Operator: Ladies and gentlemen, good day, and Welcome to the Godrej Consumer Products Limited Q2 FY27 Earnings Conference Call. As a reminder, all participant 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 this conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference call over to Mr. Vishal Kedia. Thank you, and over to you, sir.
Vishal Kedia: Good evening to all. I welcome you to the conference call for GCPL. We have with us Mr. Aasif Malbari, MD and CEO, and myself, Vishal, interim CFO for the company. We will start with opening remarks from Aasif, after which we will move to the Q&A segment. I hand over the call to Aasif now.
Aasif Malbari: Good evening, everybody. FY27 has been a quarter of strong, broad-based performance for Godrej Consumer Products Limited, fully aligned with our expectations and strategic priorities. We delivered strong, broad-based underlying volume growth across India, Indonesia, and Africa despite subdued monsoon conditions in India, while being supported by tailwinds in Indonesia. At a consolidated level, revenues grew 19% year on year, 15% in constant currency terms, with underlying volume growth of 8%. EBITDA grew 12%, net profits grew 14% to INR 523 crore. This marks our second consecutive quarter of high teens revenue growth, with high single-digit underlying volume growth and double-digit profit growth. Our standalone business delivered 13% sales growth performance driven by 7% underlying volume growth. This is despite an estimated 150 bps impact from trade inventory correction in the quarter.
Aasif Malbari: While this has been a modest near-term impact in terms of the correction we have done, we believe that maintaining healthy channel levels is important for operational excellence and sales teams to remain focused purely on off-take. Standalone EBITDA was mildly impacted due to this correction. In Home Care, we delivered 19% value growth led by strong performance in air fresheners and home care liquids. Alongside that, we gained market share in household insecticides. This is encouraging and indicates that the actions we have taken across brands are beginning to deliver. Our electrics portfolio delivered sequentially improving performance supported by the new six minutes campaign, while incense sticks continue to scale strongly. Godrej Fab maintained a strong double-digit growth trajectory and continued to strengthen its market position. Godrej Spic, which was scaled nationally during Q1, continues to witness healthy consumer repeats and sequential growth, with significant distribution headroom still available.
Aasif Malbari: During this quarter, we launched Godrej Rizz in selected markets across West and South India. We also launched Godrej Zap, our entry into stain removers online. Both these new launches have been received well. Personal care delivered value growth of 8%. Soaps remained stable despite significant price increases and grammage reduction, although with a favorable comparator. Our premium liquids continue to do well. Cinthol body wash continues to scale sequentially, while Muuchstac face wash progressed in line with our business plan. Actually, it progressed beyond our business plan. Hair colors maintained its growth momentum and continued to gain market share across our key bets. Perfumes and deodorants delivered strong double-digit growth, supported by healthy underlying volume growth in deodorants and continued momentum in perfumes and EDPs. Our international portfolio delivered strong growth. In Indonesia, sales grew 20% with underlying volume growth of 8%. EBITDA grew 12%, with LPG prices doubling.
Aasif Malbari: However, we have benefited from El Niño tailwind in Indonesia, leading to increased mosquito infestation. With our future portfolio of Stella Pocket, et cetera, we have seen tremendous success with double-digit underlying volume growth sustained. GAUM delivered another outstanding quarter. Sales grew 40% in INR terms and 23% in constant currency terms, supported by underlying volume growth of 16%. EBITDA grew 43%. This performance was broad-based across categories and geographies. More importantly, GAUM has now delivered seven consecutive quarters of double-digit top-line growth and 11 consecutive quarters of double-digit bottom-line growth. This reinforces our confidence that the improvements in the business are structural. We continue to be focused on the larger opportunities that the continent offers. The launch of HI incense sticks was well-received and is having good early traction. The input cost environment remained significantly challenging through the quarter. Inflation intensified across crude-linked derivatives, palm oil, and commodity inputs.
Aasif Malbari: This led to one of the highest inflationary impacts in the last many years. Due to the nature of our portfolio in India and Indonesia, the impact of such inflation has been high single digits. Despite a significant portion of our portfolio being price point packed, we have taken stringent pricing actions combined with large cost saving program and media and trade level investment optimization.
Aasif Malbari: We have tried to keep the share of voice range bound. We have also increased the salience of our digital investments, which have given us much higher ROI. We will continue to take calibrated pricing action significantly in soaps and liquid detergent, where the cost impact is large and the margins even today are below normative levels. With continued cost savings and future pricing, we will ensure that we continue to invest behind our growth drivers while managing to deliver on our stated profit growth guidance.
Aasif Malbari: We continue to hold our FY27 guidance, high single-digit underlying volume growth in standalone, and double-digit revenue and EBITDA growth at the consol level. With revenues running ahead of plan through the H1, we remain on track to deliver with the confidence to exceed it in certain areas. We remain confident in the resilience of our portfolio, the strength of our brands, and our ability to deliver sustained profitable growth going forward. Our measure of outperformance remains double-digit UVG and profit growth. Thank you.
Vishal Kedia: We now open the call for questions.
Operator: Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one. Our first question comes from the line of Abneesh Roy with Nuvama. Please go ahead.
Abneesh Roy: Yeah, thank you. My first question is, when the recent management transition happened, a lot of imperatives and priorities were shared with us quite candidly. I understand when any management transition happens, change in numbers will take time. So my question is not at all on numbers. My question is on the slightly softer aspects which you had mentioned. First one, of course, was the digital advertising capability where Nisa in the analyst meeting said that you are quite low in terms of percentile. What are the initial changes which have happened without getting into numbers if you don't want to? Second is, in terms of the hustle to get daily targets, market share, et cetera, what has changed? Again, no numbers needed. Third is in terms of HI new molecule in the advertising message or overall communication. Is there any change?
Abneesh Roy: I haven't seen it, and I may not have noticed the ad, so I'm not the right person. But if you could address these three aspects, that is my first question.
Aasif Malbari: Hey, thanks, Abneesh. So I think, Abneesh, I think the first one in terms of, or let me put it this way. I did share the direction, I did share the strategy, I did share what are the multiple changes which we are looking at. All of them have been changes which are well thought through. Over the next few months, at regular interval, we'll kind of share as to what progress we are making against some of them. Some of these changes which we spoke about are structural. They result in, I would say, change in the ways of working. It does require rebooting in terms of certain teams kind of coming on board. They are all being put in place as we speak. The first one in terms of digital advertising, I think this is a clear direction which we've taken.
Aasif Malbari: We understand that we do a reasonable amount of stuff when it comes to digital advertising, but we are not top percentile. Again, it doesn't happen overnight, but building in those capabilities, making those shifts, ensuring that we move significantly to the world of influencers, digital, et cetera, is something which we've started. I do see ourselves kind of moving and getting into a top percentile over the next few quarters. It's again not to do with what percentage spend more. It is more to do with capabilities, and do we believe that in each of the categories we are in the top percentile. We know what is best in class and how to get there. So I do see in a few quarters getting there, but it's not about percentage and spend. So I think that's the first one.
Aasif Malbari: When it comes to operational excellence, we are decisively moving, and we understand where the rhythm should be built, what should be corrected, and how it should be corrected. I think some of the corrections which we've started to kind of take in terms of trade inventory, et cetera, is purely with that in mind. Because you need the engine to kind of fire where the entire sales team is focused on offtake, and primary is completely run without any human touch. For that, you bring down the inventories to completely system-defined inventories and move that way. So we are making decisive shifts on this, and I do see ourselves getting into a rhythm of operational excellence quite soon. Coming to the new advertisement on HI, the product is the RNF product. The ad also kind of calls it out in the ad.
Aasif Malbari: The ad is an ad which is significantly clutter-breaking, and we do believe that this will give us a bigger impact in terms of reach.
Abneesh Roy: Sure. India CEO, is there any date you want to share? And any timelines you are looking at? I know these are very timelines.
Operator: Sorry to interrupt. Abneesh, your audio was not clear in between. If you can repeat the question.
Abneesh Roy: Is the audio clear now?
Operator: Yes, sir.
Aasif Malbari: Yeah.
Abneesh Roy: Sorry.
Aasif Malbari: Yeah. Abneesh, I think you are referring to India CEO, if that's what I.
Abneesh Roy: Yes. Any timelines? Are you looking for any specific skill set? For example, digital advertising, currently, you think that there is a way, there is a gap. Daily sales achievement, there is a gap. So are you looking at specific skill sets also? Of course, at senior levels, it will be well-rounded. But if you could have an update on timeline and any skill set you are looking at.
Aasif Malbari: No. I think, we are on to the process to bringing the India CEO. This is an important and a key hire for us, and hence to ensure that we get the right person, both in terms of Godrej values, and second, in terms of entrepreneurial mindset. Is what I would kind of call out. Frankly, I am not too kind of worried about a few weeks here or there in terms of appointment. To get the right person is more important. We are running through that process in a fairly robust manner.
Abneesh Roy: And the last quick question. Last quick question. Any update on milestone where you have reached in terms of your new product in the bathroom cleaning space and pet food? Any further progress? I understand still in pilot mode, but if more success you have seen in any geography, and how many states you have expanded, if any, beyond Tamil Nadu.
Aasif Malbari: Sure. So we have gone national on Spic. So we were quite happy with the success which we had in TN. We reached our milestones in terms of repeat. We do believe the brand actually met its action standard in TN, and we have moved the brand to national. So quite happy with Godrej Spic, which is the toilet cleaner. When it comes to pet care, I would say, there has been a lot of learnings in terms of how this category works and initial acceptance of product, et cetera, has been observed. I would possibly, Abneesh, take a quarter, next quarter when we speak. I would be in a better position to give you exactly how are we thinking of this business and what kind of milestones I would be looking at.
Abneesh Roy: Sure. Thanks. Thanks for the candid answers. That is all from me. Thank you.
Aasif Malbari: Sure. Thanks a lot, Abneesh. Thank you.
Operator: Thank you. Before we take the next question, a reminder to all the participants. You may press star and then 1 to ask a question. Our next question comes from the line of Siddhesh Deshmukh with IIFL Capital. Please go ahead.
[Analyst] (IIFL Capital): Hi, everyone. This is Percy here. My question is on the personal care category. The growth there in value terms is 8%, volume probably significantly lower than that. So what is really stopping us to perform better in this category? First of all, is it that a larger part of the trade inventory correction was in this category? Is that one of the reasons? Or if there is some other reason, I mean, why is it that I know it will always be a slower-growing category because soaps is well-penetrated. But given that there is a pricing also probably into this, any color on where are the gaps or what parts of the portfolio are weak which can be plugged over the next few quarters?
Aasif Malbari: Yeah. Thanks, Percy. I think, Percy, you're right. I think directionally, typically, soaps is something which has seen a correction in terms of trade inventory, and that has had an impact. And normally, trade inventory does kind of build more in terms of the large SKUs. So I think that has been one of the reasons. Having said that, soaps is also kind of going through its fair share of, again, price volume recalibration with what's happening in terms of commodities, as I mentioned. Both in soaps and detergents, I think there has been a reasonably aggressive price increase, which the entire industry and we have taken, and we still are not at normative levels in terms of margins. And normally, when this kind of cost increase happens, you see rounds of price increase happening.
Aasif Malbari: These are the times when you start seeing even wholesale and other inventory kind of go down. So I think both these factors have kind of contributed to it. When it comes to hair color, we've kind of had a very good quarter in terms of market share gains. So, yeah, I think that part of the portfolio has kind of done really well. Yeah. So I would quite happy with the way the numbers have kind of fallen in place in personal care because of these reasons.
[Analyst] (IIFL Capital): Understood. Detergents also, I mean, I didn't exactly understand. You mentioned detergents also in the same breath as soap. So has there been kind of a slowdown in the detergent sales also versus the earlier trajectory?
Aasif Malbari: No, I think, sorry if that got picked up that way. I didn't kind of mean that there has been a slowdown in detergents. I think soaps is where there has been a recalibration price, et cetera, and there has been that kind of shift happening. Detergents growth have been as strong as the trend lines have been. So we continue to do extremely well in terms of Godrej Fab and again, Ezee. We are entering into a season. I'm seeing good early traction when it comes to Ezee. I think it's a point which I was making more so in terms of where are we in terms of normative margins on soaps and detergents. Fundamentally in both these categories, there will be some more pricing which will kind of come through.
[Analyst] (IIFL Capital): Got it. Which leads me to my second question, which is that typically any FMCG company will have a sort of consumption cost which reflects the spot prices maybe a month or 2 ago. Therefore, Q2 might not have seen the kind of consumption cost that you would be clocking as of today, given where the prices have sort of moved up in the last couple of months. So in light of that, although you will take some price increases, how do we look at margins for the India business for the next couple of quarters? I don't know what's the best way to look at it. Either look at margins, EBITDA margins overall for the India business or look at EBITDA growth for the overall business for Q3 and Q4.
[Analyst] (IIFL Capital): Whatever is your sort of comfort, the way you internally look at it, any kind of color on that would be useful.
Aasif Malbari: Sure. So I think if one had to look at commodities, is the commodity inflation likely to be mildly higher in Q3 versus Q2? I think the answer will be yes. Commodities did kind of give a bit of a relief in between and has again kind of increased. So I think we are at slightly higher elevated levels in Q3 compared to Q2. The second one is when it comes to EBITDA. In these kind of very, very drastic commodity increases, it is important to kind of price for profit growth rather than to price for margin. Hence we kind of focus on EBITDA YoY rather than EBITDA percentages. That is really what we would do. We would try to kind of maintain growth in EBITDA at a consol level. That is where the focus should be.
[Analyst] (IIFL Capital): So the EBITDA growth would continue in this high single digit kind of a level? I mean, whatever we have done in Q2, would that same kind of growth continue in your view?
Aasif Malbari: Yeah, I think, Percy, we would want to deliver in terms of double-digit EBITDA growth at a consol for sure. I mean, that is something which we would kind of want to hold the shape in. Obviously in India, there are multiple moving parts. We are kind of taking care of some bit of the inventory. We are kind of taking care of some bit of recalibration of pricing, et cetera. But, yeah, I think the broad shape of what we have delivered, we would want to kind of definitely continue even when it kind of comes to India. A few bits up and down, it will kind of happen.
[Analyst] (IIFL Capital): Got it. That is all from me. Thanks and all the best.
Aasif Malbari: Thank you, Percy.
Operator: Thank you. Your next question comes from the line of Harit Kapoor with Investec. Please go ahead.
Harit Kapoor: Yeah. Good evening. Just two questions on India. The first was, if you look at the significant level of inflation in soap and in home care, especially in detergents, and probably the early part of the season, at least of Q3 looks like may not be exactly conducive for HI. Just wanted to get your thoughts on maintaining this level of volume growth. Do you see any kind of risks in the H2 on account of the sharp inflation-led impact or a season-led impact? That's my first question. I will ask the second after you go ahead. Thanks.
Aasif Malbari: No. I think, Harit, thanks for kind of posting the question. I think there are always some headwinds and tailwinds. Again, I think detergents doesn't really get as impacted. I think we have not seen the impact in terms of inflation impacting the volume growth. What we have seen in the last couple of quarters on detergents is that actually you get the benefit of formalization of the industry because there is still a bit of the local formalization, and hence, there is also a reasonable amount of movement from powders to liquids. So the detergents trajectory of growth is very strong, and that should continue. Soaps obviously goes through its own turmoil, but we have, as part of the portfolio, been able to kind of offset that with gains in the rest of the portfolio. HI looks fine from a season perspective.
Aasif Malbari: I am not really kind of worried in terms of HI. Even the El Niño impact was a little bit more towards H1 and H2 was looking fine. Not really kind of worried from that point of view. I think we should be kind of able to sustain our trend line on growth.
Harit Kapoor: Fantastic. Second was just on the advertising spend. It has been about seven quarters that the India standalone ad spend has seen decline, seven consecutive quarters. I would say some part of that has obviously been due to media agency change, et cetera. But even lapping that up, the A&P spends have come down. I just wanted to kind of understand whether, in your view, this is just a category thing where, because of inflation, overall category media spends are coming down. We have seen that in home care. But just wanted your thought on, is this some kind of recalibration out of advertising spends into something else? Or it is just that you have been competitive, but the category spend itself has come down, and that is reflected in this 7% and 17% declines in Q1 and Q2 respectively.
Aasif Malbari: Sure. No, thanks, Harit. Harit, I think it is clearly both the factors. I think largely in terms of soaps and detergents, we are seeing category heat come down, and hence, we are also kind of optimizing and balancing. Given the strong inflation, we are also optimizing and balancing out the spends and ensuring that our share of voice stays at the target level. So it is playing the price and the ATL in these two categories where we are seeing largely the industry also kind of operate that way. When it comes to the rest of the portfolio, it is more about ensuring that we get higher reach with lower cost. We benefited significantly from year one on changing the media agency. This year, we are benefiting by putting in significantly better practices and working more closely with the agencies to deliver that.
Aasif Malbari: We have been able to deliver much, much better reach at lower cost on that. I would say hence it is a combination of both. You could pretty much give an equal weightage to both these parameters.
Harit Kapoor: Got it. I will come back for more. Thank you. Wish you all the best.
Aasif Malbari: Thank you very much, Harit.
Operator: Thank you. A reminder to all the participants, if you wish to register for a question, you may press star and then 1 now. Your next question comes from the line of Jai Doshi with Kotak Securities. Please go ahead.
Jay Doshi: Hi. Thanks for the opportunity. My questions are on international business. Indonesia current year is shaping up better than what your beginning of the year outlook was, and GAUM has also delivered very strong growth. How sustainable is this when we think about growth beyond this year? In Indonesia, you called out it is because of El Niño. Does this mean that this is more seasonal in nature and not structural or sustainable? Likewise for GAUM, how should we think about the growth trajectory beyond the current year? Current year is definitely clocking very strong growth.
Aasif Malbari: Yeah. Hey, thanks, Jai. I think, Jai, firstly on Indonesia, we have really called it out that while El Niño had a mild negative impact in India, it did have a positive impact in Indonesia. We are seeing it in the HI space by virtue of how weather conditions impact a country which is an island nation with that kind of rainfall. We had broadly, I would say, modeled it that way. We are not fully surprised with the way the seasons turned out there. We have some benefit onto the weather conditions there. Yeah, I would say that is something we need to call out. Having said that, I am quite confident in terms of, firstly, the larger international business.
Aasif Malbari: I think in terms of the larger international business to outperform and deliver double-digit volume growth, I think we have multiple levers to do that. I would believe that we should be able to sustain that kind of delivery. In Indonesia, again, we are looking at more flywheels for getting the growth and sustaining growth at higher levels. I think the plans which the team have are quite encouraging. We will need to see with time how we are able to sustain growth at these higher levels. Yeah, I would call out a few bits of growth this year is actually attributed to better weather conditions.
Aasif Malbari: When it comes to GAUM, I think it has been a structural shift which we have been able to deliver by virtue of ensuring that our core grows at a particular level. On top of it, we are able to incubate and grow disproportionately in a lot of other categories. We believe we have got the flywheel going there. We have the organization bandwidth, we have the execution muscle, and we have a lot of the mixes which we can introduce to the continent and beyond in terms of exports to the larger region. Yeah, I think we should be able to sustain, I would say, an outperformance volume-led growth for a while.
Jay Doshi: Is it possible to further elaborate or break down your GAUM growth a little bit in terms of what is the core portfolio growth and how much of growth is coming from incubation and new categories such as air freshener? Effectively, what is the structure of the business there? The way you have speedboats in India, about 20% of sales and 80% is core. What is the future structure at this point of time? How do you see that shaping up?
Aasif Malbari: Yeah. No, Jay, actually, frankly, fundamentally, we have taken an approach that because there are lots of categories in which we were earlier operating in GAUM. Let us take the entire space of wet hair, FMCG products for hair. This technically is not bringing in a new portfolio, but we have seen that we can serve the needs of the consumers in Africa with so many other products, and our R&D capabilities in hair are extremely strong. So we have launched a range of new products, and there is Mega Growth Mousse which has been launched. There are various styling products which we have launched now under the Darling brand. So there are lots of new products which are coming through. We are operating with actually, frankly, very high capacity utilization on some of our existing businesses.
Aasif Malbari: These are businesses which have been there with us for many years, and we have reached capacity utilizations which are now kind of constraining our growth. There are expansions in capacity which are happening in the next few months. So the growth is fairly broad-based. It is not in one category. It is broad-based across various categories. Even the hair color business which we have is being growing double-digit volume, CAGRs over the last seven to eight quarters. So, yeah, I think it is broad-based, and that gives us a better confidence. It is not on one category that the growths are coming.
Jay Doshi: Thank you very much. Thanks.
Aasif Malbari: Sure. Thank you.
Operator: Thank you. Participants, if you wish to ask a question, you may press star and then one. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference back to Mr. Vishal Kedia for closing comments.
Vishal Kedia: Thank you everyone for the wonderful questions. We hope you had a chance to get all your queries resolved. In case of any further queries, please reach out to us on our investor relations contact details. Thank you and good evening.
Operator: Thank you. On behalf of Godrej Consumer Products Limited, that concludes this conference. Thank you everyone for joining us, and you may now disconnect your lines. Thank you.
