Ladies and gentlemen, good day, welcome to Marico Limited Q1 FY 2024 Earnings Conference Call. We have with us the senior management of Marico, represented by Mr. Saugata Gupta, MD and CEO, and Mr. Pawan Agrawal, CFO. As a reminder, all participants' lines will be 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 call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. Before we get started, I would like to remind you that the Q&A session is only for institutional investors and analysts. Therefore, if there is anybody else who is not an institutional Investor or Analyst, but would like to ask question, please directly reach out to Marico's Investor Relations team. I now hand the conference over to Mr. Saugata Gupta for his opening comments. Thank you, and over to you, sir. Yeah, hi, good evening to all those of you who have joined the call. Let me start by giving a flavor of the operating environment during the quarter that has gone by, after which I shall touch upon our performance, followed by our strategy and outlook for the year ahead. Volume growth for the FMCG sector was in positive territory for the second consecutive quarter, led by steady growth in urban. However, evident green shoots in rural were not yet visible. Factors such as retail inflation dropping to sub-5% levels, late peak up in monsoons, hike in crop MSPs and higher government spending continue to give hopes of a gradual recovery in rural sentiment. Although the extent of the impact of spatial distribution of rainfall and erratic weather patterns on rural farm incomes also have a bearing on sentiment in the near term. So far, I think at least in the south and west of the country, the monsoon looks good. While companies are taking price cuts in reaction to moderating commodity inflation, pricing growth has been tapering off sequentially, and therefore growth in the coming quarters is likely to be led by volumes. Food continues to lead the sector, while mass personal care categories continue to exhibit a strong linkage to rural growth. Moving on to our performance in the quarter, domestic volumes grew 3%, which is lower than our expectations. However, it should be read in the context of a couple of one-offs pertaining to channel inventory adjustments. Firstly, a sharp month-on-month fall in vegetable oil prices has led to trade, significantly lowering inventory levels in Saffola Edible Oil, while we have taken multiple price cut amounting to 30% year-on-year, to pass on the benefits to consumers. As a result, Saffola Edible Oil recovered partially on the low base of last year. Offtakes have remained healthy and the worst of volatility is most likely over, now we expect growth in Saffola oils to be steady going ahead. Secondly, the final phase of trade scheme rationalization initiated in post Q1 FY 2022, to smoothen the skew that was historically prevailing in the Q1 revenues of the core domestic business. Now that we have evened out the trade schemes throughout the year, we believe this will hold us in good stead over the long term, in terms of managing supply chain and below the line spends more effectively. While volume growth in core categories of coconut oil and value oil, Value-Added Hair Oils were subdued in Q1 by this one-off impact and muted rural sentiment, we expect an uptick in both portfolios from Q2. Now that one-offs are out of the way, we expect volume growth to resume an improving trajectory from Q2, as indicated by healthy offtakes in Q1, and 85% of our portfolio either gaining or sustaining market share and penetration on a MAT basis. Therefore, we do not expect any impact on the growth aspirations for the full year, as envisaged at the start of this fiscal and conveyed in the previous earnings call. Coming to our newer categories, we have made a positive start in the course of achieving our diversification target for the year, with Foods and Premium Personal Care portfolios cumulatively contributing 20% of the domestic revenue. In Foods, our scale-up continued with growth in mid-20s. Growth in the core oats franchise has been supplemented by healthy traction in newer categories of honey, plant-based protein, spreads, and munchies. Consistent with a strategic approach of expanding our addressable market in value-added foods and nutrition segment, we are excited by the addition of the clean, plant-based nutrition brand, Plix, in our portfolio. Plix is committed to the mission of making nutrition fun and fueling the habit of incorporating clean, plant-based superfoods as a part of the healthy and active lifestyle. Plix's portfolio consists of products that are non-GMO, vegan, gluten-free, cruelty-free, and uses reusable and recyclable packaging. The brand has built an impressive franchise by upholding evolving consumer needs and sound business fundamentals, and is now clocking an average run rate of INR 150 crore+, with a very low cash burn. It is evident that we are becoming a strategic investor of choice for founders who believe in growing sustainably with a watchful eye on profitability. Alongside the food portfolio, the composite Premium Personal Care portfolio, comprising Livon Serum, Set Wet, male grooming, and digital-first brands, has delivered a steady performance as well. We expect this portfolio to contribute to 10% of domestic revenues in FY 2024. As specific food and digital franchises attain scale, we are also charting a path towards making significant improvements in profitability and significantly reducing cash burn rates in our digital business. Moving on to international business, which has been remarkably resilient despite varying degrees of uncertainty in the operating environment. Bangladesh extended its steady run, with core portfolios performing healthy and newer portfolios scaling up well. Vietnam faced some consumption headwinds; however, the underlying business remains strong. Vietnam, South Africa and NCD business have been quite consistent over the last couple of years. We will continue to invest for growth in these businesses. The overall business is poised to deliver double-digit constant currency growth in FY 2024. For the consolidated business, revenue growth in Q1 was significantly weakened by pricing intervention in core domestic portfolio and currency headwinds in a few overseas geographies. We believe pricing deflation in the domestic portfolio has bottomed out and will now start tapering off. Therefore, we expect revenue growth to move into positive territory in the second half of the year. On the profitability front, gross margin and operating margin in Q1 expanded ahead of internal expectations, going to incrementally softer input costs, while we maintain investment towards strategic brand building of core and new businesses. While we continue to invest in A&P and maintain our share of voice ahead of share of market, we expect operating margins to expand to 20% levels in FY 2024, higher than envisaged earlier. To sum up, despite a slower than expected start, we are confident of delivering improving trajectory in top line and earnings growth through the course of this year. Last but not the least, we always view the entire business operations through the lens of sustainability, and our Sustainability 2.0 Framework has been seeing encouraging progress across each of the eight broad themes. We've detailed the same in our FY 2023 Integrated Annual Report, which was released on our website two weeks ago, and hope it will make for a good reading. We firmly believe in creating shared value for all, will aid us in driving sustainable all around and superior growth in the long term. With that, I will close my comments. Thank you for your patient listening, I'll be most happy to take all your questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead. Yeah, thanks. My first question is on yesterday's acquisition. In terms of the business Plix, what is the right to win? I see a very sharp scale up from INR 40 crore in FY 2022 to broadly INR 106 crore in FY 2023, and now, ARR of INR 1.5 billion. It's a sharp scale up. In this kind of a format, there are a lot of other players. If you could also talk about the distribution, how much is physical, how much is online? Is there any kind of synergy benefits you see from your other digital business or, say, other acquisitions you have done in the last six, 10 years? Okay. I think Plix is, first of all, Plix is largely online, therefore, obviously, one of the things as they expand, we firmly believe that any digital brand needs to get a critical mass in the, you know, in the e-com and their own D2C space of hitting at least INR 80-100 crores, a certain level of set of consumers and level of saliency awareness before it goes into omni-channel. I think while the current run rate of INR 150 crores is very encouraging, I think it is right for going to omni-channel, I think there is tremendous potential to max out there. If I believe, I think there are three things why we believe Plix is a right to win. If you really look at, one of the things we look at when we are doing acquisitions in the digital business is obviously, brands which are sharply differentiated. For example, if you know Beardo. Beardo is a Harley-Davidson of male grooming, and even after three years post our taking over, I think the brand continues to perform well. We look for founders who have a significant urge to build to last, as opposed to just building to sell. Therefore, we look at also commercial savviness of the founders. We look at good unit economics, because if the unit economics is not good for any digital brand, you will never make profit, whatever you scale up in. So the fundamental things like whether you have a core set of SKUs, which are, you know, what is the repeat rate? We have now a set of what you call a digital quotient of what we do to evaluate brands. I think our success rate, our hit rate in meeting acquisition assumption is pretty high. Now, coming to synergies, yes, I think the one or two synergy potential could be distribution. The second, as we now have a boutique of, you know, four, five digital brands, there are a lot of opportunities for cost synergies at the back end, which the process we have just about started. In a nutshell, I think, quality of promoters, quality of the brand equity, how consumers love them. For example, if you look at the ratings in some of the things like Amazon and Flipkart of a brand, whether there is significant repeat rates, does the brand started making money? To give you an example, in both, say, male grooming or, you know, Plix compared to some other brands, the burn rate is much lower. Therefore, I think these are the kind of things we look at, and we are pretty confident. I think Beardo is a perfect example. I see Plix as a huge mirror to what Beardo has done, you know? If you look at it, even in a so-called slightly tougher circumstances for e-commerce or digital brands, this brand continues to grow. In fact, it ended at INR 104 crores. It's a hit, I mean, a current run rate of INR 150 crores, and the quality of the business is good. It's, you know, it's not about short-term tactical sales, okay. One follow-up there. The scale-up has been good, and I don't think the number of years of this business has also been very long. I wanted to understand, in terms of R&D or patent or those kind of right to win, could you talk about that? Because this is, this is a very exciting field, but I'm sure a lot of other people are also trying similar kind of stuff. What is the reason for the scale up, and is there a R&D angle to that? Obviously, the product delivers. I think we, while I'm not going to elaborate, I think any acquisition we do, we do a complete due diligence, look at strengths. As I said that, ultimately, in any business, whether it's digital, brick-and-mortar, the first thing you have, you need a product that delivers. You need a pricing, and I'm talking of classical marketing that is value-seeking. You need a certain ability to innovate, consumer understanding. I think they know how to operate the marketing funnel. I, I am, I think, and as I said, it's not only about the efficacy of product, it's also about looking at the future pipeline, the ability to develop these products. I think, also we look at the background of the founders in terms of their, you know, their perspective on technology, product development, and the fact that we are pretty excited by the kind of, I said, that the team which is there. I think the question is that, in any category, I think there would be people, I think nutraceuticals, wellness is an exciting category. The question is, can you create a scale and a profitable path to market which creates a moat? There is always one number 1 and 1 fast follower in any category, you know, who they survive over kind of a time. Thanks. One last follow-up on this question. Last few years, you have done multiple D2C acquisitions. You have given a lot of freedom at the local level, which is, I think, obviously required, given the extremely different kind of business and very different kind of scale also. I wanted to understand on the earlier acquisition, how much of the Marico template has been put in place in terms of systems and process, or still, those things haven't been done because, still you want to give that culture, that culture to remain intact? If you see, one of the biggest things about Marico, which has been. Perhaps Marico has been successful by punching above its weight, and we believe that we want to be skilled insurgents and operate with owner mindset. Coming to, and that is the empowerment which we give, which is a part, inherent part of Marico culture, which attracts a lot of, you know, founders to us, because that has become a Marico template for us becoming a strategic investor of choice. Where we partner them into achieving their dreams and aspirations and a scalable, profitable growth model. There are four things which are non-negotiable. First, obviously, portfolio, capital allocation, your entire compliance, quality, and, you know, the way the manufacturing practices. Those things are obviously non-negotiable. We are trying in a process of now that we have, we also do a lot of cross-learning. I think what we have not yet done is, you know, use one P data or first party data across all the four and starting cross-selling. That is something which would lead to huge synergies. I think, there are also, we have started the process of cost management because, as you know, that we have created a kind of a nano facility in one of our plants to actually start insourcing, which will also give possible potential margin benefits. I think the process has started. It's a fine balance, but we don't want to completely run it like the core, because the right to win in a core and the right to win in a digital businesses are completely different. Having said that, once they cross INR 100-150 crore, and Beardo has already started the process, they are experimenting with, you know, omni-channel and brick-and-mortar, where they definitely having the Marico help is a source of competitive advantage. Sure, that's useful. My second and last question is on your 20% Foods and Premium Personal Care, which has doubled in essentially 3 years. So here my question is, in terms of gross and EBITDA margin of this part of the 20%, how does it compare with gross and EBITDA margin of the legacy India business? Between the two, if you could give us some color. I'm not asking for exact numbers. Which one is better, which one is still work in progress? I think Premium Personal Care obviously is a high margin business. I think what we need to do is ensure that, obviously, you know, Premium Personal Care needs high end, high EMP also. In the case of Foods, it's slightly lower margin, but low EMP. We are cognizant of the fact that very soon, the blended margin of Premium Personal Care and Foods should be equal to the gross margin of our remaining core portfolio, which is our legacy portfolio. That process is being significantly focused on, so that this happens within the next 12 to 18 months. If I may just add, Abneesh, you know, currently at a weighted average level, gross margins are definitely better than the overall portfolio. To talk about operating margin, currently many of these businesses will be investment grade, and therefore, this may not be the right time. Once some of the businesses get a scale of INR 150-200 crores, they start making money. As and when these businesses will cross those scales, that will be the right time to look at the operating margin. Having said that, we are extremely focused in terms of driving the right gross margin for the portfolio, and weighted average gross margin portfolio of these businesses put together is definitely better than the existing portfolio. Sure, thanks. That's all from me. Thank you. Thank you, Abneesh. Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Hi, Saugata. My first question is on margins. You mentioned that this year, you will do about a 20% kind of margin. If I look at your margins historically, this is probably the highest or close to the highest margin that you would be clocking as a company. What I wanted to ask is, on a medium-term basis, on a 2- to 4-year kind of a basis, do you see your margin stabilizing at this 20%, or do you still see over that time horizon sort of expansion in the overall company level margin at a consolidated level? I think there are two things. One is, as I said, you are absolutely right. We, we are pretty confident that we should be able to cross the 20% mark in margins this year. Unless there is significantly black swan inflation that hits in, you know, simultaneously on copra, crude, and everything in one particular year, I think it will start improving because there are two parts to it. One, I think in food, for example, as we scale up, we'll be significantly starting the margin improvement program on foods, because food is, we are very, very mindful that while we grow foods, we shouldn't, you know, get our eyes off the margin story. The second thing we are looking at is also, I think we have not done well in the premiumization, to be very honest. The premiumization, we are finally getting our act right, and therefore, we are going to, you know, improve this one. Number three, I think if you look at some part of the international business, obviously Bangladesh is doing well. I think secondly, Vietnam also, we have now replicated some of the Bangladesh journey, and we are now replicating Middle East, North Africa. Middle East, North Africa, we didn't have scale, and therefore, we didn't have margins. There are players who make 20% plus margins. In fact, some of the market leaders in that market make 30% margins. That's another potential reason. I would say margins is likely to creep up. However, in a year where there is a black swan, where you have a 30%-40% increase in copra and crude hits 100, there would be some, this one. On a long, medium-term basis, I will see margin creeping up. The other thing which is there, this is particularly happened in the last few quarters, is that, you know, we haven't got the leverage, operating margin leverage, because of deflation, the revenue is down. Number two, I hope that by second half, the anniversarization of deflation of Bangladesh currency, which is leading to translation, you know, hits in our both top line and mar- you know, and your bottom line, that will also start, you know, somewhere neutralizing. As you know, the Bangladesh contributes to a significant portion of top line and bottom line in our mix, and that had a significant depreciation, starting from Q1, but now it's settling down. By Q3, that effect will start neutralizing. Overall, I think subject to no black swans, it's to answer your question, yes, it will now, there'll be a steady increase, but not, you don't expect any hockey stick from here. Sure, sure. Just a sub-question on that. While you are going to make attempts to improve the food margins, I'm sure for the foreseeable future, they will, at the EBITDA level, be below the company average. Therefore, this is a faster growing segment, so even if the margin improves, hypothetically, let's say, from 3% to a 10%, but a 10% on a significantly higher base because it's a faster growing business, doesn't that put a drag on your overall company margins? No, no. That's why I talked about the PPC or the Premium Personal Care, which is serums plus male grooming, plus skin care and digital. Now, they have the potential for higher EBITDA. Okay? Number two, in foods, at least in oats, we have proven that we can deliver a kind of a core margin in EBITDA terms in oats. The foods, I think the ask is to how do I start hitting INR 150-200 crore each category? The focus from now on in foods, instead of launching 10 things, whatever we have, and maybe we'll launch one or two things, is that how do I start doing two things? One is getting, focusing on scale. For example, soya, honey, Munchies, can we get scale? Foods, the margin really goes with scale. The second thing which we have started, which we have not done, is, you know, right now, you have individual set of advertising. You know, whether Saffola Oil advertisers, Saffola Oats advertisers, Saffola Munchies advertisers, Saffola Honey advertisers. Very soon, in fact, in over the next couple of weeks, you will notice the first signs of a, what I call a Saffola master brand advertising, which will also give you efficiencies in A&P rather than the fragmented A&P which you are currently seeing in foods. Right. My second question is on VAHO. When our Q4 results came out, you were very confident that this business is now on track for, if not a double digit, at least a high single digit kind of a growth. This quarter, VAHO is roughly flat. Just wanted to understand, apart from the pipeline issues that you mentioned, I mean, does that explain that entire differential between a zero and a high single digit, or is there some other reason for this? There are two things, I think. Just are not pipeline. Pipeline has contributed some part of it. I think the second part, what has happened is that, we continue to see, at the bottom of pyramid, high intensity, this one, because everyone. See, this, one interesting phenomena observing, obviously, while the food inflation is slightly softening and overall inflation is softening, the tendency towards focus on consumers buying LUPs and price point packs, and therefore competitive intensity at bottom of pyramid, which, has again slightly increased, okay? Having said that, again, I believe that quarter two onwards, we will see, reasonable improvement as far as VAHO number is concerned, and the second half, we'll go back to what we had talked about. Right. Just wondering here, I mean, just thinking aloud, historically, we haven't seen consumer trends being so fickle that they change in one quarter and then suddenly revert back in the Q2. What gives you confidence that whatever weakness you are seeing now will sort of reverse very soon? No, I think it's not the weakness and the sentiment. I don't think if you look at the category growth levels, in fact, it has improved. If you ask me that, is Q4 and Q4 plus, if you add, say, Q4 plus Q1 and compare it, let's look at a January, June, okay? Mm-hmm. Then compare it with, say, July, December of last year. There is a sequential growth, there is an offtake growth, there is a market share gain, and therefore, if you look at a January and June together, and VAHO, I think the story is better. Therefore, as -- and I don't think any consumer sentiment dip has happened drastically, it's in offtake terms run rate. In terms of January and March versus April, June, there has been no significant difference. Okay, okay. Understood. That's all from me. Thanks, and all the best, Saugata. Thank you. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead. Hi, Vivek. Hi, Saugata. Hi, Pawan. A couple of questions. Can you, Saugata, talk about the secondary versus, w e know the primary, obviously. Can you just talk about, you know, because of this, channel issue and the measure that you have taken on the scheme trade scheme rationalization, what would be the secondary, roughly speaking? A couple of%, I don't want to get into specific. As I said, that is not an excuse for why we have done 3, okay? I think it will be a couple of percentage points higher. That will be primarily on in case of Parachute and VAHO? It's only in Parachute and VAHO, that's right. Okay, got it. And- I'll tell you what, so that you have the perspective that, i f you look at, you know, historically, long ago, Q1 was 31, we have got it down to 27. We want to take it down to 25. That should explain the thing. That also means, you know, that also means because there is a destocking in this quarter, so this should unwind and then, you know, as you know, trade promotions get streamlined, automatically the revenues should also pick up in the next, let's say, quarter. I think it is also a good opportunity. Ultimately, it's offtake. Number two, as I said, that, we want to mirror offtake, and there are also that offtakes are smoother offtake along with smoothing of all, you know, the secondary and primary. I don't want to get into primary, secondary offtake, but all I can assure you is that, I think given whatever trends we see, that this quarter onward, it will start improving again. You know, it's very difficult to get into that just because secondary was higher than primary last quarter, I will want to do that much. Ultimately, we have to look at something which ensures and ultimately that we look at offtake and penetration, as long as that is and market share protection. I think primary is, we have to derive things, so I don't want to get into, you know, looking at primary and secondary, but all I can assure you is that the numbers that will come from both Parachute and VAHO will be certainly better than what it is there in Q1, and the overall volume will keep on increasing as we go towards Q2, Q3, Q4. Got it. Just a follow-up, Saugata. You know, so I know there are, there, and again, these are dipstick surveys, so may, may not be exactly accurate. My understanding is that, you know, Marico, at least in the last few years that I have seen, you know, your, your, trade inventories are quite, you know, quite, at an optimum level. You can always get better, for sure. Unlike some of the other companies who actually play with inventory a bit here and there, in that context, you know, I would have imagined that, you know, there is no big, you know opportunity to kind of streamline the, the trade inventory. Correct me if that understanding is incorrect. I think, we obviously go into a, what I call a pool-based system, which we do for our management. Having said that, you must be cognizant of 1 thing, which is, you know, especially urban distributors, when you have a lot of Saffola index, they have a, you know, the, especially in this quarter, where there was a 30% reduction in prices, obviously their revenue would have got impacted. Okay? That leads to and so therefore, we have to be mindful of our partners, profitability and other things. Got it. The next question is on, both, you know, specifically on Parachute and Saffola with, you know, with whatever deflation that we have seen, we are seeing, how do you, how do you see competition, particularly from let's say, regional loose in case of Parachute and, you know, and somewhat similar to, you know, a bit organized in case of Saffola E dible Oils? In the case of Parachute, what happened in Q1 is obviously there was a little bit of deflation. Fortunately, we believe that deflation is now settled in, and there could be a sideways movement of copra into little more positive territory as we move into August, September, October. Therefore, I think that issue that was there in terms of slight this one on volume, that should be taken care of. The other thing which we are doing is, as I said, that we want to invest money to ensure that we for demand generation, so we are aggressively investing money behind demand generation. If you note, you will see that even in Q2, Q3, Q4, there will be A&P increases while we commit, no, we deliver our margins of 20% plus. We will not deliver margins by having a, you know, cutting down YoY on A&P. Okay? I think that is what we are doing, that we are putting things in place for demand generation and micro-marketing in place, so that Parachute this one in back on growth, and whatever value we can give to the consumers, we'll do with value. Need not be pricing, but other tactical means. Coming to Saffola, see, Saffola's issue is this: Saffola offtakes are good. It was just that there has been a significant downstocking. We have to get into a position where there is a steady, you know, what I call steadiness or, or less volatility in the pricing, because people wait and watch, and they don't stock. Coming to offtakes and market share, I think the current pricing of Saffola, which is at, you know, that pricing model where the price premium, the price premium is more or less right now. I don't think there is that problem in Saffola. The problem is basically what we need is a slightly more steadier and less volatile raw material, so that, you know. Therefore, it is not a competitive scenario, it's a more of a HDR thing. It, it always doesn't happen here because I'm just, you know, just telling you that suppose I lose HDR, I will again suddenly gain back HDR. It normally doesn't happen until the volatility completely ceases and people see steady things. It's unlikely to happen because, you know, there are too many macro factors in the world, global political scene that, you know, impact sometimes oil. We believe at least the deflation thing which kept on happening from the peak, as you know, that 30%, that will now keep on slowing down as we enter the consecutive quarters. Okay, got it. Got it. Last question, if I may, Saugata, on the gross margin. There is a smart recovery in this quarter. You are still, you know, at an overall level, you are still below, let's say, historic peaks. Where do you think, you know, the rest of the year in gross margin? Do we see a stability in gross margins, or there is still, you know, there is still leg up over here on this line? This quarter we have expanded the gross margins about 450 basis points, 450-500 basis points. Going ahead, you know, margins will not be as high as this one, but we still believe that at a full year level, it will be in the range of 300-400 basis points. Of course, a lot, part of it will also get plowed back into investment behind brand building. Therefore, at an operating margin level, what we are saying is that minimum will deliver 20%+. Right. But, you know, Pawan, just a follow-up, you know, this quarter is 23%+ on EBITDA margin. Even if I were to take the, the same flattish number and, and the revenue line is now more streamlined, does that mean, you know, what essentially you are saying is that A&P spends can actually go up quite a bit? Because, you know, the, there is a, there is a step up in staff costs in this quarter. So even if I assume the same run date, I mean, at least in my model, at least I get a number which is more closer to 21% on EBITDA margins and not at least, and not 20%. We also have to appreciate that, you know, margin of 23.2% is also because of the denominator effect, right? Because the revenues have not grown. It has in fact grown by 3%. As we move ahead in Q2, we expect that it should move to largely flattish trajectory, and from H2 onwards, it should move into positive trajectory. That denominator effect will go away, number one. Number two, also, as I said, overall gross margin, we still expect that 300-400 basis points will be there. Yes, you are right, a large part of that expansion, as I said, the A&P expenditure could be high in double digits, and therefore, operating margin, we are saying 20% plus. Now, 20% plus is the bare minimum that we are saying. There is also a possibility that we might deliver slightly more than that. Okay, got it. Crystal clear. Wish you all the very best, team. Thank you. Thank you. The next question is from the line of Hasmukh, SUD Life. Please go ahead. Yeah, thanks for the opportunity. My question on margin has been answered. I have second question on your Foods and Premium Personal Care portfolio. That has come to now almost 20% sort of, of your domestic revenue. If I take, let's say, 3-year sort of a view, what's our internal target for this as a percentage of overall domestic revenue here? I think we don't have any further target. I think we should ensure that obviously this part of the portfolio will be a growth portfolio. Having said that, what we are saying is that two things we are looking at in this portfolio: How do you grow profitably? Foods gross margin needs to increase, and we'll also focus on the digital brands. You know, in fact, compared to, as I already said, that if you look at Plix versus some other similar brand in that space, you look at Beardo versus some similar brand in this space, our burn rates are far lower. At the end of the day, how do you get them into profitability space very quickly? It's a combination of A and B, and therefore, I would not just grow, I need to first get the profitability right and then grow. Understood. Understood. Thanks for that. That's it from me. Thank you. Thank you. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead. Hi, Saugata Gupta and Pawan Agrawal. My first question, you know, is in sizing. Clearly on Saffola Edible Oils, you know, there is a fair bit of volatility, and we recently saw, you know, firming up of palm oil prices. Do you see, you know, that pricing for Saffola needs to be taken up of this firmness sustained, and how soon that can happen? What are, what is the implication on, you know, revenue growth in the second half? You know, I heard Pawan Agrawal saying that, you know, Q2 could be flattish, but as you move into second half, does price inflation completely goes away in your assessment? Latika, it's very difficult to, you know, there has been very mild increase, you know, in our set of, you know, edible oils, which we use in the last couple of, last week, actually. Now, it's very difficult to say. All I can say is that this quarter we are at 30% deflation. The deflation numbers will keep on decreasing. In the second half, that there will be no deflation, we might, as we exit, we might move into smart, light, slight inflation, and therefore, revenue growth will be volume growth or volume growth plus. We are also indicating that the volume growth when we started with a 3, it will be more as we move into the, you know, Q2 and second half. It is very difficult to right now say them that what will happen, whether Saffola inflation will happen. Right now this is modeled on, this is on the current pricing of Saffola, say. Okay, with current pricing of Saffola, you feel the overall revenue growth, which will turn positive in second half, will probably have flattish to marginal positive pricing? Is that? Yeah, that's right. That's right. right. That's right, yeah. Okay. The second it was on, you know, your just comments on gross margins. you know, I heard someone mentioning 300-400 basis points expansion for full year. I think in the deck, you talked about 250-300 basis points. I think the question was saying, you know, you had a 500 basis points expansion in Q1, and for full year, you are talking about, you know, 250-300 basis points. We should be now taking it as more like 300-400 basis points? Is it on account of, you know, the denominator catching up, and probably some bit of mix effect as inflation comes back? At a full year, you can consider that number about 300 to 350 basis points, and not really for the rest of the, rest of the year. At a full year, you can consider 300 to 350 basis points. Okay. More importantly, as I said. Mm-hmm. Yeah, sorry, go ahead. No, no, continue. Sorry about it. More importantly, I mean, there are multiple levers which will keep on playing out during the year, right? There are forecasts. It's very difficult to have a right forecast. Even the best of the international agencies have not been able to get the right forecast for the edible oil. There are a lot of multiple things that will play out. What we believe is that with 300 to 400 basis points, somewhere between 300 to 400 basis points could be the gross margin expansion. If we get that expansion, we will continue to invest, because we have a lot of new agenda that we have created, and we definitely want to fund them. However, what is more important is that an operating margin level is 20% plus. Okay. And the last question, you know, was on, you know, the modern trade contributions for VAHO and Parachute. If you could share that, any, any rough sense there? Are you seeing the salience of private labels and modern trade channels increasing in the coconut oil space? Any, any comments there? I think we will not share, we will not be able to share channel-wide contribution for brands. All I can say is that if you ask me whether the market share of Parachute is lower in modern trade, the answer is no. Okay. All right. Thank you so much, Saugata and Pawan. Bye. Thank you. Thank you. The next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead. Hi, I'm Arnab Mitra. Hi, good evening. Hi, hi, good evening, Saugata Gupta and Pawan Agrawal. My first question was actually on the acquisition again. You know, the difference I see with your past acquisitions is, in the recent past, is that this seems to already be at a reasonably larger scale of INR 150 crores ARR. And in the kind of product segment they are in, which is plant-based protein and things, do you see this-- I mean, at what growth rate can they grow at from a base that is already 150? Because it seems a pretty large FP number for these kind of brands to achieve. Does it mean that being plant-based, it's going to be a bit of a niche within the protein and nutraceutical market, or it's not necessary that these products will be a niche and the pricing could be competitive, even though it's plant-based positioning? The way we see it is that if you look at India, I think, India, even plant protein is going to be a big driver of growth. As opposed to the entry point in the Western markets, where it has started off, a lot of plant protein has started off with mock meat and other things. Here it is a plant protein nutraceutical or plant protein in the face of soya, which we are doing in food. Coming to any nutraceutical, if you have, there are four or five drivers of growth. There is heart health, there is what is called weight management, there is diabetes or sugar management, there is gut health and bone health. These are the five platforms, when a wellness or a nutraceutical brand works. What we look at is that whether plant protein and some of the brands. Incidentally, interestingly, Plix also has something called, you know, it's a little bit of personal care, skin food in that territory. What we looked at is that in all these platforms, and that is how global nutraceutical brands operate, you know, that can my proposition ultimately extend across all fives? We believe that it happens. At the end of the day, you know, there are some famous, you know, big startup brands starts with something, you can always move to adjacencies, isn't it? Sure, sure. No, understood. Like Beardo. Beardo is still 40%. It's okay. I I mean, at the end of the day, we can move to adjacency. You start with something. Then it stands for, for example, it stands for nutrition with fun, cool nutrition. That's what the brand stands for. Maybe it can be extended. No, understood. Understood. A related question was, I mean, again, not asking exact numbers, but approximately if you could share the, you know, range of gross margins that this category or this brand has. Is the INR 150 crore turnover fragmented across a large number of SKUs or you see certain SKUs becoming sizable within this INR 150 crore turnover that they currently have? I alluded to this. One of the things we look at for any good acquisition or a good, which is a scalable, is do you have a couple of hero SKUs with high repeat rate, a loyal set of consumers with a very high, you know, Amazon rating, which are the core of the brand, because they are the guys which give you that, what I call the foundation of growth. A lot of startup brands launch fifty things and start to show growth. I think this one doesn't have that. There are a couple of SKUs which contribute a significant portion of the, this one story. The gross margin is high. I can also tell you that, not many food categories can have a digital model, because digital model unit economics requires a certain set of ACoS. This brand can afford to have a digital model which is profitable because the gross margin is high. In fact, if you look at food, very few food categories can have a standalone digital model because food usually have lower gross margin. My second question was, you've, you've given this INR 400 crore turnover, which is a combination of some of your older brands like Livon and Set Wet, and the new age digital brands. Now, my understanding is that the, the older brands which came from the Paras portfolio, they were probably not growing very well leading into COVID in the previous 4-5 years, while the digital brands, of course, grew very fast, in the, in the post-COVID period. How do you look at the growth of this overall INR 400 crore portfolio, especially in the environment that this year we hear that internet e-commerce growth is slowing down, in personal care? How do you think of the legacy, I mean, the older brands like Livon and Set Wet also contributing, from here on? The way we look at it, I don't want to get into individual this one, but the fact is that the newer part of the portfolio, which is Premium Personal Care, Foods, digital brands, we would like it to grow by 15%-20% every year from a medium-term basis. Just one clarification, Anup. This INR 400 crores does not include the Paras portfolio. It is basically the digital brands of Beardo, plus Just Herbs, of our own in-house digital brands. Oh, okay, so you're saying it does not include Livon and Set Wet, with it? Yeah. As you had mentioned. Yeah. Okay. [crosstalk] However, when we are saying that our contribution from the premium personal care and foods, that will become 20% by end of year 2024, that definitely includes the Livon, the Paras portfolio as well. Okay, understood. Understood. thanks. That's it from my side. All the best. Thank you. The next question is on the line of Sheela Rathi from Morgan Stanley. Please go ahead. Yeah, thanks for taking my question. Hi. Hi. I just had one question. This is more on the medium-term, I would say. You know, the question is, from your lens, what is the current positioning of the Saffola brand in the minds of the consumer? I'll tell you why I ask this question is, basically, you know, company has embarked on this diversification strategy in the last few years. Is there a thought here that, you know, over a period of time, we could be, you know, thinking about, reducing our exposure to edible oil? Because, you know, it kind of adds to the volatility in the business. I just wanted to hear your thoughts on that. Hmm. You're absolutely correct. I think, my dream is that another three, four years from now, food becomes higher than edible oil in the portfolio, okay? Because that way, we will de-risk this commodity. One of the things we internally track is how much we, over the next five years, we'll continue to do a commodity de-risking, which we'll do on our portfolio. Because at the end of the day, ultimately, sadly enough, oil and water doesn't mix, you know. In the personal care, is far less volatile to your commodity. Because we give our RM percentage as a percentage of net realization, needs to continue to decrease, and that is something we track over the next five years. Now, coming to Saffola specifically, I think Saffola, if you look at the history of Saffola, it was completely anchored on heart health. It started off, if you look at the 1994 advertising, it was on fear, it was for the sufferer. It was curative, it went into preventive, and now I think Saffola is a way of healthy life. Ultimately food, it gives us taste values. I think one of the things we are trying to do is that we are also trying to ensure that how does Saffola, besides expanding the total addressable market, is that coming from a sufferer to somebody who wishes to, what I call adopt a healthy way of life, you know? It's like taking anything which is better for you. Saffola will enter categories with an option which is better for you, and that's how the brand will keep on growing. Having said that, obviously, the core brand, which is the Saffola oil, the heart equity is too strong, and we will not completely, obviously, vacating the heart equity. What we are saying is, it is for a healthier heart and as opposed to somebody with already a heart problem. Understood. We will continue to have this brand, but, you know, the endeavor would be to continuously increase the exposure towards other food businesses. Yeah. Therefore, the brand becomes from denial to happiness, from, you know, having far more food values, moving from individual sufferer to family. I don't think it still will encompass kids, but I think that's the next step. I think it is more of saying that, you eat what you want to eat, but eat healthily. Therefore, Saffola gives you options, you know, whether it's breakfast, it is snacking in between meals or a meal substitute. Understood. Just one more bit on this, you know, I asked that question also, is that, how is it positioned in the minds of the consumer? Today when a consumer buys Saffola Oats, is this because, you know, they know that Saffola Edible Oil is a, you know, healthy oil, and that's why, they are, you know, they're buying the Oats product also because it comes from the same brand. Is there that salience which is still there in the minds of the consumer? See, very interestingly, the amount of number of households who buy oats are higher than number of households who buy oil. As you know, because oats is a price point at INR 17, okay? Now, I think obviously the primary driver for the consumer to buy Saffola continues to be health. It is no longer just heart health, it's health, and therefore, the taste is the discovery. Therefore, if you look at the Ragi chips, for example, as we are investing in millet in a big way, then you will see some of the things which we are doing on millet. We believe that it is offering. We are, one of the learnings when we, you know, in 2010 or 2011, we prototyped a snack and it bombed. One of the learning is that Indian consumers will never at all compromise taste for health. Therefore, all the products which we design for Saffola, first we ensure that it beats on or is parity on the taste benchmark. Health anyway is pre-sold as far as Saffola is concerned. Taste is actually a discovered and a surprise benefit which we want to drive. Understood. Very clear. Thank you, Saugata. Thank you. A reminder to participants, please press star and one to ask a question. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Hi. Yeah. Hi, good evening, Saugata and Pawan. Thanks for the opportunity. I'm on slide 7, and I'm just doing and reading the numbers, where you have given VAHO number, which is -2 volume, -5 value, and VAHO is flat in terms of value. I'm just more curious, if I track the journey of last 8 quarters, about 8 quarters before there was a downtrending and VAHO was doing significantly well, you alluded that now, the VAHO is, I mean, the entry point VAHO has seen a lot of competition. In terms of consumer behavior, I just wanted to understand, I mean, I'm not looking at the primary number, but on ground, if you tell me something about, is the consumer shift is primarily affected in the mass end of the product is because of food inflation, or there is something more to it and that's why the even VAHO is not showing? A little question on that, how the category has evolved or declined, in terms of value, volume over the last, four, five quarters? Okay. Let me just address it in two parts. If you look at, you know, the last, and I'm talking alluding to the last couple of quarters, five, six quarters. What happened is whenever there is, unlike some of the other personal care categories, in the case of Value-Added Hair Oil, it has and it is somewhere mirrored some of the mass personal care categories, where there is significant amount of rural consumption and agnostic consumption in terms of quantity across different LSM classes. Whenever there is inflation, so compared to, let's say, premium skincare and other parts of the, you know, personal care portfolio, VAHO or soaps or, say these are the, while, you know, detergents obviously has a premium end of it, which is the liquid detergent and all that. These kind of categories, they get impacted far more. What we have seen actually, if you look at the start, there has been degradation. In addition to that, what happened is that, there has been significant intensity into the bottom of pyramid. Even if the organized players which are not participating intensively, I mean, in the sense that one change that happened, which we noticed from Q4, is some of the organized players in VAHO started raising prices. The trade intensity, which is the below the line, actually, you know, so the pricing got transferred into below the line spends. Some of the smaller players are also therefore aggressive. What has essentially happened is the consumption, while it has grown in volume terms, the value, there has been a kind of a slight value degradation that has happened. Having said that, I think that's why I said that our task is to... We are already seeing that in terms of the fact that in the last 8 quarters, every quarter we have got value growth, and we are now focusing on value market share. We have started getting value growth, and we have to, as I said, and we are doing it, but it's still there's a journey in terms of doing a better job in the premium part of the portfolio. The premium part of the portfolio has now started just about growing. We believe in the last 1 or 2 months, we're seeing that growth. Okay. second question on the related PCNO. Have we dropped or taken any pricing action in this quarter, quarter one, or now you're, you're forced to take some action? No, I don't think so. Having said that, as I said that we will, you know, we saw a slight deflation that happened in Q1, we didn't take pricing action. That is perhaps one of the reasons. The reason we don't want to take pricing action, we expected the thing to reverse, which has reversed. We, this taking frequent pricing action, you know, upsets the rhythm of the sale, which we... We actually weathered it out this quarter, and we expect now things to be okay and our pricing to be okay. What we didn't want is take a pricing action, as I told you last time in the call, that given that PCNO has SDRs and a very widely distributor, it takes around 6-8 weeks for the pricing to realize. Then we shouldn't have a thing that we are, you know, underpriced in the market, and we have also, we have lost out on the margin and we lost out on volume in the Q1. I think we have taken you know, that kind of a stance where we wanted to wait, because this frequent price up and price down actually is not good for the brand and good for our rhythm of sales. Thank you. Ladies and gentlemen, we'll take the last question from the line of Latika Chopra from JP Morgan. Please go ahead. Hi, just one question, you know, on with these margins, you know, they have expanded quite well. Could you advise- Latika, your voice is breaking. Please use the handset. Yeah. Hi, is it better? Slightly better, but yeah. Okay, I am on my handset. My question was on overseas margins. You know, the margins are 29%+ this quarter. What drove this, and do you think this will be sustainable? This is largely driven by, again, Copra gains in Bangladesh, and going ahead, back to the levels of 25%-26%. Okay. All right. Thank you. Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for the closing remarks. Thank you. Over to you. To conclude, we had a slow start to FY 2024 on the top line front due to one-offs in the domestic business, but we draw confidence from underlying indicators of a pickup in domestic volume growth, followed by tapering off in pricing deflation from here on. The international business has been resilient, and we expect to sustain its healthy growth momentum. Given the accommodative input cost environment, we will continue to aggressively invest to drive an improving trajectory of growth in the core and newer portfolio. That being said, we should be able to deliver healthy margins on a year-on-year basis through the year. To sum up, the full year earnings growth prospects, as envisaged at the start of the year, remain firmly intact. If you have any further queries, please feel free to reach out to our IR team, and they'll be happy to address. Thank you, and have a great evening. Thank you very much. Ladies and gentlemen, on behalf of Marico Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.