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Emami Ltd
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Ladies and gentlemen, good day, and welcome to the Emami Limited Q4 FY '22 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 Pataki from IIFL Securities. Thank you, and over to you.
Hi. Good evening, everyone, and welcome to the Emami's 4Q conference call. I have with us from the management, Mr. Mohan Goenka, Director; Mr. Rajesh Sharma, President, Finance and IR; Mr. Vivek Dhir, CEO, International Business; Mr. Vinod Rao, President, Sales; and Mr. Gul Raj Bhatia, President, Healthcare division.
So without further ado, I'd like to hand over to Mr. Goenka for his initial remarks. Over to you, sir.
Thank you, Percy. A very good evening, friends. I welcome you all to this conference call on Emami's result for the fourth quarter and year ended 31st March 2022. During the quarter, consumption trends remained subdued amidst weak sentiments and steep inflation. The geopolitical conflicts aggravated the raw material inflation scenario as crude oil prices spiked up and persistent inflation continue to hurt consumer wallets across rural and urban markets, leading to a slowdown in sales.
Despite the challenging macro environment, we have been able to post a resilient performance during the quarter with consolidated revenues at INR 770 crores, growing by 5% in Q4, which translates into a 2-year CAGR of 20%. Our India business grew by 4% over previous year. That is a 2-year CAGR of 22% with flat volume growth over previous year. Our major brands like Pain Management grew by 9%. Healthcare range grew by 4%. Male Grooming range grew by 4% and 7 Oils in One grew by 8% during the quarter. While Navratna posted flat growth during the quarter, it grew by 13% on a 2-year and by 4% on a 3-year CAGR basis. Kesh King, however, declined by 7% over previous year, but grew by 16% on a 2-year CAGR basis, and BoroPlus declined by 18% during the quarter.
In this quarter, modern trade grew by 9%. E-com continued its robust run growth by 90% over previous year. In Q4 '22, the salience of e-com channel has increased to 7.1% of domestic revenues and modern trade contributed to 8.4% of the domestic revenues, increasing its salience by 60 basis points as well. CSD revenues grew by 32% during the quarter. Our distribution initiatives continue to progress with additional 8,000 rural towns being added in this quarter through Project Khoj, taking the total tally to 40,000 rural towns. Revenues and presence in stand-alone modern trade outlets increased with coverage expanding to 40 cities and more than 3,300 outlets. The company also activated around 32,000 additional outlets for its health care products by focusing on Ayurvedic bhandars and chemist outlets, taking the total tally to 1.1 lakh outlets.
Coming to our international business. Our sales have grown by 8% during the quarter on a high base of 28%. However, if we exclude the sales from CIS region, which was impacted due to the geopolitical issues, our international business grew strongly by 17%. Key geographies like Bangladesh and UAE performed well during the quarter. If I look at the profitability number this quarter, I believe we have posted decent set of numbers despite strong inflationary pressure and a high base of previous year. Gross margins at 62.4% contracted by just 30 basis points on account of judicious price hikes and strategic procurement.
EBITDA at INR 164 crores grew by 1%, and profit after tax at INR 104 crores declined by 15% on account of one-off Forex loss of INR 5.1 crores and lower other income. However, PAT at INR 356 crores grew by 4.1x over previous year on account of recognition of MAT credit entitlement amounting to INR 288 crores in this quarter. In FY '22, consolidated revenues at INR 3,192 crores grew by 11%. EBITDA at INR 952 crores grew by 8%. Profit after tax at INR 703 crores grew by 23%, and PAT at INR 839 crores grew by 85%. I am happy to share that we have posted a 3-year profit before tax CAGR of 20% in FY '22, which is one of the highest in the industry since the COVID period despite the ongoing challenges.
In the full year, our major brands like Pain Management range grew by 18%. Kesh King grew by 11%. Healthcare range grew by 9%. Male Grooming range grew by 16%. BoroPlus and Navratna grew by 5% each and 7 Oils in One grew by 29%. I'm happy to share that we have not only managed to increase or maintain our market leadership positions, but also increased our household penetration in most of the categories.
As we are all aware that the business environment since early 2020 has been facing many, many challenges, which affected consumer behavior. While the industry has had an uphill task of mitigating these challenges by smart adoption of new ways of doing business, including digitization, it keeps facing new challenges in the form of geopolitical issues and steep inflation in global commodities, which leading to price hikes by companies to tide over the cost push. This, we believe, has led to plummeting consumer sentiments across rural and urban affecting the industry. However, we believe that there is some sign behind every dark cloud and thus we are optimistic of witnessing an upward curve in the consumer sentiment in the near future.
We have always believed in growing both organically and inorganically and keep investing in businesses and brands where we see synergies with our current businesses and scope of growth. In March, we acquired the reputed Dermicool brand of prickly heat powder and also invested in Tru Native F&B, a new age company marketing nutrition products. We do believe both of these brands will pay rich dividends in times to come. At the same time, we will continue to invest in our existing power brands as we do believe there is much headroom for growth.
With this brief, I now open the floor for Q&A. Thank you.
[Operator Instructions] We have the first question from the line of Abneesh Roy from Edelweiss.
My first question is on the gross margin pressure in Q1. Do you see significant pressure in Q1 given we have seen widespread inflation? In Q3 call, you had said in Q4, you don't expect significant pressure, which you have delivered, only 30 bps gross margin compression, which is quite decent performance. But in Q1, how do you see because always lag is there in terms of impact?
Right. So Abneesh, you are right. So now that the materials we had, most of it has been consumed in quarter 4. So we have to buy that new prices, what is prevalent in the markets now. What looks like as of now that there should be a pressure of about 200 basis points in quarter 1.
And that's without you taking price hike or that's post your price hike, if any, you already done?
No. Price hikes have all been factored in. Post the price hikes, that would be the kind of contraction.
Sure. And second question is on the rural demand, when do you see recovery because we are seeing NREGS job demand going down, which is a good trend. That's a lead indicator plus good monsoon, high crop prices. What are you picking up from on ground? Is it a H2 recovery? Or you think in Q2, some recovery can start?
So as of now, Abneesh, markets are still subdued. As far as rural demand is concerned, we are seeing some pressure. But at the same time, what numbers we are seeing today that there is good traction as far as our summer portfolio is concerned, where we are seeing some concern is on the very high base of our pain portfolio. So it would be a good play as far as our portfolio is concerned. So -- but overall, the demand sentiment still is low. We are very optimistic that the second quarter, there should be some bounce back for sure.
Sir, and last quick question. Your volumes are flat, and you did say currently demand situation is challenging for the entire FMCG sector. In light of that, 10% higher advertising spend is something which is not very common. Most FMCG companies have cut down, add volumes, add funds softly. So why you want to spend so much higher when volume growth is flattish?
See, it is very difficult, Abneesh, that to cut expenditure just like that because there were some new launches that we had done. On account of that, we had to spend some amount of money. Also, some amount of money goes into our Zandu Care. So that is an ongoing cost, which we have to entail anyways. So looking at overall scenario, I think the costs have gone up. But if you see on a yearly basis, we have maintained our numbers. We haven't increased our advertising significantly.
We have the next question from the line of Shirish Pardeshi from Centrum Capital.
Sir, I have got 3 questions. When I looked at your presentation, Kesh King range have declined 7%. And on 2 years CAGR had grown 16%. What has exactly happened in this product? Because last time when we had a call, you said that Kesh King is now running good momentum. So maybe you can give some qualitative comments.
So Kesh King, Shirish, you are right. So we are very bullish on the Kesh King range. And I think we have delivered a good set of numbers. If you see on the 2-year CAGR, we have grown at 16%, okay? And this for the whole year, we have grown at 11%. So we were sitting on a very high base on quarter 4. I think our growth was almost 40% or something. So on that, we have declined, but I don't see any challenge as far as Kesh King range is concerned.
So it's not a product issue or the offtake issue. It is more to do with the high base. That's right?
Yes. It is -- the base was very high last year in this quarter.
Okay. And then a question on Navratna. And despite the strong summer, we have managed to get a flat growth. So what is exactly happening in the Navratna product?
Navratna has bounced back. Last 2 years, in the peak season, we had COVID. So of course, that is the effect. But we have seen good set of numbers coming in April month. So I think Navratna would deliver quite significantly well. I'm not worried about Navratna. The summer season is also good this time. So we should get good set of numbers.
Okay. Okay. And my question on international. Despite these all challenges, the growth is okay. But if you have to factor in last 2, 3 years, we are trying to do a lot of changes. Barring about CIS countries, you think we can manage here a double-digit growth?
Very much. So Vivek is here on the call. Vivek would be able to answer your query.
Hello, and Vivek [ this side ]. So I think we are seeing a good growth momentum from August onwards. So Russia, Ukraine situation was unexpected. This led to a lower number. Despite that, we could grow by 8%. And the next quarter onwards, we should have a double-digit growth despite the situation which we are facing.
Okay. Mohan ji, just last one question. You said that 200 basis point margin decline after considering price increases, correct?
Right, absolutely.
And how much price increases we have taken so far? Because last time you have -- last quarter, we were saying 3.5% we have taken. Is there any new price increase which is gone?
So we have taken almost 4.5% price increase, Shirish. Yes.
[Operator Instructions] We have the next question from the line of Prakash Kapadia from Anived Portfolio Managers.
[Audio Gap] which means they have been witnessing market share gains in most of the product portfolios. Now given our power brand portfolio, we are slightly niche and slightly high market share. So how is our market share trajectory happening because smaller companies face challenges in inflationary times or we are high in market share. So the difference is not too large in this kind of an environment for us. If you could give some light on that. And you also mentioned about down trading in rural markets. So what could be the LUP contribution? Has that seen a major change? And also, if you could comment on urban kind of markets, what are we seeing? Are we seeing lower LUPs in urban markets also? What are we trying to do to bridge the gap in these inflationary times? Are we planning some bridge mid-level SKU products? what is happening on the urban side? If you could give some color, that would be helpful.
So Prakash ji, as far as market share are concerned, you are right. We have increased our market share in almost all the portfolios, in all the categories that we operate in. Of course, last 2 years were very, very challenging. Despite of that, we have gained market share. But now we would have to see how we can grow these markets. And we have taken an aggressive stance because the markets are now in the sense, opened. Though there is inflation, all of us know the story. But still, we are going aggressive as far as our advertising is concerned. Because after 2 years of lull markets, we need to invest aggressively on our summer portfolio, which is very key for our growth. So we are confident that in some of our portfolios, we should be able to grow the market as a whole. Other than just the pain portfolio, which was driven due to COVID.
COVID, right.
Yes. So that would definitely see a decline. Other than that, all the other categories, whether it is Kesh King, Navratna oil, Fair and Handsome or 7 Oils in One or the other categories would see a growth. So that is one.
Mohan ji, essentially in Europe, because market share is decent and high for us. So unless and until we, as you know, leaders don't try and expand, the market growth could become difficult. That is why the aggression, obviously, given what we've seen last 2 summers because of COVID. Is that a fair?
Yes, yes. Absolutely. So we would be quite aggressive in our summer portfolio as far as advertising and our promotions are concerned. Okay. So that way, the market should grow. And we have seen good numbers coming in the month of April because it was extreme summer this time. Okay. And secondly, yes, there is down trading happening across the market, whether it is urban rural. Luckily, Emami has small LUPs, which contributes to almost 23%, 24% of our total business. So there, we don't have gaps as far as LUP is concerned. I have not seen a significant growth in LUPs due to this inflation. But yes, because we have the LUPs, we are been able to service all kind of markets, urban and rural.
Okay. Okay. And on the urban side, are we seeing some lower packs starting to move more? Are we trying to put in some bridge packs to meet demand in replacement of larger packs or something?
We already have, Prakash ji, all those bridge packs that you have been hearing in the market. So we have price points from INR 1, INR 5, INR 10 too. There is no gap there, honestly.
Okay. Okay. Okay. And we've seen a stake increase last year in Brillare, Helios Lifestyle. So what kind of size are these companies as of now? What are we thinking of scale in the next 2, 3, 4 years? If you could give some direction into some of these companies. How are they doing? What is our thought process?
Well, Helios is doing pretty well. And the other ones Brillare Science is pretty little smaller compared to Helios. But Helios is doing pretty well. And in coming couple of years, I think that should continue doing well and increase its revenues.
Okay. Some aspirational number, some numbers, if you can or direction you can share, Rajesh.
So currently, this year, I think it is roughly around INR 80 crores kind of top line and continue to do well.
And from April 1, Dermicool consolidation happens, right, for us?
Right. So we acquired almost at the end of the March last year. So no revenues came last year. So our revenues have started flowing in from this year, from April. Yes.
[Operator Instructions] We have the next question from the line of Manoj Menon from ICICI Securities.
Team, I got a few questions. But if it is constraining the folks in the queue, please let me know and then I'll come back. So I'll take one at a time, sir. The first, Mohan ji and Rajesh ji, typically, in the past, Emami has worked with lot of consultants with the medium, long-term thought processes. If you could highlight a few projects which you're working on currently and what's the brief and where we are. So that's question number 1.
So Manoj ji, right now, we don't have consultants working with us. By and large, the projects that were there, we are continuing some of them. But those projects are already completed. But other than the distribution, which is Project Khoj, which is an ongoing project for the last 1 year, that is continuing. But other than that, there are no external consultants on board.
Understood, sir. Understood. Also, one observation was, you have a very strong independent director which I have seen in the past actually plus or my -- maybe I need to reframe my question actually. So it's only a Project Khoj and there is nothing which is basically in the pipeline currently, right, whether it is an external consultant or whether it is something else which you're working on. What I'm trying to understand was basically, sir, the -- look, markets may be soft today and maybe in 3 months' time, 6 months' time, commodities can change and there will be different scenarios. So what I'm trying to understand here is the things which you are working on your own leaving out the external factors.
Yes. Absolutely, Manoj ji. So we have identified some growth areas internally that, which are those great areas. And projects which were already being handed over by the BCG and others, those are already -- they have given their reports, and we are implementing those strategies. So we don't need them right now, honestly. But the implementation would happen now in some of the projects that we completed last year. So yes, so as I said, there are growth opportunities in some of our existing brands.
Very clearly in Navratnas, in fact, all the summer portfolio. Fair and Handsome, it's a complete relaunch. We see a good amount of growth coming in. 7 Oils in One, we have a strong strategy for growth. We are investing good amount of money. Similarly, on the Healthcare range, Gul Raj is here. He can throw some light on the Healthcare range. How are we growing there? So we have earmarked growth strategies for some of our categories, and we will be working on that direction for this year.
Sure. Sure. Sure. Understood, sir. Secondly, sir, one thing on Kesh King. Basically, the question is like this, actually, sir, either a category relevance aspect there, which is constraining the growth here because let me take a step back, right? So allow me -- again, I'm just repeating this if there is -- if I need to come back in the queue, please let me know. If I think about a brand like paperboard, for example, right? I mean, so there was an expectation that there is a certain market, but then what we realized is that this market is available at a certain price.
So when I look at, again, the -- whether it's Indulekha, whether it is Kesh King, whether it is the "problems" solution, reasonably higher-priced product from a consumer point of view. Is it a segment issue, industry issue from a sustainable low volatile growth? Given the assumption few years back for that, this is a great opportunity. So I'm -- it's not about the quarter. I just wanted to hear about your prognosis and it just that KK has been with you for a long period of time, and you had your learning curve, et cetera, on this. How do we think about Kesh King opportunity in the medium term? Or what do you realistically see? And what are the actionables from your side, sir?
So firstly, Manoj, I think we still believe that Kesh King is a great opportunity. There is no reason why the brand should not grow. And as I said that the brand has grown. If you see on a 2-year CAGR basis, it has grown at 17%. This quarter, it declined on a high base of 45% growth. So don't go by this quarter, it has declined by 7%. We have taken on the competition very, very strongly, whether it is Indulekha or whether it is a Kesh Kanti. Of course, at this point of time, any costly products is going through a tough time. So it's not just about Kesh King. Every product, which is a premium price product is not selling so well. So we also have to bear that in mind.
But as far as hair fall problems are concerned or hair growth is concerned, that is very, very relevant. And I think Kesh King delivers on that promise. So on a long-term horizon, it has potential to grow at definitely at a double-digit growth. I'm not at all worried about 1 or 2 quarters here and there. On a 2 year, we have grown at 16%. What is -- it's not a bad number.
Fair point, sir. Got it. No, no, very fair point because my only -- honestly, my observation as an analyst was, let's say, for example, a lever stopped talking about Indulekha. You got to take it in off-line question rather than in a call.
Which is good. Which is fine for us, Manoj. It even gives us more room for growth.
No, no. That's a fair point actually. Because my worry was or either the question was about the category relevance, and you answered that. Sir, the third thing was about cooling oil. For south as a vector for growth has been there up for cooling oil. I know that you have a reasonable persistence, which you have built in the last decade. But any specific comments here. So when I say south, for example, correct me if I'm wrong, on basic understanding. In my understanding, you have a very good presence in Andhra. You got opportunity to add to what you have done the good work in Tamil Nadu. But then there are other parts of this, Karnataka, Kerala kind of. And so just how it's as a vector for growth in up in the Navratna part of it, given that it is also part of the world where probably 10 out of 12 months is summer?
So Manoj ji, you are right. Unfortunately, south has many other hair oils which sells pretty well. So there is, of course, a challenge in the south compared to the north or the west market. You are right. We invested huge amounts of money in Andhra, Tamil Nadu and Karnataka. And that's why we are seeing the numbers coming in from South India. But if you ask me, I think the potential still lies more in the north and the western regions than so much in the south regions. Because to change the habits, it takes time, and it is very expensive. But despite of that, we would keep on investing in certain markets in all the 3 markets, not so much in Kerala, but Andhra, Telangana and Tamil Nadu and Karnataka.
Got it, sir. I'll take this offline because according to follow up, so which came on this actually. Sir, lastly, you have done a few, I would say, acquisitions, investments in startups. Just trying to understand the relationships with the startups. Let's say, on how do you work with them? What level of engagement, let's say, you personally will have with them or the team will have them, et cetera, et cetera.
So, of course, we have monthly meetings with them. They share all their plans, which is jointly approved by us. Whatever help we need from them or they need from us, it's an ongoing process. Now whether it is Helios or it is Brillare. Brillare is now part of -- it's a subsidiary of Emami. And Helios also, we have got a significant share now. So both these companies, we are relatively involved. Other investments also, there we have invested keeping long term in mind because the markets are moving to a new direction, which is very difficult for Emami to do that on their own.
So there is good amount of learning what we have got from these startups. And if you would have seen Manoj over the last 3, 4 years, our presence on online, which you were always doubting -- all of you are doubting, now it has reached to almost 7.5%. So our modern trade plus e-com is now 15%. On our portfolio, I don't think it's a bad number, okay? So there is definite learning from the startups and which we implement in our existing portfolios.
Understood, sir. Sir, if I may push this a little bit, actually, whatever you could talk in a public domain. So when we talk about learnings, for example, the modern trade, that's an exceptionally good outcome, which we have seen actually, and that too in times like last couple of years. For example, when modern trade could have possible got even disrupted, right? So I think on a normalized basis, possibly you are nudging probably double digits or even more.
But then from a learning front of view, if you can help us understand at a team level, is it on the speed to market or let's say, concept to launch? Or is it to do with, let's say, about another XY -- another company told me, a unlisted personal care company told me recently about, let's say, something like democratization of marketing insights? Or is it an R&D aspect there? Or is it just a simple risk-taking aspect? So when you say learning, for example, functionality-wise, let's say, if you could help us understand where Emami is today versus, let's say, 2 years back on what you would have actually gained from, let's say, these investments, sir?
So I would ask Vinod because Vinod heads this division. Vinod, if you can throw some light on the e-com.
Sure. So I'll answer it in both for e-com and modern trade. And I think the critical -- the key learnings that we take is, like you rightly said, the democratization of the investments. What investment works, what are the kind of areas we need to invest, which deliver results and growth. 2, is on the back end formats. And so we were in a portfolio, we made lot of choices and we made lot of decisions regarding the large packs, combos. These are becoming significant growth drivers for us, and they -- in share terms, they've increased dramatically, which is helping us driving growth.
The other area is the overall in-store investments. I think there is a lot of learning that we take from these companies as to what is the kind of nature of investments we need to make in modern trade formats. And these have -- result -- driven phenomenal results for us. 40% off-take growths in stores where we have invested in, and we're using the [ pack ] of a complete Ayurveda care and which is helping us to do an entire Emami brand block in store, which has driven growth for us.
So lot of critical investments made, the kind of JBPs, the joint business plans with -- we do with accounts. We've become preferred suppliers in many of the large accounts and we share the table with the likes of Colgates and such companies, a lot of top-to-top engagements. I think these are all learnings, which has helped us drive growth, both in e-com and modern trade.
We have the next question from the line of Kunal Shah from Jefferies.
I have couple of questions. The first one is on the summer portfolio. So you mentioned April has done well. So when you say that, do you also include Dermicool and any integration issues or that you have faced in the initial few months, given that this April and May are 90% of the portfolio?
So this excludes Dermicool. Whatever I'm saying is on our existing portfolio. And this integration has not happened because it presently, they are only selling from their own network. Number should add on our balance sheet. But the arrangement is that they will distribute this year, it will come to us from next year.
Got it. But any challenges that you are seeing in this arrangement, which impacts revenues for this year? Or that should not be an issue?
No, I don't think there would be an issue. If you would have taken it, then there would had been much larger issues because it was peak season. And those changes would had much larger impact.
Got it. Got it. My second question was a clarification. So you said 200 bps impact in 1Q. Is that gross margins? Or are those operating margins?
Gross margins.
Got it. And finally, I have a couple of bookkeeping questions. So what should be the amortization of brands that should happen in the coming -- so FY '23 and there on, given we have also acquired Dermicool now?
So roughly, next year, the amortization should be anywhere around INR 120 crores kind of because -- yes. Because for the first quarter June, Kesh King would also get amortized. And post that, only Dermicool and the other smaller brands would be getting amortized.
Understood. Understood. And finally, what should be the expected tax rate for next year?
We would be paying MAT only next year also. So roughly 18% to 19% overall tax rate, but then we also have to see now how much MAT credit we generate next year because from this quarter onwards, we have started recognizing the MAT credit. So I think that should bring down some 1% or 2% tax rate lower. We should be able to generate MAT rate next year as well.
We have the next question from the line of Percy Panthaki.
Sir, you mentioned that price increases that you have taken are about 4.5%. Just wanted to understand, if I look at the FMCG players, listed FMCG players, and we are hearing the conference calls, et cetera, looking at the numbers. This is one of the lowest price increases across FMCG players at 4.5%. So do you think there is leeway to take more price increases, especially in light of the fact that there is a cost push inflation and there is a pressure on your margin? And if you do take it, you would not be out of bounds compared to the industry average.
So Percy, it all depends on the category that you operate in. I think we have been aggressive. You also have to recognize that our 23%, 24% portfolio comes from LUPs, where we don't take any price increase. So on an overall basis, on the packs that we have taken price increase goes in the range of about 7% to 8%. So this is the max, honestly, at this point of time, we can pass on.
Sir, on LUP, you do not do a grammage rationalization?
No. We have already done that in the past, Percy. There is not much scope honestly, on grammage reduction.
Okay. So given that input costs are -- sort of have picked up in the last few months, and you are unwilling to take price increases, supposing they stabilize at the current level, then how do you recover the lost margin?
So if -- see, prices, first of all, have stabilized now. So they are not going up, okay? And in the long term, see honestly, this is not the kind of price increase we normally take. And once the market stabilizes and we see a down trend, you would see, again, we bounced back to our original 70%, 72% gross margin levels. So we have seen that in the past also when prices of menthol had really accelerated and we increased our prices. When they came down, we straight away added to our margins. So I think it is just a matter of about 2 quarters where we would see this kind of a decline. Then we will see a benefit coming in from the third and the fourth quarter.
Understood. Sir, second question is, I just wanted your insight on how you're looking at consumer behavior in the hair oils market, particularly. So what we have seen is hair oils market itself is not growing. I'm talking about value-added hair oils as a whole, everything except pure coconut oil. So over the last 3 years, if I look at the CAGR for Q4 for Dabur as well as Marico, it is 0 to 1% kind of 3-year CAGR. So obviously, this is a category which the consumer right now is sort of deprioritizing given that there is inflation and he has to cut somewhere. So he is cutting personal care, and hair care is one of the parts of the personal care.
But my question was, how do you see this playing out across the different subsegments of hair oil? So there is a low-cost Amla, then there is a mid-costs oil like almond, et cetera, and then there is the premium oils. So where do you see the consumer really having the biggest pressure? In which of these 3 segments? And is there any up trading, down trading, et cetera, which is happening? Or is it that the premium customer is someone who has a higher income level and therefore is not worried about little bit of food inflation, et cetera, because he has that much of buffer of savings and he is not cutting his expenditure. That's what we saw, for example, in Hindustan Lever, where their mass market brands did not perform well, but their premium brands have actually performed well. So any thoughts on this, sir.
So Percy, firstly, we are -- we have 3 hair oils. One is Navratna. One is Kesh King. And one is 7 Oils in One. All 3 operate differently in different markets, okay? And we have different consumers. Firstly, none of these brands have performed badly, if you look at a 3-year CAGR, okay? You can get the details from Rajesh, whatever details you want. Other than Navratna, which was one-off because of the COVID scenario. I also said that April month has been good when we have seen the extreme summer months. Same trend is continuing in the month of May also for Navratna oil. And same is the trend for 7 Oils in One, where we are seeing significant growth coming in continuously quarter-on-quarter basis.
Only of course, there is some challenge on Kesh King because of the pricing, which we are facing recently, which is very, very new. On a 2-year CAGR, I have continuously been saying we have grown at 16% CAGR also on Kesh King. But yes, last 2, 3 months, because of this inflation, there is some pressure on the Kesh King, which I'm very, very confident once market normalizes, we would also see growth in Kesh King. So there is no structural issue as far as oils are concerned or at least our portfolio of oils are concerned. Because numbers [Foreign Language]. Ultimately, numbers will speak.
We have the next question from the line of Kaustubh Pawaskar from Sharekhan.
Sir, my question is on new launches. FY '22, we have seen like what's kind of [ earlier ] expect for some of the launches in the Healthcare category or even in the listing products. So FY '23, how do we look at -- look from the one of these launches? And which of the categories we would be targeting if there are any launches which are you are planning to do?
So Kaustubh, last year, yes, there were couple of new launches that we did. Almost contribution from new launches were in the range of about 2%, so which included some of the Healthcare portfolios also. Gul Raj is also here, who looks after our Healthcare portfolio. He is the CEO of the Health Care division. So Gul Raj, if you can throw some light what we are doing on Zandu care and what growths you see in the midterm and long term.
Right. So on the health care perspective, as you rightly said, there have been a few launches which we've done. And many of those have done well, such as the health usage of amla, aloe vera, aloe tulsi, karela jamun. So they've ramped up pretty well. We also had the launch of the Ayurvedic cough syrup, which has done very well. Of course, it was aided by the Omicron issue which happened last year. Even in the digital ecosystem on our D2C platform, we've done a number of launches which are the first of its kind in terms of the online space. We are investing [indiscernible], and we are seeing good green offshoots on those. Obviously, they will take some time to ramp up because we are going on a test and learn basis to see how much we should invest, how much would be the returns.
And from an overall perspective, very clearly, we do see upsides happening on some of the categories where we have a relatively low market share, such as Chyavanprash, such as the laxative segment. Even the generics and ethical business, we have been growing much better than what our competition is doing. So we are going to be more aggressive in areas where we can grow the market share. And on brands like Pancharishta, Kesari Jivan, where we are the leaders. We will obviously work towards increasing the consumer penetration to grow our top line in these brands.
Right, sir. Sir, in hair oil, are you looking for any launch because we have seen Bajaj Consumer Care in last couple of quarters, they have had stream of launches. And also they have done launches on the digital platform. So since you are also focusing on expanding your digital portfolio. So any thought process on that? Whether if you want to launch any specific products in the hair oil category or where you want to penetrate this in some of the markets where the penetration levels are low.
So Kaustubh, on hair oil, as I said, we have 3 categories: cooling oil, 7 Oils in One and Kesh King. Right now, we would focus on these range, these products primarily to see that they grow. But apart from this, if there would be any launches, it would be mostly on the e-com platform, which would be premium offerings.
Okay. Okay. And with the acquisition of Dermicool now, how much is the summer portfolio contributing to your overall revenues?
How much would be summer portfolio contributing to overall revenues?
Yes. India business revenues.
Including Dermicool?
Yes.
That we have to calculate, Kaustubh. We will come back to you. Okay?
We have the next question from the line of Shirish Pardeshi from Centrum Capital.
Rajesh ji, I have a question for you. We have realized this MAT credit of INR 288 crores. Now this is what we have accumulated over last past 5 years?
So INR 230 crores out of INR 288 crores is of earlier years, almost INR 55 crores is for current year, out of INR 288 crores.
And we have [indiscernible] complete?
So we -- yes, we have accounted for this MAT credit this year, considering that our tax benefits in some of the units is for next 4 years now. And earlier, there were views of the auditors that COVID scenario is there. So it is not certain by what time we will be able to utilize the MAT credit. And hence, the accounting was not done, but this year, looking at the current situation, we have accounted for that.
So if I understand correctly, the past till date, we have recognized, and this year, we will further accumulate the MAT credit?
Right. From FY '23 onwards, right.
And earlier, you did mention about Kesh King amortization will get over by June.
Right.
And only then Dermicool will remain for the next 5 years?
No. We also have Creme 21 and a couple of these start-ups were in consolidation, the value of intangibles brands comes into picture. So some small amortization for these brands also would happen.
No, I was worried because you gave a number of INR 120 crores. That's what I -- it doesn't add up.
So for Dermicool from next year onwards, almost INR 62 crores, INR 65 crores kind of amortization would happen and the remaining INR 20 crores for Creme 21 and other smaller brands.
Okay. So it is roughly about INR 85 crores?
INR 85 crores annually after Kesh King.
Sure. My second question is to Mohan ji. Can you throw some light where we stand today on the pledge?
Pledge, right now, Shirish, is at 34%.
And any plans that in medium term, we -- I mean last 1 year, we have been saying that we will cut.
Plan still remains the same. We said we will bring it down. It will only happen post our sale of our -- some assets that we are looking for.
But I think it's a good time to…
Overall percentage has gone up because of the price correction.
Okay. Okay. And last question on Male Grooming. I mean last 1 year, we have done lot of things. And we have, in fact, relaunched the product last year. But the growth rate what we are seeing, is that a distribution issue or category issue? Or the new launches is not done or picked up very well?
There is no issue, Shirish. Please appreciate that all the schools, colleges, all the social events were not happening due to COVID in the last 2 years, okay? Now that everything is opening up, the marriages or school, colleges, so this market will also see an upstream. We have seen good growth in the month of April as far as Fair and Handsome is concerned. And same is the trend for May also. So we are, again, as I said, other than the pain portfolio and some health care challenges, which grew due to COVID, other than that all the categories are showing good signs of growth.
Exactly. The point what I was trying to say that over last 7 quarters, Pain Management has gone to a different level. And still this quarter also, it has grown very well. So what is it that working for Pain Management and not working for Male Grooming? But you are seeing largely because of the social event and out of home. I mean…
What has been working because of in Pain Management because of the COVID Omicron last wave higher, that's why Pain Management grew. And because there were no social event. So the Male Grooming, it's a discretionary range. It degrew.
Okay. My last question to Mr. Rao. Where we are in terms of Project Khoj? Because last call, we said that from 4 states, we are going to go to 10 states covering 85% of the sales. So now is that project is completely expanded? And what are the things which we are learning? And in terms of quantitative, if you can say or suggest or help us to understand what's happening.
Yes, sure. So we are well on track on our objectives of Khoj. So we added last year itself. In fact, we've gone from our -- and as we speak, we've gone from 6,000 substructures town to 10,000. In total, we added last year, 8,000 towns, which took our coverage now from 32,000 to 40,000. And as we speak, we've -- it's reached 42,000 in terms of our towns in coverage. We expect to add another 70-odd thousand stores. We accrued -- in the system, we've kind of accrued 32,000 stores addition last year itself. And by this first half, we will add that tally to 75,000 stores. The business also, all our KPIs in terms of our business size, our repeat purchases of all these new town additions, that's very healthy. It's upwards of 95%.
And that's also because we used an approach where we've identified potential towns, looked at our gaps and appointed distributors in these towns, which has helped us actually get to a 95% accuracy. And that's a very large accuracy in terms of repeat when you embark on a town expansion agenda. Typically, you tend to hit 60% accuracies. That's because we use a potential-based approach. Looking at a potential and the right kind of gap identification, we were able to deliver this kind of accuracies. It's doing very well, and we continue to do that and even the next year agenda is similar. We will look at using out the towns that we've added in the last 9 months of last year. And we continue to expand in second half of this year, and we will add another 8,000 to 10,000 [indiscernible].
And Shirish, let me also tell. As far as management is concerned, we have been very, very clear that despite of so many challenges, this inflation, low sales, rural not doing well, we haven't cut a single budget as far as Project Khoj is concerned. Or there is a clear mandate to Vinod that whether it is SAMT, even expansion in the chemist outlets or any other opportunities that we had seen over the last 1 year, we will all implement now or going forward. There is no cut in the budgets.
Right. And just to add to that, we've -- in fact, we've increased our people on the ground by almost 50% in rural.
Right. That's really amazing.
So I hope if these all things will add up in FY '23.
Right.
Mohan ji, my last question to you. We have seen a new trend. Most of the FMCG companies are trying to revise the senior management. We did have Mr. Gul Raj Bhatia and Mr. Rao on the Board. But I think after Venkat, I mean, I've not seen a professional CEO in the company. So is there any thought or any comments you can offer because now you have -- you are sitting in the driver seat.
So I can't comment on this, Shirish. If it happens, you will come to know. I think we have an excellent set of professionals working, and we are seeing the results of that. I think it's a good mix of professional with family. We have -- at the top, we are very -- going very aggressive. Abneesh also asked about our increase in advertising despite of pressure. So that is that stance we are also keeping for this year because it's not a short-term strategy that -- we can always manage our margins, if we cut our advertising. But that's not the strategy we are taking on. The targets to every CEO, whether it is international, health care or Vinod is that we need to grow. And for that, whatever budgets are needed, we will earmark those budgets. And same is to the brand teams also. So right now, we don't have a definite plan to appoint a CEO. If it happens, you will come to know.
We have the next question from the line of Vishal Punmiya from Nirmal Bang Institute Equities.
Just one question on the inventory days. So this year as well, we can see that the inventory days have kind of increased, and it's been the case for the last 4, 5 years. So if we can get some comments on the reason for that.
Vishal, it is primarily on account of summer building stock and also the inventory for Dermicool which we acquired at the end of March.
Okay. And for the last 5 years, would -- is there anything specific that we can highlight in terms of the increase in inventory rates?
No, it has nothing to do with any specific reason. Otherwise, it is only because of the increasing business of some of these brands and also a couple of brands we have acquired like Creme 21 also over the period. And some of the new launches have also come into our world. Health care is there, so lot of new launches. So looking at the portfolio, the inventory is with respect to that only.
Okay. Okay. And just lastly, what would be the rural urban mix for us at the end of this fiscal year?
It is -- rural is still higher almost 54%, 55% for us.
That was the last question. I now hand it over to the management for the closing comments.
We thank all the participants for joining us for our earnings call for quarter 4. And thank you, IIFL, thank you, Percy, for arranging this call for us. Thank you.
Thank you, everyone.
Thank you, everyone.
Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.