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00:00Welcome back. You're watching Earnings Edge on NDTV Profit.
00:10Godrej Consumer Products is in focus. A steady first quarter for the company.
00:15Profit jumps 41%. However, revenue dips slightly.
00:20We had a chance to catch up with the Chief Financial Officer, Asif Malbari,
00:24who helps us decode the quarter gone by. Listen in.
00:29We have called out three important KPIs for the business.
00:34The volume growth in India, Indonesia and overall profit growth.
00:38We have ticked the boxes on all three.
00:41We delivered an 8% underlying volume growth in India,
00:45a 7% underlying volume growth in Indonesia and an overall profit growth of 13%.
00:50So in terms of the EBITDA growth, including Forex.
00:55So overall, it's been in line with what our expectations were.
00:59The revenue growth has been lower than the underlying volume growth
01:03because of the price deflation, which we've seen over the last year.
01:08But as we look forward with the inflationary pressures and commodities,
01:12we're expecting that next quarter onwards, we will see revenue growth ahead of volume growth.
01:17So we're quite happy with the way things are shaping up.
01:20Got it. So Mr. Malbari, then considering that commodity price will further go down,
01:27do you expect any expansion in the margins from that 21.8% mark?
01:31No. So we're expecting commodities to kind of start increasing a bit.
01:35We've started seeing inflationary pressures and hence,
01:38there is some price growth coming in into the business.
01:41So we are seeing revenue growth, which were actually lagging the volume growth,
01:45actually now starting to kind of go ahead of volume growth,
01:49which is something which you normally see in FMCT.
01:52Normally, FMCT sees additional price growth of 2-3%.
01:57So we should start seeing that now in the medium to long term.
02:01Got it. So then will you be considering price hikes going forward?
02:04And if yes, by how much percent?
02:06So quite a few of the pricing actions have already been taken over the last few months.
02:11And hence, you will see the effect of that in our revenue growth going forward.
02:16Coming to the second question, which you asked in terms of margin,
02:19if you see our margin journey over the last couple of quarters, including last quarter,
02:24we have significantly improved the shape of the business in terms of margins.
02:28Even in last quarter, the EBITDA margin of our India business was at 25%.
02:33And we do expect the India business margins to stay in this 25-27% band
02:38by using various levers like cost reduction, mix, leverage and new innovations.
02:44As far as the international business goes,
02:46we do see a better improved scenario in terms of margin portfolio.
02:50Last quarter, we saw an improvement in margins across all international businesses.
02:55The Africa business, which over the last couple of years was operating a single digit EBITDA margins,
03:00in the last two quarters has now moved to a 14% margin.
03:04And we do expect, we are guided that we will take this business to a 15% margin over the next two years.
03:09So we are very clearly on that journey.
03:12We've also seen improvement in margins in Indonesia and in Latin.
03:16So yeah, we should see a double digit EBITDA growth going forward.
03:21Okay, got it.
03:22And, you know, Mr. Asif, you've also announced that you'll be entering the pet care business
03:28where you'll be making roughly 500 crores of investment.
03:32I want to understand that how big is this market
03:35and how much of a revenue growth will this add to your overall business?
03:40Because I believe that you will be starting this from second half of FY26.
03:45So from a long term perspective, what is the kind of revenue growth that you're expecting from this?
03:49It's a very, very exciting category.
03:51Pet care currently is a 5000 crore category in India and it's still very, very nascent.
03:56Very low penetration in terms of pets and also very low penetration in terms of pet foods which people consume.
04:03So we do believe that this market will grow in double digits over the next decade.
04:08And hence, it's a very, very exciting entry which we are making.
04:12We have all the rights to win because our group company, Go To Jaggeroved, is actually India's leader in animal feeds.
04:18And they are going to be the partner who will support us in manufacturing our R&D.
04:25As far as an aspiration goes, in all categories where we enter,
04:28we normally come to a podium situation in terms of market share.
04:33So we will definitely have the similar aspiration in pet care in the medium to long run.
04:38We will talk a little bit more about the mix, etc. when we come more closer to entry
04:43and what kind of target revenue we set for ourselves.
04:47Got it. And Mr. Malbedi, in terms of your Africa business, where revenues were down around 36% overall,
04:55now I understand that this is because of high interest rate that drove trade de-stocking plus the Red Sea crisis overall.
05:02I want to understand that when do you expect an overall recovery in your Africa business?
05:08So firstly, I think in terms of the Africa business, we are very happy with the shape of the P&L of the Africa business.
05:15We have grown profits by 20% in this quarter in Africa.
05:20We also improved the margin profile from single digit EBITDA to 14%.
05:24So that journey has now been quite going well for us.
05:29In terms of volumes, we believe that it was just appropriate with such high interest rates to bring the trade stocks down.
05:37So as long as off takes are growing, running an efficient go to market and bringing the trade stocks down is in the interest of trade
05:45and it allows better margin profiles. And that's what we've kind of done in this quarter.
05:53It will take another one or two quarters for further simplification and efficiencies to be driven.
05:59But while we're doing that, we should be improving the shape of profits for the business.
06:03Got it. And Mr. Malbedi, overall, I want to understand that in FY24, you roughly did a revenue of 14,000 crores.
06:12What is the kind of internal targets that you're setting for FY25 overall in terms of top line growth and bottom line growth as well?
06:20So I wouldn't want to give a guidance in terms of what we're doing.
06:24But our aspiration is definitely to kind of ensure that we are for our India business.
06:30We deliver a high single digit underlying volume growth.
06:36Yeah. At an overall level, at a consolidated level, our aspiration definitely is to ensure that we deliver a double digit EBITDA growth.
06:44So these will be two important KPIs for us in terms of an aspiration.
06:49And we keep guiding as we go. As of now, we believe we're on track in terms of what we're setting up as an aspiration process.
06:56OK. And Mr. Malbedi, you know, most of the FMCG companies that have come out with their earnings have said that,
07:02you know, rural recovery has now come onto the cards.
07:07And in fact, rural demand has outpaced the urban demand overall.
07:10Now, I understand this might be also on the back of a lower base.
07:14But what is the case being for Godrej Consumer as well?
07:18So I would say towards the end of last quarter and towards the early part of this quarter, we are seeing some wind shoots in terms of rural recovery.
07:26So, again, we remain optimistic in terms of the demand scenario improving from what it has been over the last year.