Manoj Menon: Wonderful. Good morning from the ICICI Securities research team. It is our absolute pleasure once again to host the management of Bajaj Consumer Care for the quarterly conference call. The company is represented today by Mr. Naveen Pandey, Managing Director, Mr. Dilip Kumar Maloo, Chief Financial Officer, Mr. Aakash Gupta, Head Finance. We continue to have a constructive stance on the Bajaj business and the stock. Now to the management for the opening remarks, post which we will open the floor for Q&A. Thank you, sir.
Naveen Pandey: Thank you, Manoj, and good morning, everyone. Welcome to the Q2 FY 2027 call for Bajaj Consumer Care. In the last quarter, we delivered a revenue of INR 333 crores with a growth of 27% against the same quarter last year. On margins, we delivered an EBITDA of INR 83 crores with an EBITDA margin of 25% and a PAT of INR 70 crores with a PAT margin of 21%. at the end of the H1 of the year, our revenues are up 28% to INR 674 crores.
Naveen Pandey: Our H1 EBITDA is INR 167 crores, which is a growth of 85% over the previous H1, and our PAT is INR 141 crores, which is a 75% growth over previous H1. What I am particularly happy about is that this performance came amidst volatile and dynamic business environment, and despite all the challenges, we have been able to deliver these very strong set of numbers.
Naveen Pandey: In line with our commitment to strengthen our core, Almond Drops hair oil continues with a strong performance in this quarter and has delivered double-digit unit volume growth. This growth came across pack groups, and sales channels. While all pack groups have done well, the growth was particularly led by small and medium-sized packs, which outperformed the overall brands. As part of our commitment to further strengthen Almond Drops franchise, we launched the new enhanced positioning supported by our TV campaign based on hair strength leading to beauty. We have gone live with this campaign towards the end of the previous quarter, and in this quarter, you will see this being supported by our 360-degree campaign with enhanced investment behind digital.
Naveen Pandey: This for us marks the start of reinvigoration and strengthening the premium position of this brand, and you shall see more action on this front in the coming quarters. Our consolidated A&P spend for the quarter were up 7% over the same period last year and are up 18% on H1 basis. We continue to maintain robust SOV SOM ratios in traditional and digital media, and we have carefully optimized the non-working A&P and reworked our media operating cycles to create some spend efficiencies. As we move to the growth portfolio, the Coconut franchise delivered a strong volume growth across channels. This quarter also saw the relaunch and new launches in the several of the growth portfolio smaller brands. In Amla Oils, we have refined the consumer proposition and are testing the new mix in general trade.
Naveen Pandey: In body lotion, we have upgraded both the product and packaging and will test it on e-commerce. In Banjara's, we have introduced packs that extend the brand into large adjacent categories, which could offer significant growth potential for us if we are successful. At an overall level, we have substantially improved the profitability of the growth portfolio and remain committed to building it into a second growth engine for the organization, both in terms of revenue and margins. This quarter saw continued momentum in our general trade channel, which grew in line with organized trade, and both channels delivered growth in the strong mid-20s. Within GT, both urban and rural business performed well, with rural continuing to grow marginally ahead of urban. Within organized trade, both modern trade and e-commerce performed well, with growth coming across sub-channels and customers.
Naveen Pandey: Quick commerce continued its scale-up and remains the fastest-growing sub-channel for us. In this quarter, we have also come close to completing our immediate objectives under Project Aarohan, which has been a massive effort from our sales team over the past eight quarters. Spread across three phases, we covered GTM transformation across 13 key states. We have been able to add over 1 lakh outlets, 1,000-plus distribution points, and have been able to close over 600 van routes, achieving an expansion in direct reach and a reduction in fixed FD costs. While the work of infra addition for this stage is largely done, our teams will continue to drive efficiency and attempt to improve throughput in these outlets in the balance of year. Our work here is not over, as we will quickly move to Aarohan 2.0.
Naveen Pandey: In Aarohan 2.0, we will focus all our energies on expansion of our direct reach in urban by 10% and in rural by more than that over the next six quarters. In international business, the rebound which we saw in Q1 continues in Q2, and we have performed well across country clusters. This channel for the full H1 has grown ahead of the company growth, and except for Bangladesh, most of our other key markets individually have also grown ahead of the company average. Bangladesh is witnessing a tough operating environment and grew in the teens. Our international business is also improving a sharp improvement in profitability. On the back of revenue scale-up, margin correction, and cost optimization, we are delivering a good improvement in the EBITDA margins of this channel.
Naveen Pandey: On the overall margin front, this quarter witnessed continued volatility in key raw material prices due to the West Asia war, in edible oil inflation and the cascading impact of these two things. Our gross margins for the quarter were at 59.9%, and overall, for the H1 of the year at 60.8%. Despite the sequential reduction in gross margin, our teams have been able to rally around and deliver very strong savings in FD costs and employee costs, which has allowed us to deliver a near-term higher EBITDA margin of 25% and a PAT margin of 21%. Going forward, the cost environment remains volatile, and we stand committed to taking actions as appropriate to protect our P&L while being fair to our consumers. To remind everyone, as an organization, we had taken a calibrated price increase action towards the end of Q1.
Naveen Pandey: We will now follow it up with another round of price increase and MLH reduction in Q3. In this round, we are approximately taking a 5% increase in consumer price, which will be split roughly equally between frontal price increase of 2% to 3% and a similar contribution coming through MLH reductions. Overall, like always, we remain focused on strengthening our brands through enhanced advertising, digital investments, and by driving innovation. We will continue to work on building our growth portfolio and on the expansion of our distribution footprint through Aarohan 2. All while staying prudent and committed to proven financial management. Thank you, and back to you and the team.
Operator: Shall we open the lines for questions?
Naveen Pandey: Yes, please.
Operator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone 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 comes from the line of Vinay Shukla from PhillipCapital India. Please go ahead.
Binay Shukla: Thank you for the opportunity, sir. Question is on outlook side. Things we are now entering into the higher base with H2 largely behind us and commodity inflation has come back. Given that Bajaj Consumer operates in a relatively discretionary category, how should we assess the company's growth trajectory over the medium term? Is it achieving a mid-teen growth in 2027 and sustaining a near double-digit growth in 2028? Any outlook that you can share on this front, sir?
Naveen Pandey: Nothing to add, Vinay. That is what our aspirations are from long term, even plus 5 or double-digit growth. Yes, for the year, we are expecting the high teens, and that is what we have said. I do not think there is any change or any delta to be added.
Binay Shukla: Okay.
Naveen Pandey: Unfortunately, I cannot guide you to next quarter or there on, but what our aspirations are remain unchanged. We remain confident about them.
Binay Shukla: Got it. Secondly, on ADHO side, since ADHO performance has been very strong over the last two quarters, here I am just trying to understand whether it reflects the internal initiative-led execution or is it more of structural changes happening in the category. The second part of this question is, if you can break down the ADHO performance between how much contribution is led by distribution expansion or channel led or like MP form, then new product launches or premiumization. This is on ADHO, sir. Just trying to understand the break-up of the ADHO performance across all the four segments.
Naveen Pandey: Vinay, obviously our belief is that there has been an improvement in category. But our performance is also impacted a lot by the actions which we have taken and the output of those actions. So it will be a combination of both, is my belief. I can't really split between what is the category contributing and what is the action. But since you asked on specific ones, like R1 and what do we believe, we do definitely believe that a good amount of our growth, maybe 2 to 3 percentage point of volume growth, would be driven on account of distribution expansion, and that remains a continuous opportunity for us. As I have stated multiple times today, we operate at around a 50/60 index to direct distribution of our larger peers, and over a period of time, we would want to achieve 75% index on direct distribution.
Naveen Pandey: That's something which has benefited us, and we will continue to focus on it because we believe that can continue to benefit us for the next few years.
Binay Shukla: Got it, sir. Just two data points I wanted to know. What is the contribution of the price point packs in your total ADHO sales? Secondly, what is your current contribution of the modern trade and e-commerce channel or in overall sales? And sorry for what is the volume. Yeah, sorry.
Naveen Pandey: Contribution of price point packs basically in value terms is less than 20%. It is in teens. Contribution of organized trade channel in value terms to the overall company is close to 30%.
Binay Shukla: What will be the volume growth for this quarter for ADHO?
Naveen Pandey: We have given a 10% plus volume growth basically indication. We do not give the exact numbers, Vinay, as you are aware. In our commentary, we clearly stated a double-digit unit volume growth.
Binay Shukla: Understood, sir. I have more questions, but I will join the queue, sir. Thank you so much.
Operator: Thank you. Next question comes on the line of Avi Mehta with 360 ONE Capital. Please go ahead.
Avi Mehta: Yeah. Hi team. Thanks a lot for this opportunity. Sir, I just wanted to get your thoughts on how is the consumer behavior, mostly, need for this sharp pricing. You've suggested that you would be looking at another price hike. Just wanted to understand this in the context of what we're hearing about rural monsoons, et cetera, and what gives you confidence of maintaining this volume growth trajectory as we go forward despite this pricing. The second question, just wanted to get your thoughts on the quick commerce channel. You did align or argue about the growth portfolio essentially doing much better. Conceptually, would you look at quick commerce more as a brand-building channel as well, or would you kind of look at this more as a fulfillment channel?
Avi Mehta: I wanted to just hear your thoughts and I'll kind of align the next question based on that. Thank you very much.
Naveen Pandey: Thanks for your question. First, I think, our endeavor always has been to pass the minimum level of price increase we can to the market. We also have to be fair to our P&L, and we have to do an action which balances the interest of the consumer as well as safeguards our P&L. So what we try and do is we try and pass on the absolute cost rather than trying to protect percentage gross margin, et cetera. If you would see in the past, that has been demonstrated in our actions. Going forward, again, our endeavor is to do the same. We are taking price increase, which we believe would be sufficient to cover the kind of a cost impact we would need to manage our overall P&L. Now this is something which is happening across the country.
Avi Mehta: Yeah. Cool. Sorry. Go on, sir.
Naveen Pandey: Not just us. Hence, these pricing actions by and large in a certain zone would basically, other companies will also need to take. Some of our peers in other categories have already announced price increases. I believe that this is something which will, if you look at the history of our brand as well as in the FMCG market, we have had periods of hyperinflation, and the brands have been able to pass and sustain inflation for those periods. As and when the inflation subsides, we will figure out appropriate ways of easing the pain on the consumer through various actions. That is on the first part. On the second part, how do we look at quick commerce? That is where the difference of approach comes in within our own larger portfolio of brands.
Naveen Pandey: For very large and very well-distributed brands like Almond Drops, it could be a demand fulfillment channel, providing convenience to the consumer. When it comes into more premium variants or more urban variants which are targeted at the urban elite, let us say, for example, serums or certain other higher-end personal care products. For those products, we will also look at quick commerce as a demand creation plus fulfillment channel. It will not be something which will be a company-level strategy, but it will be a strategy which is best suited by brand, by market, which we will take and we will activate as we go along.
Avi Mehta: Got it. For the first question, I just wanted to clarify, what I was trying to understand and just reading between the lines, it seems that you believe at least the demand is not giving you pushback or given the industry price hiking. I did not mean from a competitive lens because, in Almond Drops, you are the leader, so it is more from a demand and consumer feedback. That is what I was trying to understand. Any signs of stress there?
Naveen Pandey: See, I think it is early, but we remain optimistic. At the same point of time, I would say it is early because, whatever concerns which we are talking about, which included, you talked about in terms of rural demand and El Niño, they are all while away. They will happen only when the harvest starts hitting and what will happen. I am sure, the government is also trying to do their bit in terms of easing the overall pain. I remain optimistic about our economy.
Avi Mehta: Got it, sir. Thank you very much. That is all from my side. Thanks a lot.
Operator: Thank you. Next question comes from the line of Abneesh Roy with Nomura. Please go ahead.
Abneesh Roy: Hi, this is Abneesh Roy. Congrats on a very good set of numbers. My first question is on the test market of products. You did mention lip balm and color shampoo is adjacency, and I do note the INR 15 pricing for the shampoo also. So if you could tell us any other differentiation you see, what is the right to win here? Adjacency, I do understand, but any other point you want to mention which markets in this from a Banjara's perspective? Thanks.
Naveen Pandey: Thank you, Abneesh, for your remarks and for your question. Abneesh, we are test marketing these in Banjara's core markets only, which are the four southern states. The belief which we have is Banjara's is a company which has been there in these markets for many decades, and hence there is a very strong equity around the herbal natural brand values which exist. We remained, in these years, very cosmetic and very top outlet-centric distribution over a period of time. With the distribution of Bajaj and Banjara's merging in South, there is an opportunity for us to take this portfolio to a much larger retail footprint. However, as we do that, what we need to do is ensure that we are taking product SKUs and participating in categories which are very mass and very dominant.
Naveen Pandey: This attempt is to try and figure out our product and positioning, as well as the price fitment for these markets. Those are the pilots which we are doing. Obviously, the revenue size of these categories, even within South, is multiple hundred crores of rupees. If we can get our execution and our proposition right, it will provide a significant headroom for Banjara's sales. So in South, in the market where Banjara's has equity, we are basically creating SKUs and propositions which can participate in large, fast-growing categories and help us get some share there.
Abneesh Roy: Sure.
Naveen Pandey: Beyond that details, please pardon me, I will not be able to share, but I hope you get a sense.
Abneesh Roy: Absolutely. Quite useful. Second question is on the coconut portfolio. Here, have you added MLH here? I do understand pricing is negative, but have you added the grammage? Is it coming because of the MLH increase or is it that generally demand is robust?
Naveen Pandey: Avneesh, unlike the leader, we have not given free volumes higher. Our volumes are actually in similar lines to last year or possibly even lower in some packs. We have not added volumes basically to the pack. What you are seeing, and that is why we started reporting unit, because that is the toughest measure for volume. By giving free volume, we cannot get credit. Again, in coconut, we are seeing good traction. We are seeing really good traction in the number of bottles being sold.
Abneesh Roy: Last question. Project Aarohan, almost 2 years is done. I wanted to understand in phase 1 and phase 2, those 8 states, is there any particular state you want to call out better growth and some state where growth has been challenging? Any learnings and any strong highlights you want to point out on phase 1 and phase 2?
Naveen Pandey: Again, I think in our core markets, we got very good response. Distribution in places which are high equity markets for us have really given a better delta. I think that is a theme which you can look at, as compared to markets where our equity is slightly weaker. It is a continuous effort for us to go on.
Abneesh Roy: Sure. Thank you. That is all from my side.
Naveen Pandey: Even the weaker markets have given a positive delta, a good positive delta, Abneesh. But since you asked me to compare, obviously, the higher equity markets have given a higher delta within that same group.
Abneesh Roy: Sure. Just one follow-up on Project Aarohan selection of state. So phase 3, for example, which is currently, I think, almost done. Bihar, Jharkhand, Odisha, Punjab, Gujarat, how do you see these markets from a core versus non-core? And clubbing, say, balance, say, 14 states into kind of Aarohan 2.0. Those are again smaller states for you, I understand. If you could clarify.
Naveen Pandey: Aarohan 2.0, Abneesh, would be all states, all 27 states of the country. So we are now not differentiating between phase 1 and phase 2 because we believe that what we did even in the first round, let's say states like UP, MP, we can now pick up another round of distribution expansion in those states. Let me clarify. When I am saying Aarohan 2.0, it is a pan-India national program and aimed at expanding direct distribution by 10%, and we want to take this objective as a year-on-year objective. So Aarohan 2 would be another 10% expansion. Hopefully, we will get into Aarohan 3 and 4, wherein in every phase, we will look at expanding our direct distribution by 10%. So when we get into that will be there.
Naveen Pandey: In terms of the specific question on phase 3, obviously there are Hindi-speaking states here which have much higher share for us and certain other states where the share is lower in these markets. The division of phase 1, 2, and 3 for Aarohan 1 was also done keeping in mind our go-to-market readiness and our infrastructure position on the ground. Because we have to phase it, and other softer parameters were also used to decide the sequencing of the events. But as we go into Aarohan 2.0, it will be a one-shot national exercise wherein we will take now and continue to work on expanding distribution.
Abneesh Roy: So thanks and all the best. Thank you.
Naveen Pandey: Thank you, Abneesh.
Operator: Thank you. Next question comes from the line of Mayur Patel with 360 ONE. Please go ahead.
Mayur Patel: Hi. Thanks for the opportunity. Excellent set of numbers and very good execution, Naveen and the team. Just want to check one thing, get your thoughts on the gross margin weakness which we have seen over the last two quarters. Do you think it has bottomed out? I know you are taking all the right actions on the cost side, and you have guided for more pricing actions going forward. How should we see gross margins going forward?
Naveen Pandey: Mayur, I really find it difficult to give an answer because I really don't know what is going to be my cost basket for this quarter. What we are doing is that we are buying. We believe that the cost is at the highest level possible, and hence our fresh buys are only for very, very small quantities. We are keeping our inventory and our entire system very lean. Now, what it also means is that as volatility of the price will happen up or down, we will see it. So we are taking actions based on certain assumptions and certain buildups. But how it will happen will be difficult to predict or give guidance for. However, we have used overall operating efficiencies and other levers like in the past couple of quarters.
Naveen Pandey: We will try and ensure that we manage the volatility on cost at an overall level and continue to keep up with the strong performance. So, beyond that, I can't really tell that whatever pricing action we are taking, will they lead to a margin improvement? Will the margin remain at the same level? I think it's difficult to predict at this point of time. But yes, we are committed to ensuring minimum volatility at an overall level, and that's what I can say at this point.
Mayur Patel: Sure. Just last thing, any update worth sharing on the M&A side? Anything happening?
Naveen Pandey: No, nothing to report as of now. We are not at any deal stage, or we are not at any stage wherein we can report something.
Mayur Patel: Fine. I will get back to the queue. Thanks, Naveen. All the best.
Naveen Pandey: Thank you.
Operator: Thank you. Next question comes from the line of Tejas Shah with Avendus Spark Institutional Equities. Please go ahead.
Tejas Shah: Hi. Thanks for the opportunity and congrats on good set of numbers. Naveen, you spoke about focusing on direct distribution as the credible growth driver from here on. When we look at some of the other peers and since 2019 onwards, we have seen that the numeric distribution has not gone up for the industry, but a lot of focus has been on increasing or expanding the direct reach. But we have not seen commensurate outcomes in terms of growth for some of those companies. In fact, most of those companies. Just as a veteran in the industry, your insight that does it just improve the quality of distribution and much more, perhaps it has a subtle advantage in terms of your consumer insights improving, but it does not show up in numbers picking up as far as revenue growth is concerned.
Naveen Pandey: Thanks, Tejas, for your question. It is an overall question. I will try and answer first what my belief is on the direct distribution, and then I will come into why we are wanting to focus in on it from the Bajaj Consumer. I think overall, direct distribution, what it achieves is that while on the cost front, it increases your cost a little bit. It allows you better ability to execute on the trade, and hence you are able to ensure a slightly better range presence. You are able to ensure slightly better stock weights and stock shares in the outlets where you go direct versus where you go indirect. Now, this in different categories has different paybacks, at different market shares, has different paybacks for different companies.
Naveen Pandey: The reason why we believe it is a good strategy for us to do in Bajaj Consumer is primarily around on two vectors. One, on basis of direct distribution as compared to most of our peer group companies, what you will see as overall availability is nearly the same as the others in terms of direct plus indirect. But our direct distribution is roughly half of our peer group companies. Now, this clearly provides us an opportunity, and my sense is, I do not have a science to it, is I think somewhere around 75%, we will find a sweet spot above which it might not favor for us, because we have a portfolio which also we are building, and we are adding to not just Almond Drops, but we are building the growth portfolio.
Naveen Pandey: We believe this journey up to 75% or 80% would be fruitful for us because it will allow us to not only get better stock share and better availability for Almond Drops, it will also allow us to take the growth portfolio into those outlets wherein wholesale might not be as supportive of our endeavors. And hence will allow us direct ability to execute in these outlets. So that is why I believe it will be good for us. That is why I believe it has worked for us so far. And I think till somewhere when we reach 75% to 80% index of our larger peers, I think it should continue to work for us.
Tejas Shah: Perfect. Just to kind of weigh the success of this effort, you would say that tangibly it should show up in growth numbers and not only on tangible factors.
Naveen Pandey: Has to. Otherwise, there is no merit. Now, the delta can be smaller or larger, but it has to eventually show up in growth. Otherwise, it is just an empty investment.
Tejas Shah: Sure. Second, we have much more widespread and so far sustained inflation after a long time. Clearly, pricing power of the sector or the consumer companies are also coming to surface after a long time. Perhaps early, but just wanted to understand what is your sense that at least in the near term will be able to pass on as an industry and as a brand also without hurting demand and kind of protect margins as well?
Naveen Pandey: Well, again, I think it is a tough question to answer, but all I will say is I remain optimistic. I think we have been working in an environment which is hyperinflationary, and this hyperinflation is not because of a war and hence it triggered cascading impact. So far, we have seen the demand to remain resilient. Going forward, I think we expect India and Indian demand to remain far more resilient as compared to others. Now, will there be any effect or not? Very difficult to say, but yeah, at this point in time, we are optimistic. That is all from my side. Thanks and all the best.
Operator: Thank you. Next question comes from the line of Sukhwit P. Patil with ICICI Finserv Private Limited. Please go ahead.
[Analyst 1]: Good morning to the team. I have two questions. The first question, Mr. Naveen, is, I just want to understand beyond the regular outlook, what are the top two to three execution priorities you are focusing on in the next few quarters, specifically to accelerate growth across the core hair oil space and any newer product introductions? Alongside that, what do you see as the biggest risk from a changing consumer preference from a competition point of view or rural demand trends, and how do you plan to mitigate this? That's the first question. Another second question. Thank you.
Naveen Pandey: Okay. Your question was in terms of first, what are we doing to drive growth. If you were to look at our commentary, we've been extremely focused that our growth will primarily come from three vectors. One, we are continuing our effort behind strengthening our brand Almond Drops, which had seen in the past few years a sluggish performance. Over the last six, eight quarters, we've been investing significant amounts of effort and monies behind recreating Almond Drops brand, and we believe our work is continuous. It just started. It's not ended, and there's a lot of new things which will get unveiled over the next several quarters on what we are doing on Almond Drops. So that, we believe, will be the first growth driver for us.
Naveen Pandey: The second growth driver for us would be the work on growth portfolio, which we are doing, which we've talked about, saying that these are the smaller brands in the portfolio, but which are operating in very large categories and have great growth potential, provided we get our execution right. We've been working a lot on the subtler elements of these over the last five, six quarters, and we're very happy with the results which we see. We stay very optimistic about the potential and the contribution this portfolio can make to the future of Bajaj Consumer. The third would be on the front of distribution, which we've been talking about in terms of completing the Aarohan Phase 1 and getting into Aarohan 2.0, wherein we will build on our continuous execution and enhancement of direct reach to drive growth and performance.
Naveen Pandey: I think that's the first part of the question you had asked. On the second part of the question, which you asked in consumer preferences and changes. This is a category of ours where we operate, which has a 91% plus penetration, which means nearly every single household in the country uses this. The change in demographics or the change in preferences, which possibly you're referring to, is what we see impacting less than maybe 1% to 1.5% of the households in the country. Within that also, there are very strong trends of premiumization and certain other things which we will participate in. But overall level, I think there is a lot of job to be done on the MRN in terms of making the product and the category exciting, on ensuring great quality distribution.
Naveen Pandey: And if we do that, we have plenty of growth opportunity within our core space. I guess that's my attempt to try and answer both parts of your question.
[Analyst 1]: Thank you. My second question to Mr. Manu is, just want to understand from a financial point of view, what key risks or challenges do you anticipate in the coming quarter, and what specific measures are being taken to protect margin, cash flow, and strengthen the balance sheet, particularly-
Operator: This is the operator. We have lost the line of Mr. Patil. I will promote the next. That is Mr. Amit Purohit. Please go ahead.
Amit Purohit: Yeah. Hi, sir. Thank you for the opportunity and congrats on a good set of numbers. Just on the margins, sir. You had indicated that just about 20s kind of margins and mid-20s this year. We are almost closer to the higher end of the broader range. In the context that the input inflation is there, plus the ad spends that you are indicating some repositioning in the ADHO segment. Given that context, how do we think of from a near-term and a medium-term outlook from a So two parts to it. One, on the ad spend outlook, and second, any other cost initiatives that you highlighted for this quarter. Should that be continuing to ensure that a steady state margin improvement over the medium term is a possibility.
Naveen Pandey: Thank you for your question, Amit. Two, three point of views I'd like to share. One, see, in an inflationary environment, our attempt is to protect and grow the absolute EBITDA pool rather than a percentage EBITDA pool. We would want to demonstrate good growth in the absolute profit we make for our stakeholders and shareholders, and that becomes a larger focus for us rather than trying to monitor the decimal point movement in terms of margin. In terms of advertising, what will happen is what we've typically seen is in cycles which are hyperinflationary, most of the consumer goods companies iterate their spends on advertising. When this happens, what it allows us is it allows us to be competitive at lower absolute spends.
Naveen Pandey: When the entire industry is advertising less, I can maintain my share of voice at lesser spends than what otherwise I would have had to if the industry was advertising at regular level. So what we are at an operating level is we are very cognizant of how the industry is behaving, and we iterate our spends to what they are needed. Third, what we have done even in this quarter is that within advertising, there are media spends and there are non-direct media spends, which we call as non-working advertising spends, which might be on FD costs or endorsements or research costs, et cetera. And we've been very tough and very tight on managing costs like that. And we will continue to do so in the next quarter or till the easing out happens, wherein nice-to-do spends will have to wait to cushion the overall impact.
Naveen Pandey: I think that's what I can share. I hope it answers the question which you had asked.
Amit Purohit: Thank you.
Operator: Thank you. Next question comes from the line of Makarand Malsikar with Proinvest Private Limited. Please go ahead.
[Analyst 2]: Hello. Good morning. Am I audible?
Naveen Pandey: Yes, please.
[Analyst 2]: Sir, we have observed a significant increase in purchase of stock in trade relative to the cost of materials consumed in recent quarters. Could you help us understand what is driving this change? Is it primarily a shift in product mix or increasing third-party sourcing of finished products, or does it reflect a broader structural change in the company's manufacturing and sourcing model?
Naveen Pandey: So see, what has happened is that we have outsourced basically the production of one of our factories in Guwahati from a company-owned facility to a third-party-run facility to drive better operating efficiencies towards the beginning of this financial year. Hence, if you are looking and comparing numbers on inventory and procurement against last year, they might not be like to like. Beyond that, if you have any specific question on any one of the items, I request you can write to Aakash, and we will be happy to provide you the specific details which you need.
[Analyst 2]: Okay, sir. Thank you. My second question is, you have said that there has been a double-digit volume unit growth. We have also seen ML reduction in recent quarters in certain SKUs of ours. So I just want to understand how much of the reported volume growth is attributable to this pack size reduction as opposed to the underlying demand growth.
Naveen Pandey: So the reason why we have given and reported unit volume is because it does not take into account any free volume, any benefit on account of volumes going inside it. Hence, it is a reflection of how many bottles get sold or how many times the consumer has come and bought it. That is why we are reporting the unit volume growth rather than volume growth, which might basically get inflated artificially when somebody gives free volume. So we have used a tougher measure to indicate the
[Analyst 2]: We have taken
Naveen Pandey: This will not get impacted.
[Analyst 2]: Additional volume. We have taken.
Naveen Pandey: Yes. What I am saying is unit volume will not change with free volume being given in.
[Analyst 2]: Okay.
Naveen Pandey: If I am selling one bottle, one bottle is still one bottle, even if it carries 20% extra volume inside the bottle.
[Analyst 2]: Okay, thank you.
Naveen Pandey: Yeah.
Operator: Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Naveen Pandey: Thank you.
