroeconomic condition, how do you see the company plan to maintain or sustain the growth momentum in the coming quarters? And second thing is, is there any specific market or a segment that we are targeting on to see expansion opportunities to contribute meaningfully to the growth lever down the line? So we do believe that current momentum on growth will continue. And our belief is because if you look at last six to seven quarters, I think personal care has shown a consistent growth. So across both the brands and personal care has shown consistent growth. Glucon-D also over the last three to four years, if I see, I can tell you that it's a double-digit growth. So it's a function of season, but in a short term, that impacts. But over two to three years, there is no concern about growth. Nutralite also continues to move forward in the right direction. We had challenges in FY24, largely in the early part of FY24, which was related to sweeteners, both from WHO and some trademark issues, which have got reversed and which have been addressed by us. We've seen a positive momentum back on the brand on the portfolio of sweeteners between Sugar Free, Sugar Free D'lite, and Sugar Free I'm Lite. And Complan also has seen at least a positive movement. It's not to my satisfaction, but yes, we have work to do. So across our portfolio, we've seen a good reason to believe that we will continue the momentum. Plus, our acquisition also is showing a good tailwind in terms of moving forward. So my belief is our double-digit growth is something we can sustain over the next few quarters and build further on it. Perfect. On t he margin side, we've been sustaining a gross margin despite the commodity price inflation. Now, are there any strategic pricing action that is on the pipeline, and how are we mitigating the cost so that we maintain this margin level? Any strategic supply chain backend integration that's coming into play, or what is the efficiency improvement that's getting up so that you can ramp up your expectations a bit on margin reaching up to 17%? How's the play and action that's working around in this particular segment? As a company, I think we're quite focused on playing both back and front, the full value chain on this. Typically, being a leader and a premium player across most of the segments that we operate, we are able to price up our products and drive the margins individually. Sometimes the product mix can be not necessarily in our favor. What we saw in between the years of 2021-2023 range, where there were, I mean, the whole commodities across the board shot up, and it was no way we could escape that. But otherwise, we are well equipped to hedge ourselves when some commodities go up. It could be through a mix of buying forwards wherever we see opportunity, do a replacement opportunity, various things that we are doing in terms of formulations, buying forward, and pricing up to ensure that our gross margins are protected. FY 2021 to 2023 was really a tough time across the board for the industry. But aside from this, being market leaders, we have a decent pricing power across our portfolio. So we remain focused that we have to keep moving up our gross margins as a part of strategy to build up. But is there any pricing that's coming into play in the coming quarters? Yes. T here would be a price increase across multiple products wherever we are seeing the costs going up. Largely commodity-led products, we are taking wherever required price increases. Even the last quarter, if you see, our volumes are 4.8% versus 12.7% overall sales growth, revenue growth. So clearly, there is a price space that we work on. O ne final on the e-commerce or the quick commerce channel. That's becoming a very important space, especially for all the FMCG brands. And you did allude that it's a strong growth area that you'd like to focus on. So what is the total revenue that the digital channel is actually contributing to our company as a whole? And second thing is, how are we leveraging the digital transformation through AI or data analytics so that you get some consumer insights which will help you in improving your distribution efficiency as a whole? Digital, AI, and data, I think we use at multiple levels. First of all, from the online business perspective, about 10%-11% of our revenue comes from selling in online platforms. And that's been growing at a much faster pace than the rest of the business. And we are quite conscious of the fact that since the consumers are shifting to this, we should be ahead of the curve. And typically, we find most of our market shares higher in these channels. And therefore, we are embracing it very fast. But we don't stop here because if you have to win in the online marketplace, we must engage with our consumers in various formats. The share of digital marketing, online marketing as an overall investment has gone up significantly over the last couple of years. And even the TV channels are struggling today, and we find a lot of shift happening to online marketing. Having said this, we're using AI in various forms. One such example is where we've launched Nutralite Share, where consumers can engage any idea, any food product they want. They have a picture, they have an idea, ingredient, anything. We are able to recommend them recipes of what to do and simultaneously also support with some Nutralite product in that recipe. Having said this, we're also using AI, not AI, but digital data and analytics on recommendation engine for our salesmen at the last mile. So almost 1,500, 1,600 of our salesmen at the last mile who service more than 6 lakh outlets. But they work on handles, which are where they pick up orders. Now, there is a recommendation engine in this shop given a certain profile of outlets. We're using a data analytics engine to build on that as well. So we're using data analytics, AI, all those things as we build forward. We're also building a strong backend in terms of dashboards, which is, again, will rely on a lot of digital data that we are pulling together. So as an organization, we are focused and we believe decision-making business will shift a lot more to data and digital world. And we're well equipped to be ready for the future for that. Perfect. Thanks and good luck. Thank you. The next question is from the line of Viren Deshpande from Alphapeak Investments. Please go ahead. Good evening, sir. Congratulations for good results. I would like to know what will be our effective tax rate for the year because if you take in this quarter because of a comparatively lower profit, our tax rate has gone up to 35% overall. But what will be the effective tax rate for the entire year, 2024 to 2025? I t all depends on the amount in the current profit that we are going to generate, the profit before tax. But certainly for the quarter, you would have noticed that we have recorded deferred tax liability in the range of about INR 3.5 crore-INR 4 crore, right? So that's the deferred tax liability because that is the reversal of the earlier gains that we have accrued in the books of account. So that's the reversal of deferred tax asset, which is happening now. And about INR 3.5 crore-INR 4 crore, you can assume as a deferred tax liability getting recorded in the Q4 as well. Yes, sir. It's a non-cash item. Because in nine months. It's a non-cash item. It's a item. It's a non-cash item. We would have to really pay it around that tax. No, that is true. But in the nine months, if we see the tax, it is only INR 10.5 crore if you take the net of deferred. So INR 10 crore on a INR 185 crore. Whatever has been accrued so far, which we are seeing at INR 10 crore, what I'm saying is that we are going to accrue more, about INR 3.5-4 crore in next quarters. Ou r effective tax rate will continue to remain low for the last quarter also? It all depends because the quarter four is very heavy in terms of the sales and EBITDA and the profit before tax. Yes. The effective tax rate will come down significantly. The amount-wise, it will remain the same, about INR 3.5 crore to INR 4 crore, but the effective tax rate will come down. Naturally, because of the higher profit before tax. Normally, our Q4 and Q1 are the constituting almost 85%-90% of the total profits of the year. Yes. Yeah. And they will continue to be there. Is there any way we can even it out with some product line which can be addressing that issue? We would love to, but I think to change the structure of business takes a much longer time. We are keen, but we'll see. It will take some time. But for now and next, in short to medium term, I don't see that changing. Thank you and all the best. Thank you. The next question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead. D o we sell our sweeteners to FMCG companies or pharma companies? You tell us. We believe we are largely FMCG company, but. Yes, sir. My question was regarding the company called Blue Jet Healthcare that does high-intensity sweeteners. So they earn very high margins. So my question was regarding that. Do we plan to sell this, or are we selling them currently? In fact, we serve every channel, including GT/MT, Commerce, as well as we serve B2B as well, some part, a very small part. But we serve most of the channels. We have food service. We have CSD. We have grocers, chemists, even cosmetic outlets, food outlets, all sorts of. So we have outlets. The retail environment we service is wider than many FMCGs, typically you'll find out. Because most FMCGs are very limited because of our diversity of portfolio. We have more FMCGs than many others. W hat would be the B2B portion of our overall sales as well as modern trade and general trade? B2B, how would you define B2B? If you're saying food service, if you're looking for food service, which is largely the Horeca channel, that would be about 8% to 10% range. T he institutional kind of clients, that would be additional or? I f it's not a source. It's just not institutional clients. It is a lot of, I mean, these are businesses. Therefore, we're calling it B2B. But there is also a distribution part to it. There are wholesalers, vendors who buy from us and sell to some of these institutions, some of the small outlets, dhabas, small bakeries, food stores, a lot of variety of spaces who are making food and use Nutralite as largely Nutralite as ingredients, and even large hotels and cloud kitchens also. Sir, I'm trying to understand that between our general trade business, between modern trade, e-commerce, and quick commerce, which channel has the highest return on capital, which is the lowest credit period and the highest margin? So if you could tell us in each of these segments, how does our profitability differ? That would not be possible for us to share. What I can tell you at a high level is that our general trade business and our food service business is serviced through distributors who are on same-day payment, I mean, cash and carry kind of system. We don't have any significant credit on a routine involved. The e-commerce and modern trade business, since we deal directly with the banners, large organizations, we have a credit system which is standard to any terms of trade that we would have, whether it's Reliance, Amazon, Flipkart. We deal directly with them or through the sellers. So there is a standard thing. So those are things. But beyond that, return on investment and margin profile, I think we'll not be able to share at this point. Sir, I'm not asking a specific number. If you could just tell us that whether the profitability overall that the company enjoys with each of these channels so, for example, if the profitability is highest in general trade, then sir, the mix is shifting towards e-com and modern trade. So that's what I'm trying to understand. A ll I can explain to you is cost to serve are fairly comparable because general trade also, while may have supposedly higher profitability, but there is a cost to serve because there is a large number of people involved to serve it, while e-commerce has fewer. So it's also how we manage it. But cost to serve are reasonably similar across channels as we find. And in the evolved channel like e-commerce, we also try to sell the big, big tag packs with the higher profit. There we balance the profitability. So we're largely at cost to serve level. With the profitability, we are quite balanced across. S ir, is it fair to assume that going forward, as the proportion of e-com and modern trade increases, the working capital intensity of the business will increase, though the margins might not get impacted that much? Yes. Yes. That's how we see it. That's right. That's right. That's right. That's what we're dealing with. Sir, o n the other hand, in the general trade, I think we are more and more doing direct selling to the retailers and cutting out the distributors. So will that not balance out the working capital increase on the e-com and modern trade side? So I think the market is shifting towards organized trade in the urban India, while we are expanding our general trade. And we are continuing to work with distributors. So I mean, we'll have to see how the market moves, but we are responding to the consumer purchase behaviors. And we see that shift towards organized trade to be a secular trend, and that will continue to move, at least in medium term. Great. Thank you very much and all the best. Thank you. The next question is from the line of Lokesh Gusain from BOB Capital. Please go ahead. My question is around gross margin percentage. Just a follow-up on that, on how you have been able to offset the inflation to maintain or improve gross margins. So you mentioned buying forward, replacement opportunity, formulation, and pricing as the key drivers. Are you able to? I understand a breakup won't be possible, but are you at least able to rank them in the order of which ones have helped you the most and which ones down the rank? One of the important things is when the costs go up, we look to increase the pricing. So that remains the number one lever for us more often than not. Only in the categories where we are not able to be the price driver or there is a significant problem in the market, which seldom happens, but sometimes does happen, we usually drive the pricing as the first lever. We also look at what we can do from a sourcing point of view if there are opportunities or reformulation point. But reformulation is a very long-run process. So unless there is a fundamental issue, we don't go back to changing structural issues. But largely, it's led by pricing. Of course, there is a product mix issue. There is a c ost measures in terms of our actions. They also follow through. In terms of cost efficiency, do you have a certain some FMCG companies have a certain annual run rate? Some quoted as 2% of sales. They take out 2% of sales equivalent of costs every year from their operations. Do you also have a similar internal target or no? W e have a fairly stiff target taken by manufacturing and supply chain teams, both procurement and manufacturing teams who work on cost efficiency and improving costs on a regular basis. In fact, Zydus Wellness does it consistently, but Zydus Group also has a very strong program, which we work with them, and we've been constantly able to build our capability around that. So these targets are taken by the teams on a consistent basis. I s there a standard thing that you follow? Some companies follow 6% of sales. Some follow 2% of sales on an annual basis to take the cost out just so they have some lever against inflation as and when it comes, or they can use that efficiency to kind of get more volume share. So just trying to understand if you have a similar target and what it is, if you can share that. I cannot share a specific target, but I can tell you that there is every year we plan a certain numbers to come through, better efficiency, better cost takeouts, which work across various levers, which could be in terms of vendor negotiation, new vendor development. I mean, these are standard things that most procurement teams will do. There is yield improvement. There are so many other factors that we do which work on which contribute to this. So there is a clear target taken by the team, which are gone into several levels of details and do not work at just high level of saying 3%, 5%. If If the opportunity is 8%, why would I do a fixed 5%? So I would look at every year as a part of the process, we go into depth of what are the opportunities, identify, and work to a plan. Some are aspirational targets also taken sometimes because things that we don't have a visibility, but the business needs it, we do that as well. But we don't have just a fixed number and just deliver on that, but look at opportunities specific to each space that we work with. All right. That's understandable. Very clear now. So just one more follow-up. You mentioned you're using buying forward, like you're buying your raw materials in advance. So is there a company-level policy? How much in advance do you buy? Category to category. For example, when we buy palm oil, Malaysian Palm Oil Board shares the forward numbers for several quarters. Now, if the procurement team with some advice does feel forward, we will do it. And that too, also the seller should be available. It's not just Palm Oil Board because we buy refined palm oil. We do some cover. So it's specific to categories that we are commodities we are buying. There have been opportunities in the past where we felt the price was right. We've covered for a full year also, not on this specific, but other categories. So it's opportunity and understanding led. But we do have product-wise policies of what we would cover and what we would not, which is based on our learning and experience and some advice that we get from expert groups. Understood. So just one more clarification. So when you're buying your raw materials, is that sold from the local, like the Indian vendors, or you directly buy it from overseas, for example, palm oil requirements? W e are clear that we are sizable. Wherever required, we work with the global vendors also. But like you mentioned, palm, no, there's no point buying from international vendors because we buy refined palm oil. International vendors will be selling crude. So refined has to be bought locally. So I mean, these are things which matter step product to product. And therefore, we try to buy from the best sources available, which have a strong capability. And wherever global is required, we are able to work with the global partners as well. Understood. Thank you. Appreciate it. Thank you. The next question is from the line of Mayur from Wealth Managers. Please go ahead. Good evening, sir. And thank you for taking my question. J ust two questions. One is on the margin side, and if you have given some answer on that, sorry for repeating it. Just to get some clarification again, when we look at the margin performance over September and December quarter related to the September and December of previous year, so we understand there is a good seasonality. We understand it is a weaker quarter. K eeping that in mind, this question is, so it's not that we don't understand. We understand the seasonality for both these two quarters as weak. The margin improvement or has been largely flatish, and the year-to-date, which is a nine-month performance, which margin improvement of more than 200 basis points is largely coming in the June quarter, which is normally a very strong quarter for us, and March is also a very strong quarter for us. What I just wanted to understand is the fact that the margin performance in September and December is lower despite we are comparing year on year, is only because of the lower seasonality and product mix issue. This should cause the improvement should come back in the March quarter again and June quarter, or the last part of that improvement is now behind us as far as the whole year is concerned. We are heading into the low-hanging fruits are behind us, and we may be heading into some kind of margin stability as we go ahead. Le t me ask you, are you talking about operating margins or gross margins? Sir, while the focus is on the EBITDA margin, but if there is a lever on the gross margin, also you can because gross margins have been improving, and now they are getting stabilized. So maybe if you can combine that with the gross margin, it will be okay. But the primary question largely is on the operating. Let me answer at three levels: gross margin, EBITDA margin, and net profit. So first of all, if you look at it, almost for six, seven quarters, except for last quarter, which is flattish, we have constantly improved our gross margins like for like over previous year. So gross margins, we've been very, very focused on driving it back to the levels. And I think October, December numbers would reasonably match October, December 2021 kind of levels. So we've been able to recover back what we lost between FY 2021 and 2023. So our focus remains on improving our gross margins because that's the first port of call in terms of improving our profitability. And we are, as an organization, quite focused on driving that despite inflationary challenges. So it's a journey which will continue. We believe there is some more margins to pull out. If there is a stable inflation, we could manage to build further on it, but we will have to see how much our actions play out versus the environment. Now, looking at EBITDA margins, I think you will find that last two quarters, our EBITDA growth is faster than our top-line growth, so there is a small movement consistently up on our EBITDA margins versus the earlier year. Yeah, one would like to see more, but like you also mentioned, it's small quarters, so you can't really show a significant shift, but our EBITDA growth has been faster and leading to a small improvement on EBITDA margins as well. Net profit is a different piece altogether because it's a function of two or three non-operating variables coming into the piece, which is largely impacted by tax. That impact, whatever is happening, is because we have a deferred tax liability, which plays out. But otherwise, from our operating piece, we are quite focused that our margins, operating margins will continue to improve. So beyond EBITDA, in fact, because largely the debt has also come down over the coming years, so we believe we'll keep getting better at it. And therefore, you should see some further improvement. [Crosstalk] T he point was the fact that March and June is a good quarter. The improvement which we have seen in the past, last March and June, should broadly continue because we will get the benefit of seasonal mix and the operating mix. It's not that all the low-hanging fruits are behind and we may see stagnation of the improvement? No. W e do believe that there is still scope for us to continue. We believe our journey is still not completed when we are stabilized. It's still going to go up. Sir, one more question is in a slightly different direction. We understand for so many years in markets that what market does is not in the hands of the in terms of the investor returns is not in the hands of the management fully. But just to give a broad point, and I'm sure you will also be sensitive to it, and if you can add some understanding for help for long-term investors, we have seen last four, five years have been investor returns from our side have been lower. There have been reasons we understand there's no one. But the point I was trying to understand is from two points. One is just when we have started to improve the performance, the overall market sentiments are down. So that much more pull we will require in terms of our execution because the past five years have been anyways low for us in terms of investor wealth creation and significantly lower compared to even many other years. So that is on one side. Do we believe that we will be able to recover this and the pull will be which is required and expected will be there? And secondly, a slightly more specific question. Since there has been the private equity kind of, or I don't know too much about it, but they have been on the selling side. And given the large stake which we had, there is a continuous selling pressure which from sector which has been there. W e are not trying to understand that strategy or not, but given the large holding, is there any kind of understanding that by when this is expected to complete and what, directionally, anything which you have any color? Because I'm sure given that stake of holdings, there would be some understanding which just directionally, nothing specific on strategy and company, but just directionally, how does it play out? L et me answer the first question. I think you have rightly said management has that much limited degrees of freedom. If I look at trailing 12 months numbers for us from a top-line point of view and not just last one year, but even a three-year, we've been growing. Top-line has been growing much faster than most of the other peers that you could bunch up as a group. We do believe that the expectation from the management is to improve performance, and therefore, we are quite focused on driving growth ahead of the industry. So I would look at it not just one year, trailing 12 months, but even a three-year. If you look at it, our growth rates have done reasonably well. 2023 was a hard year because of seasonality, but one and three, if you look at it, we are reasonably sorted. Secondly, having said that, within that profitability, the journey which we've seen five, six quarters, we hope that we will continue. So we appreciate your point of view, and we believe that as a management, the expectation from our critical stakeholders, the shareholders specifically, is to have a better performance, and we are quite focused on that and that at least from our execution and our intent, we will see those things playing out. The results will have to speak for themselves. Having said this, moving on to your second question, I think True North is a large investor who came on board at the time of acquisition. They've run the full cycle from their fund point of view. We're not specifically privy to their plans, so they will take the call when they have to. I hear the selling pressure, but I also hear some investors also talking about liquidity of our shares. So I can only say that you will have to reach out to them to understand, but beyond that, we would not be privy to any of those things. Thank you, and wish you best. I wish you all the best and hope to continue to see continued superior execution as we go ahead. Thank you. Thank you. Thank you. That was the last question for the day. I now hand the conference over to the management for closing comments. Over to you, sir. Thank you very much. We've had a good run over the last few quarters with government also showing signs of taking steps to support consumption. There is a movement in rural. We also believe that our actions are in place. We are hopeful that we continue this double-digit journey and execute well on our existing brands as well as new product portfolio. So, I look forward to talking to you again after this quarter and the full-year performance. Thank you. All the best and take care. Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.