Emami Ltd

NSE:EMAMILTD

Earnings Call Analysis

Company Aims 6-8% Volume Growth, 10% Tax Rate

Despite challenging market conditions such as rural market stress and seasonal weaknesses, the company is targeting volume growth in the range of 6% to 8%. They continue to focus on category premiumization, product launches, and margin improvements, aiming for higher market momentum. Additionally, the effective tax rate (ETR) is expected to remain around 10% for the next year, considering the MAT credit entitlements.

Challenging Conditions in Q3 Yield Mixed Results

The company navigated a challenging third quarter, which saw demand trends akin to the previous quarter, with continued low uptake in rural areas and weak demand among low-income, mass consumers. An unusually milder winter season dampened sales of winter-related products. However, the company managed to achieve modest revenue growth of 1.4%, reaching INR 996 crores, despite a volume decline of 0.9%. Growth was mainly supported by non-winter product lines and robust performance in international business, particularly in the MENAP region. There were robust growth figures of up to 80% in certain brands, such as Helios and Brillare Science, while more established brands like Navratna and Dermicool saw a 7% increase in sales, and pain management products saw a 3% uptick. The portfolio expansion strategy included the launch of more than 20 products on the direct-to-consumer (D2C) platform Zanducare in the last 9 months, underscoring the company's commitment to diversification and innovation.

Profitability and Margins Show Resilience

Despite the subdued volume growth, the company's profit metrics showcased resilience. Earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 7% to INR 315 crores, with margins expanding by 170 basis points to 31.6%. Profit after tax (PAT) followed suit, rising 9% with margins widening by 180 basis points to 25.9%. Over the nine-month period ending December 2023, the company's gross margin expanded by approximately 300 basis points, driving a 16% increase in PAT to INR 575 crores. The board's declaration of a second interim dividend of 400%, amounting to INR 4 per share for FY '24, signals confidence in the company's robust financial health and its commitment to shareholder returns.

D2C and Modern Trade Driving Growth and Margins

The D2C initiatives through Zanducare have seen notable traction, with around 90 products launched in the past three years—20 in the preceding nine months alone. These launches cover multiple segments, particularly healthcare, and are expected to be key drivers of growth looking ahead. While the D2C brands have yet to penetrate mainstream modern trade channels extensively, they show promise for margin expansion. The company's margin improvements in modern trade have not yet reached expectations, indicating an opportunity for further growth. Also, the company's recent foray into the competitive toothpaste segment with ayurvedic offerings like Dantveer, signals its strategic move towards tapping into the growing demand for natural and ayurvedic personal care products, despite the segment's notorious competitiveness.

Strategic Positioning in Growing Categories

In the ayurvedic and natural healthcare market, the company competes with both larger brands and smaller players, leveraging its existing strengths and manufacturing capabilities. For OTC products such as Pancharishta or Honey, the company competes largely with big players. However, in the medico marketing space and D2C segment, both competition with larger players and market share gain from smaller entrants are part of the strategy. The D2C segment, in particular, appears ripe for gains given the company's investment in digital-first products. These efforts align with broader industry trends, which have shifted towards specialized offerings and services particularly after the pandemic, and suggest a potential for strong double-digit growth ahead.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to the Emami Limited Q3 FY '24 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Percy Panthaki from IIFL Securities Limited. Thank you, and over to you, sir.

[Percy Panthaki, analyst]

Hi, everyone. Good evening, and welcome to this Q3 and 9-month FY '24 Results Call for Emami. On the call with us from the management, we have Mr. Mohan Goenka, Whole Time Director and Vice Chairman; Mr. Vivek Dhir, CEO, International Business; Mr. Gul Raj Bhatia, President, Healthcare Division; Mr. Manish Gupta, President, Sales; and Mr. Rajesh Sharma, President, Finance and IR.

I'll hand over the call to management for their initial remarks, and then we'll open up for Q&A. Over to you, sir.

[Mohan Goenka, executive]

Thank you, Percy. Very good afternoon, ladies and gentlemen. Thank you all for joining us today. It's a pleasure to have you with us as we reflect on the performance of this quarter. Quarter 3 saw similar demand trends witnessed in Q2 with lower rural offtakes and demand from mass consumer in the low-income segment is still not picking up. Moreover, as you all know, the quarter experienced a delayed onset of winter with lower intensity impacting the demand for winter products. Despite these challenges, we delivered a resilient profit-led growth in Q3 of this year.

Our consolidated revenues at INR 996 crores, grew by 1.4% with volume decline of 0.9%. Notably, while domestic sales remained flat, our nonwinter portfolio grew by 5%. Navratna and Dermicool range grew by 7%. Pain Management grew by 3%. Health care, excluding Chyawanprash and Honey grew by 3%. Overall Health care range being flat for Q3. Helios and Brillare Science grew robustly by 80%. However, BoroPlus declined by 9% due to the late onset and mild winters. Male Grooming range and Kesh King Range declined by 6% and 13%, respectively. During the quarter, we launched Zandu Agni Balm, a stronger multipurpose balm bar to counter regional competition and gain share from overall balm portfolio. Further, we also launched 5 digital first launches during this quarter on our D2C portal, Zanducare, including an ayurvedic toothpaste Dantveer. Overall, we have launched more than 20 such innovative products on Zanducare platform in the last 9 months, and around 90 new products since its launch, underscoring our commitment to diversification and innovation. Despite prevailing challenges due to currency depreciation in key markets, general elections in Bangladesh, continued political disturbances and crisis around the Red Sea, affecting the movement of goods.

The international business also continued its robust performance growing by 11% in constant currency terms and 8% in INR terms, driven primarily by the MENAP region. We also launched a pure glycine oil under Creme 21 and a conditioning shampoo range under 7 Oils in One in select international markets. Favorable input costs led to an expansion of our gross margin by 290 basis points to 68.8%.

EBITDA at INR 315 crores grew by 7%, with margins expanding to 31.6%, a rise of 170 basis points. PAT at INR 258 crores also saw a healthy 9% growth, with margins expanding by 180 basis points at 25.9%. For 9 months ended December '23, our revenues grew by around 5%, accompanied by an expansion of gross margin by around 300 basis points despite seasonal challenges. Our EBITDA grew by 11% with margin expanding to 27.5%, an increase of 170 basis points.

Our profit after tax at INR 575 crores also saw an impressive growth of 16%. I am happy to announce that our board has also declared a second interim dividend of 400% amounting to INR 4 per share for FY '24 to reward the shareholders. The economic landscape is evolving favorably with several key indicators pointing towards a promising future. The recent downgrade inflation is a positive sign and an expected recovery in rural markets, coupled with government impetus would lead to strong growth ahead.

Further, the announcement related to government focused on poor, woman, youth and farmers and increased allocations towards MGNREGA in the union budget, coupled with better-than-expected GDP growth in the last quarter. Further, fortify our confidence in the potential for improved growth. These macroeconomic factors, combined with our accelerated scale-up of emerging channels, distribution initiatives, D2C portals, Zanducare, strategic investments, innovation, pipeline and ongoing investments in our core brands are poised to drive growth going ahead.

With this overview, I invite the questions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama Institutional Equities.

[Abneesh Roy, analyst]

My first question is on the 5 D2C launches. So what is the long-term potential either in the specific segment of the industry and from these brands? And you also are trying to improve margins in modern trade. So last 1 year, how is the trajectory there? Have you arrived at the initial goal in terms of the profitability in this part of the time?

[Mohan Goenka, executive]

Yes. So Abneesh, I will answer on the margin front. We have improved our margins on modern trade in the last 9 months, though it is slightly not as we had expected, there is further room to expand margins in both e-commerce and modern trade. As far as the D2C brands are concerned, Gul Raj is here. He will take this.

[Gul Bhatia, executive]

So we've launched new products in multiple segments in the D2C platform covering health care. And as Mr. Mohan Goenka mentioned, we've launched around 90 products in the last 3 years and about 20 products in the recent current year in the last 9 months. And we are seeing a scale-up happen of multiple products and multiple categories through the D2C platform. So very bullish on the digital first products going forward, both in the current quarter and in the coming quarters.

We've also launched a very potent and very efficacious toothpaste called Dantveer as you may have seen from the note. And we are fairly confident that we can scale this brand also up in the next few months and in the coming years.

[Abneesh Roy, analyst]

So a few follow-ups there, any D2C brand you have managed to bring to modern trade? And any synergy benefits you're seeing for D2C with main company. And on toothpaste,that's very competitive and Dabur, of course, is doing quite well in terms of naturals. And then there are 2, 3 -- 2 MNCs also. So toothpaste generally is a tough category. I understand yours will be more of a D2C and natural. But generally, it's a very tough category. So why toothpaste?

[Gul Bhatia, executive]

As you know, the toothpaste category is very large. And over the years, the ayurvedic segment or the natural segment has been growing much higher than the normal toothpaste, which are non-ayurvedic or non-herbal. So we do believe that there is ample scope to gain market share in this segment, even though the overall category may not be growing. And based on both the online segment in terms of the online purchases through various platforms, including Zanducare and our entry, which we are making into the modern trade, we are fairly confident that while it's a competitive category, the kind of formulation we made, the kind of proportion we are offering to the consumers, we would be able to gain market share in this segment.

[Mohan Goenka, executive]

Sure. So also Abneesh, now that the margins are pretty high in toothpaste, particularly this ayurvedic segment, we strongly believe that Zandu has right to win because Zandu in ayurveda is a very, very well-established brand. And we were working on the formulation for quite some time. I think we have a winner formulation. So we have just launched in these channels for the time being, but I am very confident that going forward, we will take it to the retail and the larger markets because margins are pretty high now in toothpaste.

[Abneesh Roy, analyst]

Only one follow-up. In terms of positioning, how does this compare with Patanjali's Dant Kanti, Dabur's Red, Vedshakti of Colgate, so will this be more a premium given D2C?

[Gul Bhatia, executive]

It would not be at a premium like we would have other products in the category because there is a certain price point in the category. But definitely, in terms of the formulation, we got certain ingredients which are much, say, more efficacious. So we're not looking at it being limited to a very niche kind of audience. We want to get into the main market or the mass market, but we are doing the launch to online and to select channels, which are emerging channels like modern trade, so we don't intend it to be a very premium or a very niche offering in that sense. It will be more mass market as we go forward.

[Abneesh Roy, analyst]

My last question will be on your Kesh King. Post acquisition first 1 or 2 years were tough and then again, it's been volatile erratic, 13% dip in last 2 years, 3 years, you have tried to diversify portfolio also. So is this because generally hair oil demand conditions are tough? Is it because down trading is happening? So would you want to now make it more mainstream in terms of pricing? Will that be needed for growth to come back in this?

[Mohan Goenka, executive]

No Abneesh, we are not picking our pricing. Presently, you are right that the hair oil segment is slightly struggling and particularly Kesh King is a premium oil, so there is some bit of stress. But this -- we have seen 1 or 2 quarters declined, and then we suddenly see an uptick. So maybe the quarter 4, we will see some bounce back in Kesh King. This has been a one-off decline of 13%. But going forward, it should bounce back.

[Abneesh Roy, analyst]

So that is the issue. But when I compare pre-COVID annual sales to now FY '24 annual sales, what is the CAGR, you must have seen and your diversified portfolio also? So if you knock that off obviously the core business would have seen a dip, right, pre-COVID to now full year sales?

[Mohan Goenka, executive]

Yes. If you see last 4 years, Kesh King oil is at a 5% growth CAGR. When you compare pre-COVID levels, so this is one-off, a decline of 13%. It's not that the oil is declining. And markets are also tough right now for discretionary products like this. There is some bit of down trading happens because of price at what we sell. I'm not very worried. The onion and the other ranges that we have launched in Kesh King are doing much better. But once the market revives, I'm sure this should also get to at least 6% to 8% growth.

[Operator]

The next question is from the line of from Shirish Pardeshi from Centrum Broking.

[Shirish Pardeshi, analyst]

I have a few questions. Rather, the presentation is becoming now shorter. There are no mention about 7 in one oil the volume growth also is not given. And more importantly, if you can give some more color what is happening with the modern trade and e-commerce because this number is also not seen in the presentation. So maybe if you can give some more overview how this has happened?

[Mohan Goenka, executive]

Just a moment, Shirish?

[Rajesh Sharma, executive]

Hello, Suresh ji?

[Shirish Pardeshi, analyst]

Yes, Rajesh ji.

[Rajesh Sharma, executive]

Yes. Yes. 7 Oils has also got impacted this quarter because of the discretion overall getting impacted. So it has also -- it is almost down by 5% this quarter. But for the full 9 months, if you look at, it is almost flat this year.

[Shirish Pardeshi, analyst]

Okay. And what is modern trade and e-commerce salience in this quarter?

[Rajesh Sharma, executive]

So modern trade and e-commerce is more than 22% kind of, around 22%.

[Shirish Pardeshi, analyst]

And growth?

[Rajesh Sharma, executive]

So growth on those channels is also would be roughly -- modern trade would be around -- both would be around, 10% modern trade growth and around e-commerce is 15% kind of a growth level.

[Shirish Pardeshi, analyst]

Okay. My second question to Mr. Gul Raj Bhatia. On Zandu online, though it is happening to know that we have launched almost 90 new products and we have been consistently adding more products. But if I look at last 2 years' experience, I think we started with 1%, 1.5% contribution. So give some more depth, who are the typical customers who are buying? What is the profile? Because if the start has happened with the extrapolating the ayurvedic substance and we are adding the platform products on that, so how we should look at and think about the growth in the Zandu -- fueling the entire Zandu portfolio?

[Gul Bhatia, executive]

Yes. So as you know, during and post COVID, the online purchases of consumers in general have gone up. And in terms of the consumer profile, [indiscernible] exercise, they tend to be more of millennials, typically people between the ages of 25 to 35 years. They may not be buying these products for themselves alone. In the case of Zanducare, they will be buying as caregivers for their parents or their older sisters or brothers, et cetera. And in general, we are -- we know that this segment has been growing month-on-month, quarter-on-quarter. And there has been a large influx of new players also in the ayurvedic segment. So we are seeing a good scale-up of certain segments which we launched in, and we are very confident that both in the coming quarter and the coming quarters, we will see many categories scaling up further in terms of the D2C platform and it will extend not just online, but it will also extend into emerging channels, as I mentioned, such as, for example, modern trade, both in terms of the regular supermarkets and the pharmacy chains also.

We also do -- see a scale-up happening on the other e-com platforms such as Amazon, such as Flipkart, et cetera, and the e-chain pharmacies also. So they are very bullish on the launches we've done. They took some time because when you launch any product in healthcare, you would do many tests internally and stability study, et cetera. But now we've got a certain critical mass to be able to scale up going forward. And we are already seeing that happen.

[Shirish Pardeshi, analyst]

I understand Mr. Bhatia, if I bring my marketing experience, you have been recruiting customers obviously, because of the online, the product is available, there is the recruitment of customers. But the question here is that the overall sales momentum is flattish. So I've not been able to surely say that if this product expansion and the new product has been able to get because if I look at the healthcare business, it's flat, and this is despite our weaker base also. So what is it that we are missing?

[Mohan Goenka, executive]

This is, Shirish, because the Chyawanprash...

[Operator]

Sorry, to interrupt, sir, we are unable to hear you.

[Mohan Goenka, executive]

Yes. But Shirish, that is primarily because the Chyawanprash portfolio has declined, the winter portfolio in healthcare has declined. That's why you are seeing flattish numbers. If you go product-wise numbers, the brands have grown at 5% to 7%. It is due to only the Chyawanprash that the portfolio is not growing.

[Shirish Pardeshi, analyst]

Okay. Sir, my last...

[Mohan Goenka, executive]

All of these are new launches. All of these are promising. They are flattish. Some of them are large categories. At least we are getting an entry into these categories now. We have definite plans as Gul Raj said, healthcare has to grow at about double-digit growth. We are very, very confident. We are trying, if we have to pick something after launches in e-com, then we might do it if we take it to the D2C.

[Shirish Pardeshi, analyst]

Okay. My further follow-up on the domestic business. The volume -- what is the volume growth that we have seen in this quarter?

[Mohan Goenka, executive]

Volume has declined by 0.9%.

[Shirish Pardeshi, analyst]

Okay. It's flattish.

[Mohan Goenka, executive]

Yes.

[Shirish Pardeshi, analyst]

Okay. And the last question...

[Mohan Goenka, executive]

This is, again, Shirish, you have seen that we have declined by almost 9% in the winter portfolio. Winter is large in this quarter...

[Shirish Pardeshi, analyst]

Yes, I understand. And then on my last fundamental question is that over the last 4, 5 years, you are not lucky that all the 3 seasons has panned out well. So what is it that we are trying to do. I mean we have seen a revival in the senior management also. We are now trying to gather the momentum with acquiring D2C brands and now we are bringing in the mainstream. So how we should build the next 3 years? I mean, seasonality is the part which we have been struggling. But in the management terms, what are we trying to address? Is this growth has always been dependent on the outside seasonality factor?

[Mohan Goenka, executive]

No, not at all, Shirish, we have come a long way. Our dependency on seasonality has reduced significantly, okay? It cannot just go overnight. Our new launches are by and large nonseasonal. If you see our pain portfolio, which is almost 26% of our revenues is nonseasonal. So barring BoroPlus cream and somewhat of Navratna oil and Cool Talc, these are the only seasonal bands that we have in our portfolio. Male Grooming, Man Company or -- these are nonseasonal portfolio. So we have come a long way, I would say in reducing seasonality.

[Shirish Pardeshi, analyst]

I agree, sir. But the question here is that if there is no price inflation, which is going to be visible for next 2 to 3 quarters in the near term, is the volume growth will go to 5%, 6%, 7%, 8%, 9%? That's the question.

[Mohan Goenka, executive]

So aim is, of course, there, Shirish, that the volume growth should be in the range of about 6% to 8%, and that is what our aim is. You all are aware that market right now is not the best market. The rural market is under stress. So there -- winter has been under stress. So these are certain factors we have to keep in mind. What we -- what is in our control, we are only doing that. We are continuously [ premiumizing ] our categories. We are launching products. We are doing what is best we can do. We have the kind of growth you have seen in TMC and Brillare in the last 1 year, the numbers have almost doubled. So there also, we have been very aggressive, and we have worked extensively hard to maintain our margins, grow our margins despite of high margin categories at a decline.

BoroPlus cream has declined, which is a very high-margin category. So despite of all those factors, e-com, modern trade are growing very fast, which is again a lower margin compared to our GT. So there are multiple factors, which we look at. And I think once the market momentum starts, I think we are absolutely geared to get into the growth mode.

[Shirish Pardeshi, analyst]

And just last quick question on the pledge. Any word where we stand today and what is the way forward?

[Mohan Goenka, executive]

Pledge is still at 12%, Shirish. And as I have said, we are committed to bring it down single-digits. I'm very confident that -- I can't give in which quarter, but management is committed that we will bring it further down.

[Operator]

The next question is from the line of Harit Kapoor from Investec.

[Harit Kapoor, analyst]

I just wanted to have a question on the D2C part, Brillare, Man Company specifically. If some of the margin tailwind -- a small part of the margin tailwind also that some of these brands are scaled up and given you're getting -- going from sale little loss-making to, say, not as much loss-making results? Is that some scale benefits you're getting from there as well in the last couple of quarters?

[Mohan Goenka, executive]

Yes, Harit. So Man Company, there is a big shift, which was negative EBITDA margins has become positive because our growth has been almost 50%. So due to the scale up, the brand is now making profits. Same with Brillare, the negative EBITDA margins, which was in the tune of almost 40%, 45% has come down to minus 20%. So there also, we have -- due to the scale, we are getting better results. The significance in that...

[Harit Kapoor, analyst]

Great to know. The second part was on the material cost side. I think largely, most costs are in a bag now. I just wanted to get a sense on menthol. How do you see that playing out, just any kind of outlook on that commodity because it's fairly unique to you in the listed space? So I just wanted to get your thoughts on this.

[Mohan Goenka, executive]

So Harit, menthol is also benign. There is no pressure on cost, which is not just menthol, I would say, even LLP or the other key raw materials are also benign. So I'm not seeing any pressure as far as the input cost is concerned.

[Harit Kapoor, analyst]

And just a follow-up, which is the last one on that is typically, you've used pricing also as a tool to manage inflation -- OpEx inflation and you've been very successful, hasn't really hurt your growth, et cetera. So in the context of inflation has kind of raised down benign, do you see next year also some opportunities for pricing?

[Mohan Goenka, executive]

We will take a call as it comes, Harit. In the past, we have taken a price increase of almost 2% to 3%, and that definitely, we always look at roughly about around 3% of price increase. So next year, also, hopefully, we should stick to those numbers.

[Operator]

[Operator Instructions] The next question is from the line of Percy Panthaki from IIFL.

[Percy Panthaki, analyst]

Sir, you give us your thoughts on healthcare. I mean, this is a portfolio which we have been trying to sort of build aggressively over the last decade or so. And it's not just as other players, for example, Dabur also has been sort of talking about this since the last 10 years. And whenever we talk to you or Dabur, we get the sense that this is the new growth driver. I mean this is a segment which will grow like 2x of the overall company. But this has not played out that way over the last decade. So what is the reason that it has not happened? And what are the learnings for us, which we can implement? And would you still sort of hold out that target that health care is the pillar or the driver for growth, which will -- segment which will be growing faster than the overall company?

[Gul Bhatia, executive]

Yes, Mr. Percy, we are fairly confident that we will be seeing strong double-digit growth in the coming -- in the current quarter and the going forward quarters and years. For the reason that, in our case, our related market shares are low across product segments. So it's a question of investing into these identified product segments to grow the market.

At the same time, we are fairly confident that in terms of our product efficacy, our manufacturing capabilities, quality of products and the fact that we are making a strong foray into the new age product segment, which we are doing well, both in terms of the online and off-line go-to-market strategies, we are confident that the healthcare business would do relatively better than the other parts of the business, primarily because we have scope to grow our market shares, because that gives us confidence that if we get the GTM right, we would definitely see a scale-up happening more than what's probably been seen over the last 10 years.

[Percy Panthaki, analyst]

Is there something that we, as outsiders, analysts and investors are not able to see in this industry because see, are queues that we take from the industry overall or just from these 2 companies, which is Emami and Dabur, which are in the listed space, and we get regular information about. And if we take these 2 companies as a proxy for the -- sort of ayurvedic or natural health care space, then that overall industry itself has not really grown. Unless you're saying there is someone in the unlisted space whose growth is much higher. And that's why we are not able to sort of -- I mean that's why the 2 companies are not a correct proxy for the industry. So what is really -- I'm more trying to understand what has gone wrong in the past and not for Emami, but for the industry, as I understand it. So that then I can have a better understanding of what needs to improve in the future.

[Gul Bhatia, executive]

So as you are aware, apart from Dabur and Zandu, there are other brands like Patanjali, there is Himalaya, there is Baidyanath. So if you look at the overall pure healthcare, I'm not referring to healthcare as in say, a toothpaste. That's not healthcare per se. If you look at the core healthcare, especially in the ayurvedic segment, but I think the overall growth as per my sensing over the last maybe 6 to 7 years has been between 10% to 12%. So during COVID...

[Percy Panthaki, analyst]

You know unlisted players have sort of gained at the cost of the listed players because the 2 listed players are not showing that kind of growth over a decade.

[Gul Bhatia, executive]

Yes. So what's happened is that during COVID, as you know, we saw huge growth happening basically. So I'm looking at the COVID scenario also, where we saw growth upwards of 40% to 50%, at least in our business. Post COVID, there has been a certain, as you know, diversion of the consumer funds, which have gone into more of the discretionary spend more into travel, more into eating out, QSR. So we've seen that kind of a blip which has happened in the last 2 years. So there's been a complete move away from the core healthcare products like immunity, et cetera.

And within the 5 or 6 players I mentioned, some of the players have not done so well in terms of the overall business. So there's been a certain market share gain, which is happening across the category. And in the online space, there has been a fair amount of activity, which has happened over the last 3, 4 years. So there are players who come in. We are obviously not able to quantify what their numbers are. But -- so the traditional channels, if you look at the pharmacy channels, et cetera, or the ayurvedic would have seen a 10% to 12% growth overall. But the online segment in view will be growing at upwards of 25% to 30%, because the niche offerings or because of specialized offerings. So we do believe that going forward, we had to understand the trends which are happening. There is also a certain move happening in terms of chronic diseases, diabetes, bone health, cardio. So there are needs or there is a requirement for specialized offerings in these segments.

Even the services segment is picking up, whether it is wellness, whether it is Panchakarma, whether it is other forms of treatment. So this segment will continue to grow in my view upwards of 12% to 15% between off-line, online and services, and we are making plans to be getting into the relevant segments for us. Besides, obviously, as I mentioned, growing our market shares.

[Percy Panthaki, analyst]

And just a follow-up to your comment on the market share potential that you see, so can you just very briefly explain what is the competitive landscape here? What is the Pareto in terms of the top 5 players versus the long tail, et cetera? And where is the market share gain going to come from? Is it mainly from some very fringe kind of players? Or do you think that the kind of products you have, they compete more with the larger players? And therefore, if there is any market share gain, it will be from the larger players only.

[Gul Bhatia, executive]

So if you look at the 3 broad segments, 1 is the OTC business, products like Chyawanprash, Honey, et cetera, Kesari Jivan, Rhumayog, Vigorex, the second segment is a pure medico marketing, which is going to the ayurvedic doctors and others. The third is the D2C segment. So in the OTC segment, we have a very large brand called Pancharishta, which is a very unique product, as you know. So there, we define the category. So to that extent, in that category, there's been a bit of a slowdown post COVID. But we have ample scope for growing our business or our share in the relevant other categories such as vitality segment, supplements, et cetera, where we will be competing with larger players. We are not competing with the fringe players because they are relatively small.

And if you look at the medico part, there we would compete both with the larger players and the smaller players. What's happened in the last maybe couple of years is that the -- in the medico segment, the smaller players are also making forays into various states, various regions, et cetera. So there we compete both with the larger and the smaller players. And our strengths by way of our manufacturing facilities. In fact, we are the only company which has 2 WHO GMP manufacturing units. So we tend to be at a slightly or at a much higher cost than some of the noncompliant players.

So there, we would again be competing more with the larger players, though the market shares of the larger players are being eaten by the smaller players. And in the D2C segment, I think over the last few years, whatever work we put in, I think we are poised to reap the benefits more than other players. That's why you would see the digital first products and the D2C segment for us doing relatively much better than both the larger players and the smaller players who got into the market in the last 2, 3 years, basically.

[Operator]

The next question is from the line of Anurag Lodha from Axis Capital.

[Anurag Lodha, analyst]

Am I audible?

[Mohan Goenka, executive]

Yes, yes. Please go ahead.

[Anurag Lodha, analyst]

Yes. So sir, I just wanted to ask you, the ETR has come in at about 7.7% for 9 period. So can you guide us as to what the ETR for the full year would look like?

[Mohan Goenka, executive]

What is that, sorry?

[Anurag Lodha, analyst]

Our full year ETR guidance, sir. Effective tax.

[Mohan Goenka, executive]

On tax rates, so we can expect similar kind of tax rate for Q2 -- quarter 4 also. And next year, also around 10% would be there considering the MAT credit entitlements we are entitled to.

[Anurag Lodha, analyst]

Okay. Okay. And so can you tell us about the cash balances that you might have?

[Mohan Goenka, executive]

We have roughly INR 400 crores of net cash available with us. And we have just announced the second income dividend today.

[Operator]

[Operator Instructions] The next question is from the line of Ajay Thakur from Anand Rathi Securities.

[Ajay Thakur, analyst]

So I just wanted...

[Operator]

Mr. Thakur, your audio is breaking up.

[Ajay Thakur, analyst]

Is it better now?

[Operator]

No, sir, it's still breaking up. Mr. Thakur, we are unable to hear you. We have lost the line from the current participant.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for the closing comments.

[Mohan Goenka, executive]

Thank you, IIFL. Thank you, Percy, and thank you all the participants for joining us this conference call on our Q3 results. Thank you.

[Rajesh Sharma, executive]

Thank you.

[Operator]

Thank you, members of the management team. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines.