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00:00Hello and welcome to Earnings Edge. I am Mahima Vachirajani. Well, one stock that is in focus
00:12today is Emami. It came out with its Q1 FY25 earnings yesterday. Revenue was up 10%, EBITDA
00:19was up around 14%. EBITDA margins have slightly improved from the 23% mark to 23.9% mark and
00:27net profit is up around 10%. However, the stock is seeing some pressure today. It's
00:31down around 4.8%. But to discuss more about how the quarter has gone by and to break those
00:38numbers for us, we are joined by Mr. H. Bhansali, CEO of Finance and Strategy and Business Development
00:44at Emami. Well, welcome to the show, Mr. Bhansali. My first question to you is that, you know,
00:51give us some color as to how the quarter has gone by as per your expectations. What are
00:55the kind of trends that you're observing, you know, overall in the FMCG space? Yeah,
01:01the performance is in line with our expectation. As you know, we have been able to deliver
01:06a double digit growth in such a challenging environment across the globe, domestic market
01:13and also the international markets and both have performed very well. Domestic business,
01:18the growth is led by a volume growth of 8.7% and international business also the constant
01:24growth is at 11%. So all around growth and within this also, if you look at the growth
01:30has come from all the channels, it's not that few of the channels and all. So we are highly
01:35satisfied. The growth has been very good. And we feel that the same kind of growth would
01:40continue going forward. Right. Mr. Bhansali, you know, for a lot of FMCG companies, you
01:47know, the rural growth has been picking up. In fact, there are companies that have said
01:51that the rural growth has been more than the urban growth. It's, you know, overall outpaced
01:58the urban growth. So I want to understand is how is Imami seeing the rural recovery
02:02in terms of demand? Yes, this is the second consecutive quarter where the trade has also
02:10shown a good growth, which earlier was GT channel was rather flat or declining. And
02:17then there's the rural also has grown by almost the rural channel has grown 5% and
02:24GT growth has also been 5%. And on the other side, the newer channels kind of modern trade,
02:31e-commerce and institutional sales, everyone there, they've grown around 25% plus. So all
02:38around growth and very inclusive growth from all the channels, all the brands, many of
02:44the brands and supported well by Storm Summer. So nice growth. Mr. Bhansali, you know, since
02:52you mentioned that, you know, the growth has been supported by the kind of heat wave that
02:56we've seen, you know, this quarter, do you expect the same kind of growth to continue
03:02in the coming three quarters as well for FY25? Yeah, for the financial year, we expect the
03:10same kind of a two double digit growth. And that would continue because the first quarter
03:15was witnessed by summer, and then there would be a third quarter witnessed more by winter.
03:20And so this seasonality would come in, may have some here and there, but despite this,
03:26we expect because of many other steps, which we have taken in terms of marketing distribution,
03:31brands, products, and so, so, so many things which are undertaken. And on the top of it,
03:37the government has a lot many steps to improve. On the rural side, monsoon is also expected
03:42to be good. So all taken together, we expect good growth to come in. And Mr. Bhansali,
03:48you know, in terms of your profits, you know, I was I was just analyzing your P&L and I
03:53saw that your cost of raw material has gone down by 15%. So what is the kind of trends
03:58that you're seeing in raw material pricing? And what is the kind of outlook that you're
04:03expecting in FY25? And on top of that, what is the kind of margins that you're looking
04:10at for FY25 overall? Yeah, so of late this cost has started inching up also, but still
04:18they are very benign. And we expect a margin improvement to happen in terms of the gross
04:23margins as well. And we would be investing behind the brands. And so it may increase
04:29somewhat in marketing spend may further increase. But despite this, our EBITDA margins are expected
04:36to improve a few basis points. Can you quantify that few for me, Mr. Bhansali? I would like
04:45to live at it. Okay, well, and you know, since you already mentioned that, you know, you'll
04:50be further, you know, pushing money towards advertisement and marketing and your A&P spends
04:55have increased around 21% YOY. But overall, they've remained the same as a percentage
05:01of sales. So if you can give us some idea as to you know, how this entire cost will
05:05play out in terms of advertisement and marketing. There's a percentage of sales. Right, I okay,
05:13okay, I think we've lost his feed. But okay, till he joins back, let's take a quick look
05:19at what the markets are doing right now. Well, the markets have been under pressure since,
05:24you know, the record performance yesterday. Nifty 50 is down around 0.8%. But I think
05:30we have Mr. Bhansali back. Mr. Bhansali, I'd like to repeat my question for you. That you
05:36know, your A&P spends YOY have gone up by 21%. However, as a percentage of sales, they've
05:42remained same. So how is that playing out for you overall?
05:45It has increased as a percentage of sale also for the quarter. Okay. And for the year, we
05:51expect the same to same may increase a bit based on the kind of opportunity we may witness
05:56in terms of the growth. And so, but despite this, we as I said, we would be expecting
06:02an EBITDA margin, a little EBITDA margin improvement as well, despite investment behind the plan.
06:09And Mr. Bhansali, you know, your strategic subsidiaries, that is your Mann company, and
06:13the Brillaire have been, you know, witnessing significant growth in the past few quarters.
06:19This quarter, also the sales has grown around 23%. So I want to understand that, what is
06:24the kind of strategy going forward for these subsidies? And overall, if you can tell me
06:30what is the contribution right now in terms of revenue and where will it go going forward?
06:35So, this is again a very important pillar for our growth. And we expect these subsidiaries
06:43and there would be many others who could be added to this kind of strategic investments.
06:49So, are expected to give impetus to our growth. And currently, last year,
06:58for the full financial year, it contributed around 4% to our overall turnover.
07:04Mr. Bhansali, you know, one of your competitors said yesterday that they are facing some kind of
07:09pressure when it comes to selling of their oil products. But Kesh King has shown quite
07:16significant growth. So, I want to understand that, you know, what is working for you,
07:21which is not working for others? Honestly, the category, the discretionary category kind of,
07:30and one oil also falls within that in this category. And so, while the market shares have
07:37not declined, but otherwise, it is still under pressure for all, for as an industry and not for
07:47only money. Okay. And Mr. Bhansali, overall competition, how is it looking like, you know,
07:53both from the unorganized as well as the unorganized space?
07:58Yeah, competition is there and is there to continue to remain from even the newer channels,
08:05new, the startups also give a good competition. And now, not many channels have also increased.
08:11So, there has been a lot of things happening across the industry. And we have to keep
08:16ourselves appraised of what is happening around and then adapt for realities. And that's what we
08:21are doing. And Mr. Bhansali, you know, just to get an overall view, you know, your revenues in FY24
08:30were around 3500 crores, right? And your bottom line was approximately 720 odd crores.
08:37So, FY25, if you can tell us that, where will the number for top line and bottom line go?
08:45As I said, we will be expecting double digit growth in terms of the top line and the bottom
08:50line also would be aligned to that with some EBITDA margin improvement, you can make out now.
08:56And, you know, overall, we're also seeing that, you know, there could be harsh winters going
09:03forward. So, do you already have a strategy in place for your products going forward? How will
09:09it play out for you? So, it plays well. In fact, we expect good winters to come in and we have
09:15many of our products which are precisely skewed towards the winter, maybe kind of Boroplus
09:22antiseptic cream and Boroplus face washes and other products and apart from that the Chyawan
09:28Prasad. So, we have good products which are for the winter. And we are poised for a good growth
09:34to come in from that season as well. And you also mentioned that, you know,
09:40discretionary spending has remained under pressure so far and which is kind of impacting the male
09:46grooming space. However, Man & Company has shown a good growth, but there could be a little more
09:52upside to that. So, I want to understand that when do you expect some recovery? You know,
09:58considering the kind of budget that this time the government has come out with,
10:02do you expect that this discretionary spending will go up?
10:06Yes, we expect the same as to improve and in the next quarter. In fact, we are also independently
10:13taking many of the steps on improving on our marketing and distribution reach there.
10:19So, it would improve further from here, but on a general way, on a product side or a discretionary
10:27it is under pressure. But we are taking all the steps and with the impetus which is expected to
10:33come in from the government, from monsoon, that's going to give a required impetus to
10:38this kind of products as well. Okay, and Mr. Bansali, overall from a long-term perspective,
10:45you know, we talked about how FY25 will shape up for you, you are expecting double digit growth.
10:50But overall, from a long-term perspective, what are the kind of strategies, new products that
10:54you are adding and overall also, you know, this is a two-part question, the price hikes that
11:01you have taken so far and what are the kind of price hikes that you are expecting overall in FY25?
11:08Yeah, in terms of this long-term strategy, we would continue to remain in where we are in
11:12the personal care and health care kind of products and our guests would be mainly on the Ayurveda
11:20brand supported products.
11:24Right, okay, I think we've lost him again. The connection seems to be a bit patchy, but yes,
11:31Imami is under pressure. However, the numbers have been a bit better than what the street was
11:38expecting, in fact, in line. However, net profit was a miss as per the estimates. But I think we
11:43have Mr. Bansali back. Yes, Mr. Bansali, I think, let me repeat the question for you.
11:48Two-part question, your long-term strategy for Imami, one thing and second, the price hikes
11:54that you've taken so far and going forward, what are the price hikes that you are expecting?
11:59Yeah, so on the long-term strategy, as I said, we will continue to remain where we are in the
12:05personal care and health care business and we would be, because all our products are based on
12:12Ayurveda or Ayurvedic, all our ingredients are also based on Ayurveda and so we are expert at
12:18that and we would like to remain in the region where we are and so far as price increases are
12:24concerned, we have been very, very judicious. We have never been aggressive in taking any price
12:29increases. Around 2% kind of a price increase is average, is now expected in the current region
12:37and that also will be very judicious. Okay, and one last question as to any
12:44new products in pipeline that you would want to talk about and any new segments that you
12:49would want to foray into? Coming out with the new products is always an ongoing thing and we
12:57come out with the new products in general trade and in many of the channels and precisely on the
13:03digital channels, we come out with many premium products as well. So, that journey is continuing
13:09and would continue. So, going forward also the same would remain. Okay, well, Mr. Bansali,
13:16thank you so much for giving us those insights on Imami and all the best for FY25. But with that,
13:23it's time to slip into a short break, but do stay tuned. We have lots more lined up on the other side.