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Dabur India Ltd
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Good day, ladies and gentlemen, and welcome to the Q4 Results Investors Conference Call of Dabur India Limited. [Operator Instructions] Please note that this conference is being recorded. I'll now hand the conference over to Ms. Gagan Ahluwalia. Thank you, and over to you, Ms. Ahluwalia.
Thank you, Margaret. Good morning, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to this conference call pertaining to the results for the quarter and financial year ended 31st March, 2018. We have present here Mr. Sunil Duggal, CEO, Dabur India Limited. We also have today with us Mr. Mohit Malhotra, who has recently taken over as CEO, India business. In addition, Mr. Lalit Malik, Chief Financial Officer is here; Mr. Ashok Jain, Vice President, Finance and Company Secretary; and Mr. Ankush Jain, Head Financial Planning and Analysis is also present in this call. We will now start with an overview of the company's performance by Mr. Duggal, followed by a Q&A session. I now hand over to Mr. Duggal.
Thank you, Gagan, and good morning, ladies and gentlemen. Welcome to Dabur India Limited's conference call pertaining to the results for the quarter and year ended 31st March 2018. On comparable constant currency basis, consolidated revenues normal operations grew at 11.1%. Domestic FMCG business like-for-like growth of 10% driven by strong volume growth of 7.7%. Consolidated profit after tax reported growth of 18.9% for the quarter, with operating margins increasing by 140 basis points on a comparable basis. Healthcare and HPC verticals performed well during the quarter with strong volume net growth. Healthcare vertical reported growth of 11.2%. Health supplements grew by 14%, led by strong double-digit growth in both Chyawanprash and Honey. Market shares in both categories reported an uptrend. Dabur Honey continued to ride on its strong brand equity and higher investments, which are adding to its momentum. Digestive category recorded 7.2% growth on the back of good growth in Hajmola tablets. New variants, focused market inputs and distribution expansion has enabled the brand to enhance visibility and ranking in the Most Trusted Brands survey by brand equity. OTC and Ethical grew by 8.8%. OTC products, such as Honitus Madhuvaani and Dashmularishta Asavs posted good growth backed by marketing initiatives and activations. The classical -- Ethical portfolio also grew at a good pace led by medical marketing initiatives and on-ground activations. Home and Personal Care verticals posted growth of 10% led by strong performance in hair care and oral care. Oral Care category grew by 11% with growth of 13.7% in Toothpastes. Red franchise continue to perform well, driven by increasing penetration, aggressive marketing and visibility initiatives. Red Gel, which was launched in 2017-18, recorded good sales in the first year of its launch. Overall share in the Toothpaste category continued to increase Y-o-Y. Hair oils category registered growth of 8.8%, Sarso Amla, Brahmi Amla and Almond hair oils performed well. Our volume market share in hair oils category expanded by around 60 basis points during the year. Shampoo posted a robust performance growing at 31%. The brand was supported with focused marketing activities and above the line spends. The shampoo portfolio is seeing a good response from consumers post the relaunch, and we continue to position the brand on the herbals/naturals platform in this category. Home Care had a muted performance this quarter due to moderate performance of Odomos on account of relatively lower incidence of mosquito-borne diseases and lower institutional sales. The air freshener brand, Odonil, and bathroom cleaner brand, Sanifresh, reported good growth. Skin Care registered growth of 8.5%, driven by strong performance of the Gulabari portfolio. Gulabari brand has been a steady performer and is also increasing its penetration in both urban and rural markets. Foods business had a moderate quarter mainly on account of increased competitive intensity [ from value players ] and enhanced promotions across the board. So although sales growth was muted, profitability margins in Foods saw a good improvement on account of network optimization. Various strategies are being adopted to counter competition, including aggressive media spends, tactical consumer promotions and sampling. The fruit drink sub brand Koolerz has been launched to participate in the larger fruit drinks market. International business supported a constant currency growth of 16.8% during the quarter. GCC markets posted a strong revival with 51% growth led by Saudi Arabia, which grew by 82%. Egypt market continued to perform well with growth of 38%. Currency translation impacted top line to the extent of around 1%. However, this impact is reducing as currencies are becoming comparable to last year. SAARC business also posted good growth led by Pakistan and Nepal. Consolidated operating profits increased by 16.2% and operating margins expanded from 21.8% to 23.9%. If we exclude the GST impact, improvement in operating margins was around 140 basis points. A&P spends in the domestic business saw like-to-like increase of 19.1%, while on a consolidated basis, there was increase of 10.8%. Promotional expenses have come down significantly in line with our stated intent. SG&A expenses reflected some savings on account of cost synergies. PAT reported growth of 18.9% in spite of higher depreciation and finance costs. The company has proposed a one-time special dividend of INR 5 per share besides the final dividend of INR 1.25 per share. This will entail additional payout of around INR 1,000 crores to the shareholders out of surplus fund in our balance sheet. We will still retain around INR 2,000 crores of net cash in our balance sheet post this payout. After the GST implementation, the trade channels have seen some disruptions which are -- which seem to be stabilizing. We are seeing good uptick in the rural channels, cash and carry and organized retail. The year threw up multiple challenges, both in domestic and overseas markets, which have to be --which has been managed well, and the year has ended on a positive note. Going forward, we'll continue to invest strongly in our brands, distribution and infrastructure to continue to grow ahead of the market and enhance shareholder value. With this, I now open the Q&A and invite your questions. Thank you.
[Operator Instructions] The first question comes from the line of Manoj Menon from Deutsche Bank.
A couple of questions to begin with. One, just taking a step back. We have seen a significant sequential improvement in your performance over the last 6 months or so, which is very heartening. While I understand that it's very difficult to kind of, let say, look at what are the micro drivers and also macro drivers, how much of this we would attribute back to the activities by the company? And how much would be, let's say, a general rural recovery, et cetera? Or put it the other way around, if you could just help us understand some of the key pillars of your micro activities for the medium term which you are implementing currently.
In the large HPC categories, oral care, hair care...
Sorry to interrupt you, sir. May I request you to repeat yourself? We lost the audio for a few seconds.
Okay, to repeat myself, Manoj, we've seen very little tailwinds from the macros, quite frankly, as we speak. Category growth are still trending in the mid-single digits, at least for the large HPC categories: oral, skin, hair care, et cetera. We've seen some uptick in March, but the first quarter -- sorry, the fourth quarter has been fairly subdued, 5%, 6% growth. So obviously, our growths -- volume growth, I'm talking about volume growths here, our volume growth is expanding at around 7%, 8%, in these categories and have come on the back of market share gains. Now having said that, we do expect the category growths would trend up. Now while this may not be a certainty, but there are indicators, especially in the form of the monsoon, which early trends indicate a normal monsoon, also stimulus which we think will happen closer to the elections. These should provide some momentum in terms of category growth, but the last 3 quarters performance, especially this quarter and the last has been on the back of our own initiatives rather than on any support from the macros.
Understood, understood. Now along your statement, and just tell me whether it's right or wrong, would it be fair to say that Patanjali was more of a distraction, and not necessarily a disruption over the last couple of years?
Well, it's easy to say that in hindsight. At that moment, it was a disruption. And we had to deal with it. We had to take appropriate action to mitigate it. But the action which we have taken has proved successful, mostly in the case of honey, the pricing corrections, the other marketing activities, et cetera, et cetera, led to stronger growth, 20% plus in the last 2 or 3 quarters in honey, so we have fully recovered the share. So now we can't assume that this is a distraction and just -- one which will blow over and things will back -- come back to normal. We have to take preemptive action and make sure that our long-term brands' strengths are not compromised. So that's the way we looked at the Patanjali trade.
Understood. Secondly on the drinks business. I remember reading some comments in the media in the last couple of months about your foray in a bigger way into the drinks market, which is honestly extremely heartening to see because a large company looking to enter a large category. How do I think about your -- how will you address this drinks opportunity? The fruit drinks...
Well, I think I see its proportion in the marketing theme that not to be totally distracted by the drinks opportunity. It is ultimately a low margin and a certainly more commoditized space. Our focus should be firmly on the value-added segment. But this is a segment which is too big to ignore. So -- and we do have adequate amount of surplus production capacities to meet demand with this segment. So we should not ignore it, at the same time, we should not be totally enamored of this and take our eye off the main Real and Real Activ franchises. So this can certainly add momentum into our top line and to our overall market shares. But the Real price is, like I said, at the value-added segment.
Understood. So would it be fair to say that it's tactical for the time being and which can potentially become strategic at some point?
Yes, I think you put it rightly. It is tactical as we speak and has the potential to become strategic or it may remain tactical, I don't know at the moment.
And one very last question on the International business. If you could help us understand the -- a bit volatility in the performances on one-offs, distributors, et cetera there. Secondly, how do I think about the medium-term constant currency growth opportunity which you can drive organic in international product portfolio?
I think the recovery in international has been the key highlight of last quarter's performance, 18% top line and around [ 34% ] bottom line is a very strong set of numbers. Perhaps the base, of course, is on the lower side, but nevertheless. I do think that the double-digit growth in International Business this fiscal is something which we are pretty excited about. And there would be margin gains also unless the currencies depreciate further. Fortunately, we are seeing a fairly stable scenario in terms of currency, and the overall oil economy also seems to be trending up. So there are some tailwinds there which we should capitalize. The overhang of Namaste North America, which will be behind us this year, we should definitely grow in Namaste. I don't know how much, but growth should come back after 2 or 3 years of decline. So now these are multiple tailwinds which will help us. Of course, there can be events which are beyond our control, which are largely political and economic in nature. But if those don't happen, I think good growth in International Business is definitely visible to us.
The next question is from the line of Aditya Soman from Goldman Sachs.
My first question is on what will be a good level of growth for Dabur's domestic business? Clearly, you've seen a tickup in this quarter. But would 8% sort of level -- is that something you would be happy with? Or would you expect that growth to be sort of in double digits as we saw in the previous sort of rural cycle?
We are pitching internally at around 10%. Now like I said, we do have visibility here of around 8% to 10% at the first half. The visibility in the second half is quite frankly not there. But in case category growths trend up to the high single digits or thereabouts, then I think we can do a low double-digit growth in the second half so the aggregate growth come to 10%. That's what the internal thinking is. And that may or may not happen, depends upon how well the disposable incomes in rural households trend up. At the moment they are fairly stressed. And like I mentioned earlier, the category growths are still not showing any big signs of revivals. There are a few green shoots in the month of March, but still they are trending at around 5%, 6%. And we need to do -- the category growth, they have to trend up to perhaps 8% to 10%, at least 8% for us to grow in double digits. So that's the situation, and we believe that we should be able to do better than the last couple of years by a wide margin. But will we look at -- do double digits is not to be taken as a certainty.
Understand, fair point. And secondly, you've mentioned that you've done very well in coconut oil. Has this come from sort of market share gain from the market leader? Or is this you're sort of gaining share from the loose oil or unorganized segment?
Yes, we have gained share. Our coconut oil franchise, particularly the Anmol franchise, is doing extremely well. I think we have done a high-level of activations in a fairly stressed scenario. So that's an area where we see consistent growth happening versus a large pool to fish in. So it will definitely buttress the top line. And the good thing is that even in perfumed hair oils, our market shares are now, not just stabilized, they have stabilized a couple of quarters ago, but now they are trending up. And that's something which is very welcome. So in fact our biggest share gains have been in perfumed oils.
Understand. And on perfumed hair oils, is this a function of sort of the price being normalized for the whole segment? Or is it that you have offered more promotions or discounts on your...
Well, the whole category has benefited from GST so there's been higher promotional activity and, thereby, people saw part of that impact, and that has been one big reason in terms of the higher levels of growth. We've also been far more aggressive in driving the lower price portfolio, Brahmi and Sarso Amla, which is now a fairly significant part of perfumed hair oils, and that's been another driver of growth. But even then, Amla has stabilized and now is showing far more consistency than before.
Understand, that's very useful. And just one last question on honey. Would your sales be back to where they were before the disruption or is there still something...
Yes, honey share data is not really -- is not syndicated data, so we have our own internal process. We are pretty close to where we peaked earlier. Not quite there, I think there's still around 4%, 5% erosion from the peak levels. But I'm pretty optimistic, in the next two quarters, we should get back to our all-time high levels by a wide margin.
Understand. And this was on absolute sales or you were talking about share, market share?
No, this is tertiary sales, consumer household final data. So this is actually very high-quality data, but it comes with a bit of a lag. So even that 5% erosion is actually a situation around what 3, 4 months old? And as we speak -- and the data will come soon. We may have actually regained our entire lost share. But like I said, the numbers are a little bit dated.
The next question is from the line of Latika Chopra from JP Morgan.
Just my question, the first one is on margins. Clearly, this quarter saw significantly down on account of mix and fast. Do you see a potential for further improvement here for the domestic margins in the backdrop of input cost inflation inching up or probably the need for more brand investments?
If we take domestic margins, I think at the EBITDA level, we would probably have stabilized. We would -- I mean we're very happy with the current EBITDA levels, and we obviously would enhance the promotional intensity in the year going forward, so that won't help. But at the same time, I think there is price impact available now, which will help us mitigate the higher A&P costs. So broadly, we are seeing stable margins coming out of the domestic business and improved margins coming out of the -- in our International Business. So the blended margin scenario, I'm talking about the EBITDA now, that should improve, even though the improvement may not be very dramatic. And remember, we have just paid out -- or we will be paying out in the next month or 2, subject of course to the ratification by the -- in the AGM of around INR 1,100 crores of cash due to shareholders in the form of a special dividend. So that will, to some extent, reduce our non-operating income. But at the EBITDA level, I think you should see fairly consistent levels of delivery in the domestic business and better in the International.
On pricing, have you initiated any price increases on account of raw material inflation in any of the categories?
Yes, I think we have price increases in several the categories, but they're not very dramatic. Small increases, we've done. But there were -- there have been some margin issues with regard to the cost of coconut oil [indiscernible] actually, the oil cuts versus the oil table. So whenever there have been some inflationary impact, we have taken up prices, not really very dramatic. But going forward, I think if inflation kicks in higher, especially with the oil table at the $70, $75 levels and perhaps trending higher, then we have the pricing part of it to take up pricing. So that doesn't worry me. I think we should now, after a couple of years, be able to use pricing as a tool to not just mitigate but even perhaps enhance margins.
Sure. The second question was actually on juice segment. Clearly, you have to still form up your strategy on the drinks side. But on the value-added premium juices, clearly, the competitive landscape is getting tougher. Does that mean there is a need for more promotions from your side? And does that put your margins at risk? And you've mentioned about certain initiatives you're taking to mitigate these challenges, if you could elaborate more on them. And is there are a way to -- for this category or division to go back to low to mid-teens kind of growth anytime soon?
Yes, I think we are looking at double-digit growth, perhaps in the low double digits. But that is really the endeavor which we are looking at. And obviously, we will have to enhance the promotional intensity considerably, which we already have done, by the way. So you will see the impact of that in the first quarter. Fortunately, the margin profile in juices is actually pretty favorable because the material cost, sugar, et cetera, has come down considerably. So that's enabled us to pump in more money to support the brands without having any dip in our operating margins. So I think this competitive intensity which is there, it's perhaps at the -- almost at an unsustainable level because the margin profiles in juices never supports very high promotional intensity. There's a lot of private equity activity here and also one of those new players has become very aggressive. But we've seen this before and I'm not overly worried since we have to be consistent in delivering high-quality products at a kind of reasonable price. And we should be able to get back into double-digit growth sooner rather than later. Of course, a lot of it will depend upon the -- how summer is. And also, in terms of how the overall disposable income story plays out, which is true for, of course, every category but particularly true for beverages, which is a little bit more discretionary than the staples portfolio which we have.
The next question is from the line of Vivek Maheshwari from CLSA.
My first question is on the A&P spends. Mr. Duggal, you mentioned 10%, I think, at consol level and 19% at standalone level, so the difference between reported and what you have mentioned is just because of GST?
Yes, it is primarily because last year we had some tax included which now put GST as part of balance sheet. So primarily it is on account of that.
And this is just advertising? It doesn't include promotion. We just netted off against revenues, right?
That's right. But the tax, this has to be netted off from the top line.
Okay, that's one. Second, in fruits again or juices again, where is the market share now compared to what it was, let's say, last year?
Well, on a Y-o-Y basis, there has been a 2% decline from 56% approximately to 54%. It's not very serious erosion. These things keep happening. So it's not something which worries us too much. I think it's just on account of disruptive competition. And also, certain brands which were earlier categorized under the drinks space have now moved into G&M, and I don't really know why. So which has meant that the category size has improved, that has been enhanced, because of this reclassification. And that partly is leading to a little bit reduction in our market shares. But I think rather than hanging on to this 50%, 55%, 60% market share, which is never going to be easy when you have a dominant share, predicting it is always going to be [indiscernible], we would look at seeing consistent double-digit growth happening in our portfolio. That is really a bigger challenge than just taking more of the market share. As the case, we've said, brands like Chyawanprash, the market shares are less important than how we grow.
Right, while we see a decline in market share of about 2% in juice and nectar market, [indiscernible] classified on JNSD market which is juice, nectar and still drinks, our market share is very consistent at 10% levels. Two new players entered the juice and nectar market, which is [indiscernible] and [indiscernible], which are the ones who have actually taken share at an economic price point, the drinks price points. But if you look at the largest part of market share, it's pretty consistent.
Okay. But just a follow-up on that, you mentioned about all this competition, everything. But despite that the margins have improved quite a bit, in fact the highest in the past 12 quarters or so, I mean, in the context of competitive landscape, with ITC also aggressively pushing its portfolio, what extent is margin expansion then?
One of the reasons is that we have optimized our networking with regards to manufacturing where we are manufacturing more in India and, therefore, the cost optimization has helped us to improve margin besides the inflationary pressure on sugar, et cetera, you're seeing now. So these are the two here.
But this quarter -- for the follow-up in that question, there could be a little bit of trending down of margins in the first quarter and perhaps going forward because we will be increasing the promotional intensity. But like I said that's a necessary condition to defend share and we are already on pretty decent operating margins. We don't mind sacrificing a bit.
Sure. And last bit on the overall margins. So we have seen -- and I know this has been asked before, but Mr. Duggal, your, let's say, guidance of -- for margin -- a stable margin in India business and a slight increase in International. I mean, let's say, Brent is $70 or above $70 now, so which is going to impact your key inputs over the next, let's say, quarter or so. What gives you confidence in the margins at this point of time? Is it just that there has been such a big lag on price cycle, that's why you are more confident about it?
There are 2 elements here. One is the gross margins. And I'm pretty confident that we'll be able to maintain our gross margins because of price increases mitigated inflationary impact. Now having said that, there would be also pressure in terms of our SG&A because of higher outsource on account of salaries, et cetera, et cetera, largely in the one-off stock options which we have participated this year and whereas the payout was comparatively muted in the previous year. So there'll be some increase there which will be visible. And that I think we can mitigate through operating leverage and through other cost reductions. But the gross margin line which is really related to material cost and inflation, we should be able to stabilize at current levels, on a Y-o-Y basis at least.
Okay. Because in the last 2, 3 years, you have actually improved your margins in the regime where input prices are so benign. So when input prices are reversing, it's quite interesting to know that you are gunning for at least maintaining the margin or even slightly expanding it. What would...
I mean we won't expand it in the domestic business. The expansion will come from international, so the blended margins may look better, but that's a different story. I think, domestic margins, we should be able to protect. I don't see any great possibility of increasing domestic gross margins. But we should be able to protect because our price increases have been very muted over the last of couple of years. And I mean there was also the anti-profiteering issue, which didn't enable us to take up prices. With that behind us now, I think, the price increases will happen. So I'm pretty confident that, that will not be a headwind.
The next question is from the line of Amit Sinha from Macquarie.
Firstly on the oral care business. Now clearly, the good performance has continued even in this quarter. But if I compare it with the last 3 to 4 quarters, there has been some tapering down of the growth. So is this the impact of the market leaders stepping up on the herbal side?
No, not really market leaders stepping on the herbal side. But let's put it this way, there are 3 brands which we have in oral care. There are the two premium brands, Red and Meswak. And then there's the discount brand, Babool. The premium brands continue to grow at almost at 20% levels, so there's no issue there. And that's the good part. The not so good part is that the discount brand, Babool, which is actually delivering pretty good performance over the last 3 or 4 quarters, is now being in the flat a bit because of very high levels of competition at that price point that it gets. So that's really the reason why the blended growth have perhaps come down from, say, 17%, 18% to 13%, 14%, it's largely on account of the discount brand. But the quality of the growth has been consistently good. The high-margin brands have done very well. And of course, the toothpowder brand, which is a bit volatile and I think did provide some support last year, hasn't done particularly well, 3.9% decline. So that's been another issue. But I think if you take the overall quality, as I said, of growth, it remains consistently high.
Sure. Even on a sequential basis, the market share gain is there? Because you mentioned...
Yes.
Y-on-Y -- okay, great.
The Red franchise and Meswak, particularly Red franchise, are high. Babool is probably flat or maybe even small deceleration in terms of market share. But overall, market share growth has been there.
Sure. And secondly, you mentioned that one of the reasons for the gross margin expansion was a better product mix. Just wanted some more details on the sale. What are the better...
Well, broadly, the biggest part is the juice portfolio, which is lower delivery in terms of EBITDA has come down in terms of growth and the higher-margin HPC, HC have grown in double-digits. The quality of growth has improved and that has lifted the whole margin table.
The next question is from the line of Anup [indiscernible] from [ NC Research ].
I wanted your comment on the competitive landscape per se. I know partially you have covered this, but to put that into context. Last year, there's an understanding that the company which was good to adopt would be the social standing they have gained well. And secondly, the unlisted player which you have seen as a big threat the year before and there's a company silence for last couple of quarters. And thirdly, Dabur itself has been a high [indiscernible] disruptor on price points of few of the categories. So wanted your view on that, how we are now pushing Dabur, whether it is sort of value creator in some way or it is growing category by category and how do you want to spell out the medium-term strategy? And how is the competitive landscape you're seeing here from the unlisted players here?
See Patanjali was the single big disruptor over the last couple of years. Otherwise, there was nothing much which our regular competitors are doing. Of course, I'm not saying the competitive intensity was low, but it wasn't disruptive in nature, with a couple of small exceptions. Patanjali changed the whole nature of the game by coming in with a lot of momentum. And that I think was the single most biggest reason that many of our categories grew at a much lower base than normal. Of course, there was also the other overhang of GST and de-mon, et cetera. Now with all these 3 headwinds now -- well, I wouldn't say disappeared but muted to a very large extent, we should see better growth happening. And that's why the last three quarters have been pretty consistent. And even on the higher base, which will begin from this year, we should be able to see much better growth happening. But the key driver here is rural, and we need to have better growth coming out of that because keep in mind that the category growth, if you take the leaps in numbers, are at pretty low levels. They are in the mid-single digits, for the nonfood categories, at least. And that's not very encouraging.
And sir, you mentioned that rural growth this quarter has been 3% to 4% double the other month and how has been the special solution for that?
Well, you see the urban growth have been around 8%, rural around 13%, blended 10% and -- so rural continues to drive growth. And I think it's largely on account of our preemptive measures for distribution, which I have articulated earlier that has led to this strong double-digit growth in rural. There've been other headwinds and problems, like the Canteen Stores continues to underperform. I think the decline was 5%, 6% in the first quarter. So that's been a bit of a headwind. Some of the enterprise accounts also didn't do well because the whole economy was under some stress. So rural is really the bastion which we have. And I think, going forward, it will continue to grow well ahead of urban. We still do not know that the CSD issues will lapse. We hope this year will be a much better year for CSD, but there's no guarantee. So rural will have to perform. And I think we have all the ammunition in terms of distribution, in terms of products. The portfolio is now very much geared to service the rural consumer. And any improvement in disposables, which I believe will happen, should fuel rural consumption even to much higher levels.
All right. And sir, my last question is on Odomos. In the last quarter also there was a weakness there. So is it just a seasonality thing? Or do you think there's something structural happening in this category?
It's not structural. There's nothing structural, it's a great brand, I think. But it's use is fueled by epidemics more than anything else. I think that people get the scare of dengue in particular. That's when they actually get out of that in that share of not using it into actually buying the product. And well, fortunately, well, in many ways, that has not happened, but it does have a negative impact on this brand.
The next question is from the line of Nillai Shah from Morgan Stanley.
Sir, my question is, again, unfortunately on margins. You have mentioned last quarter that you're looking at improving your market shares across the board irrespective of what happens to the category growth rates. And I thought it would be driven by a number of interventions from your past pricing promotions, ad spends, new product launches, et cetera. And then you talked about gross margins and EBITDA margins as you've commented for fiscal '19. It appears that you're again slowing down on NPD pipeline. Would that be a fair assessment?
No, not really. I think NPD pipeline is much stronger than you would see in the past 2 or 3 years. Now having said that, we will not go pell-mell into NPDs, and it's high-cost NPDs, until we see visible signs of demand revival. So we are putting some of those initiatives on hold until perhaps the second and third quarters, and then we'll see -- take another view. But irrespective of that, the ones which we have committed in terms of GPM are much more than what we've done in the previous 2 years. And there will be company interest initiatives which we'll put into play. But how much of that we do depends upon the demand cycles. And there's no point in submitting it if the demand cycle remains subdued. The chances of new products managing to get to market is that much lower.
Is this a shift from what you anticipated last quarter?
Well, if you wanted to give me a -- give you a frank answer, I think the category growths in the last 2 quarters have disappointed. They have trended up pretty steeply around a year ago and then for some inexplicable reason, they have trended down. So perhaps it's a sign of consumption stress, which has been there. Now we really are seeing that the cycle perhaps has bottomed out. March was a little bit better, nothing spectacular, but we did see some green shoots in March. And the strength it would accelerate, it's anybody's guess that, whether this will get back, improve, say, to high single digits from the mid-single digits category growth or whether it will remain at this level or perhaps even decelerate. But if they do, then I think that the need for market share gains would be perhaps a little bit less because the tidal wave of growth will carry us forward, and we'll be able to capture better margins. But if it doesn't, then I think we will have to get into the slugfest of market share gains, which comes at a cost. And that would have some negative impact on margins, I don't know how much. So again, it's a question of, like I said, how the whole consumption stage performs in the next -- in this year.
Just to clarify, when you're saying that you're expecting margins to be flattish in the domestic business at the EBITDA level, that is assuming some pickup that happens at the category growth levels, and it's just saying...
Yes. It assumes a reasonable pickup. A very high acceleration in terms of growth would see margin expansion. A deceleration of growth could see margin contraction also because our investments will then have to continue. So it's -- like I said, it's very hard to focus across the scenarios. There's too many moving parts here. But I remain far more optimistic of this year than I have been over the last 2 years or even 3 years.
Sure. And final question is on your new product launches over the last, let's say, 18 months or so. Could you call out 2 or 3 of them that have been reasonably successful?
Odonil Zipper. Odonil Zipper, Red Gel...
Red Gel.
Brahmi Amla, I think all of these do not have any real failure because, I mean, these weren't very high-impact launches. But all of them have done quite well. So now we -- but like I said, last year, we've being fairly neutral in terms of how much we invested in entities. And now we are beginning to open the [ first streams, ] that we just want to wait another quarter or so to see how the demand revives, and then you will see far more action on this front.
Sure. And are all these pan-India? For example, Red Gel, is that pan-India now?
That -- Red Gel is pan-India, so is Zipper. Brahmi Amla is more of a North and West Indian initiative but mostly pan-India. But some of them do have a regional context. So their relevance is in that region and not, perhaps, in, say, South India.
The next question is from the line of Naveen Trivedi from HDFC Securities.
Sir, if you can just give us some idea about the Oral Care as a category growth, and how do you see this -- the growth difference between the Ayurvedic and natural segments and the other segments?
Well, I think the natural space continues to grow ahead of that overall space. Whether that trajectory of growth is as high as it was 1 year ago, when the country was driving most of that growth, is yet to be seen. Well, I think there'll be some moderation in growth, so -- but then for us, we have another pool of competitive space to feed from, and I think that's very positive. So for us, I think the situation today is actually pretty benign. So only when we were really getting our market share from the traditional players, now we can get it even from the other herbal players. So there are 2 streams where we can feed on.
So in that context, do you think that the growth rate in the Toothpaste segment can taper on what we have seen in the FY'18? Or you think that there could be...
For whom? For us?
For you.
No, I don't think so. I think our growth should continue to be in the -- well into the double digits, so I don't see any tapering off. Like I said, we have now another avenue to attract consumers from, so that gives us a big pool to feed from. So for us, I think the situation is quite benign. But overall, the herbal [ industry ] may be slowing down a little bit. I think it continues to gain and continues to grow ahead of the traditional players. But the rate of growth may have come down. I think we'll have to wait for another quarter or 2 to get this situation with some clarity, but it's still growing ahead of the category. Think of it, though, with our growth. Our growths are much ahead of category. So even if you take 13%, 14% growth, it's 2.5x category growth.
Maybe 6% to 7%.
2x category.
2x, I would say.
Well, and I don't know if that's positive growth, but that number is never really visible. But unless that growth is decelerating sharply -- and I said -- and like I said, I have no evidence to support that theory. The herbal success will be continuing to grow at a much faster clip.
So since you are saying the category growth is around 6%...
Volume growth. What we are talking about now is volume.
Yes. Do you think that, that category can also grow 8% to 10% in the -- since the consumer dynamics are also improving, do you think that, that part of the category can also grow 8% to 10% volume?
Yes, I said growth is similar it seems there in terms of discretionary expense, particularly in rural but also in urban. It's definitely going to have an impact. We are hoping that category will start growing, if not in double digits, at least in the high single digits, 8%, 9%, 10%, for at least the HPC categories, hair oil, oral, skin, et cetera, et cetera, because then we'll be able to ride on the tide and grow double digits. But that may or may not happen. But in any case, we intend to grow much ahead of categories for all the categories in which we participate in.
Sir, since the growth is largely driven by market share gain, can you share that what percentages of your Domestic revenues has gained market share this quarter?
Well, the big ones have. Hair Care is the standout one; Oral Care. And Shampoos, it didn't show a gain but, I think, delivering 30% recently over the last 2 or 3 quarters means that the gains will be there. They haven't been captured in the data, and we see the gains happening now.
Well, I mean, the -- we're growing at 30%.
Yes, that we're growing at 30% in Shampoos, such as Activ the best performing in HPC categories, we're growing at 30%. Last quarter, we grew at 50%. So this will show up, perhaps, with a lag because these numbers are with a lag. I think the only category where we have lost some share is services.
Yes.
And also from a very high base because we got up to 56, which was all-time high, sorry, and it was the peak -- our historical peak. And now we have 54, so some erosion there, and the reasons for that I have spelled out earlier.
So around about 70%, 75% of the portfolio has gained share?
Yes. That's true.
Several parts we gained share. Glucose, we gained share.
Honey.
Honey, we've gained share. I think the Shampoos, which, like I said, the number perhaps are going to reflect reality. And then uses of the 2 categories [ that we have now ].
Okay. And last question on the -- any changes at tax rate guidance?
In the?
In FY '19?
What guidance?
Tax rate.
Tax rate.
Tax rate. I think it would be more or less on the max rate, plus 2%. That's maybe even a little bit lower because the International Business, which attracts a lower rate, we do expect the profit growth to be higher than the Domestic business, so -- but that will be a very minor change.
The next question is from the line of Abhishek Roy from Stewart & Mackertich.
Sir, my first question is regarding your value and volume contribution from rural and urban areas, so can you please share me the details?
For the Domestic business?
Yes, for the Domestic business.
Yes, the rural franchise grew by around 12%.
12.6%.
No, but you have the numbers? [indiscernible]
Yes. So rural business -- rural channel grew by 12.6%; and urban, by around 9.2%.
Okay. This is the value growth?
Value growth, yes.
Okay. And volume?
Volume, we don't have it. Price increases are very [indiscernible].
No just about 2%, 2.5% price increase component, which is pretty secular [indiscernible] about 2%, 2.5% broadly from this.
Okay. So sir, which product contributed more from the rural areas? I mean, so which is the largest selling products from the rural areas?
I think the HPC categories are doing well there. Hair Care in particular. Hair Oils in particular.
[indiscernible].
Sorry, all Hair Care, Shampoos and Hair Oils.
[indiscernible]
Oil care [ particularly ] well than in the past, with Hair Care, which was a little bit sluggish a few months ago, a few quarters ago, has now picked up and gained a lot of momentum in rural.
Okay. Sir, the reason why I have these questions is because many players are likely, even I see, like Patanjali products, they are actually sold at a discount from the products that you sell in your rural areas. And I believe that they have actually had a pretty good market share portfolio in them -- in there, actually. And also, a few other players, they have come out with their Ayurveda products: like HLL, they have launched their Ayush brand; and even Colgate, they have already launched their Herbal toothpaste. So do you think that, that is going to be a tough competition for you?
Well, there's always been competition. And Patanjali, in fact, which was perhaps a little bit more urban. Now urban has come down quite a bit, but that is still trying to build the rural franchise. But I think, ultimately, our products are very competitively priced for rural. We have like [ INR 10 ] in Oral Care and Hair Care, and you can't go below that. So it's not that we are not competitive in the pricing front. So while we may not be a value player, but we have value offerings and which we have crafted specifically for the rural market. So there's not disadvantage per se vis-à-vis the discount players.
Okay. Sir, but this year, what I believe is that volume will be the major contribution to really -- like FMCG companies, or those are into HPC's categories. So like if raw material prices are going up, so I believe that you will be planning for a price hike as well.
Yes.
But in terms of volume growth, if I see, do you think that your growth will be sustainable? Or like do you want to tweak some strategies for that thing as well?
I think our growth will be sustainable. I don't see any evidence of that not happening. Unless, of course, there is some rural distress consequent to a monsoon or whatever. Those are the exceptional circumstances, which we don't really put into our growth scenario. But I think overall, our growth will be good this year. I'll be looking forward to this year. I think this year will be much better than what we did in the last 2 or 3.
Okay. And sir, can you just give me an outlook on the raw material price? Because what I see is that crude price is going up, palm oil prices are up, so what is your outlook?
Outlook. Well, we are assuming -- I think let's take some assumptions. We assume Brent of $70.
Yes.
And then once we get..
[ $66. ]
Where we are perhaps going a little bit wrong is the dollar, where we budgeted around $65.
[ $66. ]
$65.
[ $66. ]
Not too bad there also. So I think the assumptions are pretty much in sync with the reality, and there's been no big surprise here. Even coconut oil we budgeted at pretty high level, that we moderated a little bit from that. So our budgets are also factoring in a fair amount of inflationary forces. And so I don't think there'll be any unpleasant surprises, but you'll never know. But I know some people talk about oil going to 200. Now those are outlined even -- which I don't think will happen, but otherwise, we are pretty much on top of the inflationary situation.
Okay. So we can expect like, say, a single level of operating margin going forward?
Yes, I think we are committed to maintaining the current levels of operating margins. That is what the endeavor is. We are not seeking to enhance it unless the situation becomes very favorable in terms of what -- demand side as well as inflation moderates and the demand picks up. And that is really a sweet spot where you can enhance margins significantly. That may or may not happen. But certainly, the margin outlook is something which we are pretty confident about.
Okay. And sir, my last question is regarding your strategy on organic and inorganic growth. So do you have any plan in that part?
Very much so. I think -- we've just done a couple of small acquisitions in South Africa. So that shows the intent. But we have -- the big price will be doing something substantial in India. And we are still looking at some targets, but nothing really is coming out of it. So the -- despite the fact that we have -- will be paying a substantial amount of cash in the form of a special dividend, our intent in terms of M&A remains completely intact. There's no dilution of that intent. We still have over INR 2,000 crores of cash in the pocket and before the buildup during this year. So I think we do have the ability and the resources to do acquisitions even of a large size.
Okay. So is there any companies in the pipeline that you are going to acquire?
Well, there always are. I mean, in terms of the pipeline, that's almost seems [indiscernible] as we have -- just before we sign the check. There's always prospecting happening. And at any point in time, we are looking at 3, 4 companies or brands which interest us. And then of course, we have to see the intent of the seller and his expectation. And the last few years, quite frankly, nothing has happened and for good reason. The reasons have been largely valuation driven. But that may not be the situation going forward.
The next question is from the line of [ Umang Shah. ] He's an individual investor.
My question is regarding the segment reporting, wherein I see a significant movement of capital employed between these segments. So the reason...
Can you speak louder, please? Can't hear you [indiscernible] Can you speak a little bit clearer?
Can you hear me now?
Not clearly.
[Operator Instructions]
Okay. So my question is regarding the segment capital employed, wherein I see a significant movement of capital employed between these segments over the year. So for example, in Foods, like Q1 capital employed was around INR 240-odd crores, which has come down to around 16 -- about INR 16 crores.
Right.
So what will be the reason for this then?
So I think and what we do is that we have also capitalized, so therefore, there is a depreciation involved into this, which dilutes the capital employed. On the other side, there is also the unallocated expenses which are also attributable to that. So that is primarily the reason. And the unallocated capital employed, that is also we factor also.
So what you are trying to say is that you're capitalizing in some items, but the expenses are still unallocated. That is why...
Yes.
It is not getting reflected in the 2 segments. But in the analysis
Correct. And also, this is also net of the unallocated income also, which is arriving out of the investments.
The next question is from the line of Tejash Shah from Spark Capital.
The rural bounce-back that we are witnessing for the last 2 quarters, is it also because that the base quarter had a lot of disruption because of GST and de-mon earlier, and the wholesale got impacted the most, which has highest share in rural channels? So or -- or are you picking up signs which are much more sustainable and these are at consumer level as well?
Like I mentioned earlier, there are some [ signs ], the March numbers indicated some uptick. But the overall growths do remain fairly muted. But there has been a -- the benefit of the rural base, which was more so in the previous quarter, a little bit less so with this quarter but yet the base is up. So to get into the high single-digits, double-digit growth, we need to have a better performance in terms of categories both in urban and rural. It's not that the urban is doing better than rural. It's not. Both are under some consumption stress. And we do expect that they will -- it will trend up. It's -- ultimately, we'll see many cycles of this -- the demand happening. And I do expect that it will trend up sooner rather than later.
Sure. Sir, from today's comment on Patanjali, what we picked up is that Patanjali is perhaps not as aggressive a competitor as last year or in the recent past. You are reading this based on pricing intensity or distribution expansion or the increase in activity, what -- where you are actually seeing that intensity coming down from Patanjali?
Mostly in terms of this promotional inputs, advertising inputs and all. So it is much less of that happening this year than it was in the past, also new product activity, et cetera, et cetera. So overall, we're seeing a far more muted performance than what we saw a year ago.
The next question is from the line of Amit Kumar from Investec.
Just a couple of questions from my end. One is on the Hair Oils side. What is the kind of volume growth that we've seen in this particular quarter for Dabur?
Well, I think the volume growth in Hair Oils has been trending at around [ 6% of growth ].
[indiscernible]
Yes. Sorry, I calculated more in the region of 7% to 8%...
8%.
8%. So again, outperforming the category by around 20%, 30% -- almost 50% actually because the category growth rate trended around 5% to 6%.
Okay. Sir, just one question. Given the fact that your Hair Care growth, value growth is around 9% for this quarter, and Shampoos has sort of outperformed, I think Hair Oils, the value growth is just about [indiscernible] the volume growth. I mean, is this because of the change in mix, the smaller [indiscernible]?
No, I think the -- yes, there's been no pricing activity in Hair Oils. So -- well, now the volume and values are almost convergent.
I mean, is that kind of reflective of the competitive intensity? Or is it that you have some of raw material benefits or you don't need to take into...
[indiscernible] Remember, there are big GST benefits. There was also the anti-profiteering issues, and there was no reason to take up prices. Our margin delivery in Hair Oils is actually pretty good. So the growth came really from volumes.
Okay. Understood. Sir, my second question, in some of the categories, we have quarter-on-quarter growth rate in fairly stable categories. And Home Care, it's as stable as it can sort of get. But we're seeing a 36% growth in the previous quarter and a very muted sort of growth in this particular quarter. Any reason for this kind of volatility out there?
Home Care. Home Care.
Yes, I think it's largely driven by Odomos, which is inherently volatile. Insect care issues, [indiscernible], et cetera, are driven by how many mosquitoes are there in the atmosphere and how much are they biting. And that's really the outcome in terms of how these categories behave. This is more so in the [indiscernible] categories that's -- which we -- rather than insecticide category. So the volatility, it's part of the brand's DNA. And you would see good -- great growth happening if there's any development happening.
So there was an institutional order [indiscernible].
Yes, there was a large institutional order in the base, and we expect to get that order this quarter [indiscernible].
I'm sorry, I missed you commentary a bit. Can you -- on that institutional part, can you please repeat yourself one more time?
Yes. There was a large institutional order in the base quarter which did not repeat itself in this -- the fourth quarter of the previous year. And we believe that that's not something we should [ upsell ] because the order is still pending, and we do hope it's executed this quarter. So that was one reason. But I think the more important reason was the lack of any kind of [indiscernible], et cetera, et cetera. And that pulled down the growth of Odomos. But otherwise, growth of Odonil and particularly Sanifresh has been very good.
Sir, the reason why I'm a little bit surprised on the -- your activity in relation to Odomos is because in a winter quarter, that start the yield was a big driver of Odomos in any which way, right? So I mean, in the previous quarter, you had a 36% growth in Home Care. So very clearly, that couldn't have been driven by Odomos; it was, in all likelihood, by Odonil and Sanifresh. So that momentum doesn't seem to have continued in this winter quarter.
I don't think you should dwell too much at one quarter's delivery. I think Home Care still have a great quarter for a variety of reasons, Odomos being, perhaps, the major one. But that doesn't mean that there's anything structurally wrong. So I think we should get back to the growth in this quarter for Odonil. I'm not so sure about Odomos. Like I said, it depends upon externalities. But Odonil and Sanifresh I'm pretty confident will grow at a strong pace.
Also, Zipper is doing well [indiscernible].
Yes. And Zipper will continue to also lead and drive some of the incremental growth.
The next question is from the line of Kunal Vora from BNP Paribas.
My first question is on juice category. Like what is the advantage with you as an incumbent have? Is it your distribution of the product, branding? I'm asking because there is well capitalized and determined competition, like ITC, Paper Boat, there is benign raw material prices, like the margins are very high leveled. So what gives you confidence that you will be able to hold on to the market share? That's questionable number one. And second question, sir, is on GST. Any thoughts on [ available ] implementation, any impact which you've seen? And having seen GST implemented for a few quarters now, how has life changed for you? Have you seen any benefits or like shift from an organized or logistics cost savings, et cetera? That's it.
In terms of your first question on our competitive advantage in juices, keep in mind that over the last 20 years, we've been in this business. Our competitors have been the beverage majors, they are Coke and Pepsi, so they've not been small [ competitors. ] They've been all the big organized players. And of course, there's more of them now; there is ITC and some other private equity-funded players. So there have been further enhancement of the competitive intensity, but it's not something which we have not faced in the past and yet managed to get the leadership status here. And behind that is really our supply chain, which is, I think, the single biggest strength that we -- and the value chain. So we have the best margin in the business, and we have the best supply chain in the business, and this is something which we've learned over the years in how to find in the society and put out products that's freshest in the market. And freshness is a very big driver of sustainable growth. Otherwise, you can get a lot of stuff coming back to you, and [ the products will go to trash. ] So there's nothing which has eroded there. And according to me, some of these well-funded players, either through internal capital or through external capital, how much can they sustain the burdens? So that is also something you have to keep in mind. This is not a very high-margin business that you can burn a lot of money for until the end of time and moderate expectation of profit coming in. So we do believe that many of these players will lose steam going forward, and we'll be back to where we were. But even now, we are holding on quite well. While we may have lost a couple of points share, we do expect that we'll be able to regain them by putting in the promotional inputs which we can now afford because of the benign prices. On the second question on GST, I think GST net-net has been a big positive for us, it was a disruption which happened. But it does lower our input costs. We get the input credit benefits, especially in the services area. Our network improves. The unorganized competition reduces. All these are big, big positives, and they'll take time to play out. And the e-way bill, for example, the interstate part has really not been impacting us at all, but there could be some disruption on the second part, which comes into play from May 3. But I think now the system is pretty much prepared to be with the e-way bill the IT systems are now performing. So I think there are a couple of learning from past mistakes has been now adapted by the people running GST. So this -- the rollout should be quite smooth. So net-net, over a period of time, starting perhaps this year, I said we would see the benefit of GST emerging, especially in terms of better management of costs.
Sir, in the logistics side, the supply chain, have you made any changes after GST? Have you seen any cost change of the last [indiscernible]?
We've made some changes. Now we are embarking on a very major project to completely reengineer our supply chain. This is probably taking off literally now and take us around 15 months to complete. I think that will -- then we will realize the whole systemic change. Rather than do it in bits and pieces, we want to look at the whole supply chain very holistically, right from procurement to sale, and see under the GST environment which is the best way to optimize it. So that -- of course, the benefit of that will continue coming through throughout the year, but this is a long-term project of big magnitude and big impact.
Sure. But you are reviewing this because of GST? And then in light of GST...
We are reviewing it under any case. But now the urgency for reviewing it becomes even more because the whole supply chain architecture has now changed consequent to GST.
The next question is from the line of Kuldeep Gangwar from [ KSK Investment Managers. ]
Firstly, like you mentioned that [indiscernible]
I'm sorry, Kuldeep, we can't hear you clearly.
Is it audible now?
It's better. [Operator Instructions]
So you mentioned about first half FY '19 growth of 8% and full year potential growth of 10%. I assume it is volume growth. What is the potential price growth you are targeting for FY '19?
These are really [ indicative ] numbers. And I think they're contingent upon -- I keep repeating myself -- on the category growth reviving in the second half. So these numbers would happen only if there's a revival of that -- of category growth. So the -- yes, sorry?
But these number were volume growth you were talking about?
Yes, they are volume growth. They are volume growth because the pricing impact will be layered on the volumes depending upon the inflation situation and other factors. So I think once you really look at the growth from a volume perspective from now on, and this is really what we believe is the situation today. But in the second half -- I think the first half visibility is reasonably high, but second half is not that much because of the outlook on the category growth is not very clear.
Okay. But you were mentioning like you are having adequate pricing power as of now as well as some cost inflation in certain segments. So that means that some price hike will be required at least in first half FY '19? Is that understanding right?
Price increase will definitely happen. Now it could be 2%, could be 5%, I don't know, but that depends upon how much inflation. But when I mentioned pricing for us, it means that we put adequate amount of pricing headroom to be with inflationary forces.
Okay. And regarding distribution, so your direct distribution is about 1 million outlet. What is our optimal direct distribution reach you are targeting given the cost/benefit tradeoffs over there?
We believe that we should be at around 1.2 million. The question is how soon will we get there. We should get to 1.2 million very quickly in case the category growths revive and there is underlying demand, which will support the cost of reaching out to these outlets. I mean, it's ultimately that the deeper you go, the less is the more is the cost compared to the returns on that investment. So -- but there's no point doing it when the category growths are sluggish. But if they revive, and like I said, I believe they will, then we'll go to 1.2 million, if not this year, then certainly in the next year.
Okay. So currently, it is 1 million? That understanding is correct?
Yes, it's 1.25 million, 1.3 million. And we are pretty satisfied with the situation -- the current level of demand but are fully prepared to accelerate it if the demand cycle grows.
Sorry, I couldn't hear. Like you mentioned currently is 1 million, and you want to reach it to -- 1.2 million?
Yes, 1.025 million, 1 million...
[ 1.022 million. ]
Yes, something like that.
Yes, 1 million.
So from there to around 1.2 million is what we should target in the situation where demand revival is reasonably strong.
The next question is from the line of Riken Gopani from Infina Finance.
I just had one question with regards to the International Business. Particularly in the GCC, what we understand is the expatriate population continues to decline, and we're losing more expats as part of the overall program coming down. What gives you the confidence that GCC market -- and particularly also if you could highlight what is driving the performance during the current quarter in the international markets? And what are the potential headwinds that you see, if any, in the near term towards growth?
Yes, I think, first of all, in GCC markets, we don't target the expats. Indian expats are resigning, and the population of the Indian expats is actually shrinking. Like rightly said, we are actually targeting the local population over there [indiscernible]. And that's the source of our growth is actually coming from. And we had seen a couple of headwinds due to structural macroeconomic changes which actually happened in the entire GCC region, which, with the grain prices going up and the crude prices going up, the economies there are also stabilizing, with more stability there. And we've also done some structural changes in distribution in Saudi Arabia, which is responsible for the growth which we've seen in the last quarter. So we see that this growth will continue to happen as the economy improves and also behind some changes that we've done in our distribution structural changes there.
Okay. So it's more also driven by the distribution changes that you've done in there. Could you elaborate a little bit as to what basically you have seen there in terms of the changes?
So earlier, what used to happen is the entire market used to be dependent more on wholesale. With so much of macroeconomic changes and with the government also tightening and putting a lot of hardships there, the direct distribution becomes more important as against wholesale. So we had to shift our distributors who more dependent on wholesale reach to reach out to the interior through direct reach. So we've actually now changed our distribution to a company which has got more than around 7 to 8 warehouses across the region, and therefore, their direct reach is more possible as against the indirect. So that's where we change our distributor partners in Saudi Arabia, which is the largest market in the entire GCC. That's why you see a growth of around 85% coming in Saudi Arabia, which we think is sustainable because of these structural distribution changes that we've done on ground.
We'll take the last question from the line of Sameer Gupta from IIFL.
Most of the questions are answered. Just 2 questions from my side. The inventories have seen quite a good increase of around 13%, 14%, despite sales being around flattish. So is it related to the changes in our distribution structure over the year? Or -- and going forward, how should we look at this number? And secondly, what would be your CapEx plans going forward?
CapEx, okay. I think with regard to the inventory on the finished goods had increased primarily on account of changes under the Legal Metrological Act, where the packaging disclosure is required to be changed. So we have prepared an inventory beforehand in order not to lose sales. So that is one of the reasons that you see. And also, we have a higher forecast for the current month, for the current quarter. So that has also added to the inventory growth that we have seen as a closing inventory for 31st March. With regard to the capital expenditure, we will have approximately INR 250 crore to INR 300 crore CapEx for the current year going forward in FY'19.
INR 250 crores to INR 300 crores. Sir, when -- this would be comprising of any new plant, or this is just maintenance CapEx that you envisage?
So this will be the capacity expansion in the existing plant that we'll be doing. And we may look at the opportunity for further expansion in our capacity. So it would include that.
But no greenfield plants. This year, there will be no completely new plants anywhere in the world.
Okay, okay, because this is a higher CapEx than expected in FY'18, right?
Yes. I think this is slightly higher because we have also got approximately INR 240 crores overall CapEx in this year also.
But keep in mind, all of this would not be expended in this year. There may be some carryforward into next.
Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Gagan Ahluwalia for closing comments.
Thank you for your participation in this conference call. As always, the webcast of this call and transcripts will be available on our website. We'll be happy to address any questions. Thank you, and have a nice day ahead.
Thank you. On behalf of Dabur India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.