Godrej Consumer Products Ltd
NSE:GODREJCP
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 001.1
1 516.7
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Godrej Consumer Products Ltd
You don't have any saved screeners yet
We would like to welcome the senior management team of Godrej Consumer Products and thank them for giving us this opportunity. I would now hand over the call to Pratik for initial introductions. Over to you, Pratik.
Thank you, Ashit. Thanks, everyone, for joining us today to discuss the quarterly performance and the current business environment. The company is represented by Ms. Nisaba Godrej, Chairperson and Managing Director; Mr. V. Srinivasan, CFO and Company Secretary; and Mr. Sameer Shah, Head, Investor Relations. We will now have Nisa share her thoughts on our performance, and then we can open up for Q&A. Over to you, Nisa.
Thank you, Pratik. Good evening, everyone. I hope you and your loved ones are safe and healthy during these difficult times. And thank you for being with us on this call today. In quarter 1, GCPL's performance was resilient. Our overall sales growth was nearly flat and EBITDA grew at 3%. Profit after tax also grew at 3%, excluding exceptionals. As you know, 85% of our global portfolio is Household Insecticides, Hygiene and Value For Money products. These grew at 9%. Household Insecticides and Hygiene combined had excellent growth at 20%. While Value For Money products declined, we have seen sequential improvement from April to June and remain confident of stronger performance going ahead. I had previously pointed out that our Indonesia business is very similar to India in product category and strength of its P&L, and as an economy, actually, Indonesia seems to be stronger than India at the moment. I'm happy to report that both India and Indonesia, which accounts for 75% of our overall sales, grew at 5% each. In India, our primary sales mirror secondary sales in absolute terms, and rural grew much ahead of urban. Our performance in Africa, the U.S.A. and the Middle East was weak, but we have seen sequential improvement from April to June. And Dharnesh Gordhon, who is our new CEO of the region has already got his hands around the business, and we had a strong July, and we remain committed to a turnaround in performance going forward. One of the biggest growth pivot for us has been the resurgence in Household Insecticides, which grew at 27%. We are reaping the benefits of a very strong innovation plan and product portfolio serving consumers at all price points. Consumers are also, at a time like this, extremely concerned about their health and insect-borne diseases like malaria and dengue. So we are also investing more behind consumer education on disease prevention. We have been laser-focused on growth and innovation in our Hygiene portfolio, which grew at 15%. I'm extremely proud of our teams that we were able to cut down new product development cycle times from months to weeks, and we will continue the agility we saw in launching 45 products. I'm also happy to share that our teams have been on top of their execution game, and I believe we were agile in responding to the supply chain shocks that we face. We are using this crisis as an opportunity to digitize more rapidly and grow more strongly in channels like e-commerce and chemists. Working capital days came down by 6 days, and net debt-to-equity ratio also came down to 0.17. As always, our values matter the most at this time, and we are committed to the safety and well-being of all Godrejites and serving our consumers and communities with our full hearts and minds. Thank you. We take questions now.
[Operator Instructions] First question is from the line of Abneesh Roy from Edelweiss.
Yes. Congrats on the good performance in the HI. Some questions I have on that is, one, how is the illegal incense stick are now? Do you have the total data there? And second, any impact on out-of-home consumption in HI because people are not going outside? So these 2 are the main ones. If you could also highlight how much is the contribution from the new products launched in the last 1 year in HI?
Thanks, Abneesh. Thank you for your question. So I'll take the question on illegal incense sticks. So I do definitely believe that illegal incense sticks are impacted for a couple of reasons during this time. I think one is, as we've seen that all of us have had supply chain issues and keeping our factories running and getting the right logistics, transport and such, so I think -- and costs have gone up. So I think they have adversely been impacted by that. The second piece, which you might know that happened, is that the duty on raw bamboo sticks, which come in from China or Vietnam, the duty has been increased from 10% to 25%. So this makes the business sort of much less profitable or more unviable. And I think the other piece is, which I've also been messaging about, we have also got a lot more aggressive in terms of pushing them back, whether it's educating consumers, the PR media we're doing or through the government and legal means. So I think some of that's been playing out, and we will make sure that we use this time to just fully push them back.
Yes. So 1 follow-up here. So bamboo sticks, higher duty, can they shift to the domestic bamboo sourcing? And does it impact you also in terms of that duty structure?
You can -- yes, it would impact us also, but incense sticks, is a very small part of our business, our HI business. And we have other products like Fast Card also, and we have some new launches that are going to happen in this area. So I think my understanding is that, yes, you can use Indian sticks, but their bamboo is not of the same quality, which makes it challenging and the cost would be higher.
And my other question is on new products in the last 1 year and out-of-home consumption, how that has been impacted, say?
Yes. I think to begin with, Abneesh, we have had a meaningful contribution from Goodknight Gold FlashLiquid Vapouriser, something which got launched regionally to begin with last year, and then we scaled it up. So it has had a big contribution to overall HI sales as well as growth. I think out-of-home strategy per se, I mean has been a relatively small play. And over the last 2, 3 months, the consumption has been relatively lower as compared to the recent past year in terms of growth rates.
My second question is on soaps. So Dettol in their presentation claimed global presentation that they have become #1 in India. So how do you play in this segment? Because Dettol is almost like a generic to that segment. Of course, Protekt also can play there sort of, in FMCG, new brand takes a lot of time. If you could tell what is the right to win for Protekt here? And have you lost any market share because Dettol has become #1? Or is it a loss to rest of the players?
So Abneesh, I think to begin with, our scale-up in kind of Protekt, kind of health soaps has been very encouraging. That's something which got launched during the quarter. And we do expect even a meaningful scale-up of it over the coming months and quarters and expect it to become the integral part of our soap portfolio to begin with. We don't share market share details, right, Abneesh. So to that extent, it would be very difficult for us to, at this point in time, call out that how the share trends have been. Also the details coming in directionally on market share, are still not marrying in a lot of internal data points. So to that extent, we do feel that our market shares are quite stable. But I think the task for us will be to ensure the scale-up of Protekt Soap as well as continue with our micro marketing initiatives, which over the last 2 years, have resulted in very meaningful share gains for us.
My last question is on hair color. So when do you see growth improving because of the work from home continuing? And second is, how much is the percentage coming from salon and barber shop because again, people are using the trimmer, et cetera, they are not going to barbershop, most of the consumers. Specific impact on BBLUNT because my sense is that will be much more salon sale. So could you discuss all this?
I mean both BBLUNT and professional business, Abneesh, are very small and sort of very insignificant. The professional business has definitely been impacted. From a BBLUNT point of view, that is not actually sold in salons, that's sold in retail, some beauty shops, so online. So that will have a different sort of trajectory. I think what we're seeing with -- what we're seeing with hair colors is obviously, we have seen some amount of sequential improvement. But also what we realized is that from our consumer research, men seem to be a little bit more shabby at this time or willing to be shabby, no offense to any of the men on the call. But women seem, when a caller and they say, we don't want to sit around at home, not looking sort of good. So we do -- and then we have these Value For Money products that are well distributed and stuff. So we'll see what happens, but this is not a category where the bottom is just totally falling out.
Sorry to interrupt you Mr. Roy, I request you to come back in the question queue for a follow-up question. Next question is from Arnab Mitra from Credit Suisse.
Congratulations on a good result in the context. So on the HI business, this 27% growth is clearly a very exceptional number. So as people go back to work and spend lesser time in home, which would be happening in June and July, what is the kind of growth rates you've seen sequentially in these months? Are you seeing it settle down at a lesser rate? Or do you see the trends continuing to hold up at a very high growth rate in the immediate term?
Well I think it's too early to call out, Arnab, at this point in time, whether the trends are continuing or we are kind of settling down. Because it's very, very kind of dynamic as we speak. I think what [ we need to ] understand to begin with is there has been a strong reason to buy from a consumer perspective, which has been disease prevention, and we expect at least that trend to sort of continue. And we would be investing in fact on that platform aggressively to ensure that, I mean, that reason to buy is very much intact, and the growth rates are kind of steady, I mean, in Household Insecticides category not just here and now, but for many more years to sort of come. We will also top it up with some of the innovations, which we have launched over the last 6 to 12 months and also a few more innovations, which could come in the rest of the year. So no specific reverts in terms of what are the trend, but definitely, I think we should continue to see sustainable, kind of stable performance in Household Insecticides category, both in India as well as Indonesia for rest of the year.
And I will break it up into 2 pieces, actually. I think some of the growth issues that we were facing today, some amount due to this illegal incense stick and stuff. So I think what you will see us is also taking market share. See, we've also been very aggressive in, say, this Gold Flash Liquid Vapouriser. We are not just saying, "Oh, India's most powerful visible vapors." We've really work very hard from a technology front to get this product to be much superior, right? And we saw some years ago, when we launched a much superior LV sort of how our market share sort of really grew strongly. So I think one will be your market share both form illegal incense sticks penetration with more -- some of these other burning format. So I think -- and we've mentioned it, that we have this full plate portfolio play. So that I think is work we've already been doing and pushing forward. I think we are also, for a category like this, it sounds horrible saying an opportune time, but people are very concerned about their health, correct? Just the way that they're washing their hands or using sanitizers and stuff, they do not want to take a chance of getting any sort of sickness and having to go to a doctor or a hospital. So I think that vigilance that we are seeing across categories improved my immunity, keep me safe. And I don't think that is going to drop off overnight. So I think our job as the category leaders to make sure that we're driving distribution, we are giving customers, consumers the products that they really want and are also educating them on how to keep themselves safe.
My second question was particular to the launches you've made in -- all the 40 you made into dishwash and toilet and floor cleaners. Now these are obviously large categories. They are the strong incumbents. So how should we see this? Is this an extension of what you have in terms of some brands in a time when these categories are seeing a pickup? Or is it something where GCPL now wants to be a broad-based home care play and therefore, has gone through the process of development, thinking through how -- what role you play in this categories? How should we think about these 2 specifically large categories in home care?
I think we are quite a broad based in home care and obviously, HI sort of dominates the story. But don't forget, we've also become, over the last few years, the leaders in air care, very low penetration category with a good sort of headroom to growth. We want to play strongly, obviously, in liquid detergents. And actually these floor cleaners and all, it does seem quite opportunistic at this time. But these were categories that we had been sort of looking at. And the way we look at it in a country like India, is what is the penetration story. Sure you have very strong competitors in these categories, but we feel that the penetration story here is -- it is quite opportunistic. And it's a good time, both from a penetration viewpoint and what consumers want. Again, if I want to keep my house as clean as possible, a good time to get into these categories.
Okay. So you would say that this is not just an opportunistic foray, but you would think of developing this as a long-term growth sector for the India business?
Yes. I think any of these categories we're getting into, it's not just opportunistic. Obviously, look, if you -- even in a brand like Protekt, we know where -- what are the products that are already differentiated, where other products where we have cost advantage or other advantages and we would probably over invest in those. But they're definitely not just, let's do it for 6 months. I don't think that makes sense for a company of our scale.
Next question is from Percy Panthaki from India Infoline.
A couple of questions from me. The first is on the soaps business. Despite a significant decline in Q4, the Q1 numbers in soaps are just about flat. And it's very different from what the market leader has reported, they have reported double-digit growth in skin cleansing for Q1. So just wanted to understand what are the moving parts behind this? Why our sort of Q4 plus Q1 average decline is in double digits? If you can throw any light, any sort of particular geography or any particular brand? And also if you can sort of share if there's any initial signs of this normalizing and we're going into a sort of strong growth in Q2 or not?
Sure. Percy, this is Sameer here. So I think if you look at our performance versus last 3, 6 months, but again, over the last couple of years, we feel we are very much heading in the right direction. In terms of share gains as well as kind of our initiatives, which have been largely micro marketing driven. I think going ahead, the strategy remains more of the same in terms of continuing to pick up kind of one state, multiple districts, to kind of doubling down 360 efforts to get kind of strong foothold eventually market share gain, settle the market and then sort of also move on. Also in parallel, as I was mentioning earlier, we have launched Protekt health soap, which we think, I mean, should be a meaningful play for us, sort of going ahead. Not reading too much into the recent past performance as well as July, which honestly has been quite robust and strong for us. But as I kind of mentioned earlier, I mean, if it's very dynamic, so we need to sort of take 1 month at a time in terms of how we are progressing, in terms of when understanding, I mean, consumer behavior demand as well as kind of our structural and tactical initiatives. So we remain quite confident of continuing, I mean, share gain momentum in soaps. And also, we should see much kind of much improved performance in soaps sort of going ahead.
And Percy, in skin cleansing, we would also be in growth. So I think it's also how you bucket what products. We've not moved away from sharing categories that we have shared in the past. But if you look at -- if you plug-in some of the other products like hand wash and all that, we would be in growth.
Understood. Understood. Secondly, just wanted to sort of dig a little deeper on your gross margins, especially in the India business. It's nearly 300 basis points contraction in gross margin. And of course, there is a mix effect because hair color's decline would have contributed some part to that. So if you could just call out what is the extent of mix impact driving this? And then apart from that, the remaining part, what is the reason behind that?
Sure. So I think there are a couple of reasons, Percy, and you kind of called it out. One is obviously, adverse kind of category mix. During the quarter, we did have a decline in hair color category, which is our highest gross margin order. And hence, you would kind of see adverse category sort of impact coming in, which also results in lower gross margins. The other is also input cost. While, crude has been benign, palm oil prices have been higher on year-over-year basis. And we are in process of taking calibrated pricing changes to mitigate that insight. So I think it's a combination of both input cost increase or a lag between actually end consumer price and input costs and also adverse category mix. So my sense is in coming quarters, we should see so much improved gross margin as compared to first quarter, driven by the gap between input cost and consumer price getting partially bridged as well as much improved favorable category mix on gross margin perspective.
Right. So I was just looking at the palm oil price, actually, sequentially, it has not moved much. And on a Y-o-Y basis, I see the inflation is actually higher in March quarter versus the June quarter. So what am I missing here?
No. I think the changes, I mean, especially if you look at the input costs, even on a Y-o-Y basis, I mean, I think in case of farmer derivatives are still higher by 20 to 25 percentage per se. And also, there is kind of mix change. Also, you need to look at the retailers, right? I mean you will have different quarters and different kind of saliency coming in from each of the categories. So I mean there are too many moving parts to sort of when you kind of look into it. And it's a plain vanilla comparison of Q4 to sort of Q1 may not give you all the answers.
So how long will this margin remain under pressure?
As I shared with you, I think in quarter 2, we will see kind of much improved gross margins, baseline with quarter 1 gross margins.
Next participant is from Vivek Maheshwari from Jefferies India.
My first question is to Nisaba. So Nisaba, since we are speaking to you for the first time, post you taking charge as MD. And I do recognize that there is a huge continuity factor with you. Still, are there any areas which you -- which would gain more focus or the way in which you are looking at the business? I mean just to give an example, if I drop a parallel, when you started the journey of MD, Mr. Adi Godrej guided at 10x revenue over 10-year period. Now I know the time is not right to give those kind of guidances, but how you will be approaching things differently, if at all, given that now you are at the helm as a Managing Director of the company?
Yes. So like I said before, I was already at the helm. I think the problem with us has been growth. So my job is to make sure we grow. Now I'm not going to give you any guidance on that, but hopefully, you'll see what we do this year and the years ahead. I think that is very critical that we get back to best-in-class growth. And I think -- and I've said, definitely, India, Indonesia, very strong businesses, good category portfolios, deep P&L. And in Africa, I think along with Dharnesh Gordhon, we've already seen sequentially month-over-month in sort of getting back, I think, just having a lot of execution strength and making sure that, that business both in this -- needs to turn around in the short term. So that we can sort of realize our long-term gains for it. So I think growth and just the execution will be the focus.
That is very good to know. The other bit is, again, on the HI bit, the 27% growth that you have reported. If I go back, this is probably the best quarter that we have seen in several, several years. What is -- again, I know you wouldn't want to give a necessary guidance, but what is a sustainable growth rate? Because like Percy did, if I combine that fourth quarter and first quarter together, I get a 2% growth in this business, and there is a bit of a base issue. So could you just highlight what will be the medium-term growth target or expectation from this business?
Vivek, this is Sameer here. So again, no specific guidance. But the thought process will be to continue with new product launches, scale-up of the recent past year as well as continue to invest on the disease prevention platform and look for a more sustainable, stable sort of growth going ahead. I mean Household Insecticides is close to around 40 percentage of our India as well as Indonesia business. So we definitely need to have this category firing on all kind of cylinders. Otherwise, it just seems to bigger call for the categories to fill in. So the thinking is to kind of double down on this disease prevention platform, new product launches, continue to gain market share from incense sticks players and carry on with this kind of sustainable growth for the rest of the year. So that's the thought process.
Okay. And just a follow-up to that, Sameer. So what you have mentioned essentially is the supply side factor. From a demand side, we have seen packaged foods companies, for example, being a natural beneficiary of this COVID crisis. Do you also think that HI structurally -- not structurally, but medium term, it alters the growth profile of the category itself?
Yes. I think like I told you, and I think this -- it was a little bit earlier in the call, I said there are 2 things, correct? I think our innovation machine, what we've been doing, pushing back illegal incense sticks. So I think some of that sort of kicking in. But I think consumer demand also to stay safe, or manage your health and stuff. There's been a big shift in that. Look, now I would love to give you a guarantee of how much that shift -- we will -- it's like sanitizers or hand wash, correct? The baseline has definitely shifted much higher than it was before. Where will it level off? I don't think any of us can guess. I think what we will do is to make sure that all the input metrics, correct, on education, on disease, efficacious products at a price point, increasing distribution, low-cost manufacturing, all the inputs that we can control, we will definitely control. And like I said, say that this is giving us a moment in time on this high demand and say this incense stick being impacted. So from an execution perspective, we will do everything that we can not to let this moment in time go, which will sort of benefit the business in the long term. And I think when you think of HI, we keep focusing HI, just in sort of all these questions will be very sort of India focused. I think one of the things is that we have a lot of category know-how and knowledge in this, so how do we grow exports, how do we use this time to expand in Africa. So I think we're looking at HI a lot more. Obviously, we have a big HI Household Insecticide business in Indonesia, but I think you'll see more holistic thinking also on the growth of the overall category for the company from us.
The next participant is Manoj Menon from ICICI Security.
Some of my questions, I recon, is partially answered, but let me just still ask for some clarifications, if I may. The first, actually, just a medium- to long-term thought process on likely consumer behavior changes, which you're finding in the market currently in HI industry, which would allow you to diversify or build the non mosquito businesses.
Yes. So Manoj, building the non mosquito -- and hi, and how are you and good to be on the call with you. I think building the non mosquito business has always sort of been a focus of us. And we're seeing like, say, something like roaches actually -- and when I talk about sort of disease prevention and educating consumers. So roaches are actually something that are known to increase health problems for people to have asthma, to sort of cause it again, sort of lung related and stuff. So I think it's -- at this time, there's always bed bugs or the other insects, I think is making sure that, again, you have the right products at the right price point and then educating the consumer on it. I think another thing, Manoj, that we are seeing is that pest control, it's quite likely that people will want less pest -- people coming into their house to do this sort of work, because at least till this sort of social distancing remains. So some of our -- we have this product called HIT Roach Gel, it's a very effective product and actually competes against pest control. So I think we will see non mosquito opportunities also grow out of this.
Okay. Now the only follow-up on this particular aspect here is, is it something -- some consumer, I'm not sure whether have actually been exposed to any of these activities, maybe it's my ignorance. So is it something which you're thinking currently? Because my -- again, my question is essentially saying that this is probably as an outsider or a layman, it appears a great opportunity to build those categories in a time like this and then those habits you can build on later.
Yes, we already have a relatively large cockroach business. We have our rat -- and these sort of rat products and all have been doing quite well. So we continue to invest in these products. We also had -- we launched our full natural range of our HI products with like -- we have this amazing Fly product and if you put it on the table, totally natural, so it can be around food, that flies won't come anywhere near the table for like 3, 4 hours. So I think we have the full sort of portfolio, and we are investing behind it.
Okay. Just 2 more -- lost to the HI part of the business. One, when I look at the Indonesia overall growth, given the highest salience of HI in that market. As we speak in the shorter term, is there a different consumer behavior of Indonesia in the HI business versus India? And second question is a little forward-looking. In the context of now Dharnesh being on -- I mean is being around still in Central at the top -- versus top HI in Africa as well.
Sure. So I think the consumer behavior that we've seen is quite similar across countries, actually. So this -- I want to avoid dengue, malaria is sort of very similar across countries. Obviously, people have different source of habits or product category like aerosol business is larger in Indonesia in sales to the category than it's in India. But the heightened awareness of health and more -- keeping my house clean, keeping my environment safe goes across. I think Dharnesh coming on board, and I've been telling people I might be selection biased since I did select him, but he's been -- he's just -- it's awesome to have someone who's so experienced on the continent. It's already sort of driving sales and stuff in the short term. So I think our HI vein definitely from an execution perspective, he will drive that, obviously, the know-how stuff comes from GCPL. We have actually had a pretty successful launch in Africa. I actually took out the details of it from the presentation, because more headroom time from whoever in our competition is looking at what we're doing. But I'm pretty confident. We obviously -- you all shouldn't believe us till we do it, because we've been talking about it for a while. But I do think we have the innovation capabilities, and I think Dharnesh will come and really help us by the execution and obviously not in HI and all the product categories.
Got it. Actually, on the HI Africa piece, so that's an extremely honest statement. I really, really appreciate it. And lastly, on the Protekt brand, which has been around for a while, which you are dialing up as we speak. Just some more qualitative commentaries on if you can on the consumer metrics and the access and distribution. Just on the Protekt brand, I'm just trying to understand, get my head around. On one hand, there is a market opportunity. On the other hand, something which has been there in the market, you had had some very innovative products under that brand, et cetera. And then just some comments on Protekt brand and how do I kind of think about, let's say, with a 3, 5, 10-year period?
Yes. So I think in Protekt, obviously, a lot of the -- we have products like hand washes. We have the magic handwash, which is pretty innovative. So this is again like first time where the demand is very high for these products. So we're going where the demand is. I think we also feel -- obviously, there are lots of very strong competitors in this category, correct? If you take a name, say, like Dettol and stuff, it literally stands for hygiene and the category. But we do feel that the Godrej brand name in itself is very strong in terms for trust. We do feel Protekt with the kind of formulation perfumes, innovative products has a lot of resonance with consumers. We feel that we have cost advantages in some of the products' sub categories because like in, say, something like aerosol cans and stuff both in Indonesia and India, where because of our other portfolios, some of the largest producers of those types of products. And then we will use our sort of distribution, marketing strength to build out this category. But we will -- we have launched a lot of -- launched a lot of products, but I think our focus will be where are we differentiated? Where do we have a good margin profile? Where -- so we will sort of rely on our strength in these areas. And the other thing we're doing, which you might have seen is also that, say, in air care and stuff, we are making sort of category pivot to solve this need of consumers, "Okay, I want to perfume my -- but I also want a bit of disinfection, so even in our other categories where heightening the hygiene elements. Cinthol is doing very well. It's always actually been a germ protection. So although we have not sort of marketed it on that basis. But now we've heightened that on the packaging and stuff. So I think one is Protekt, and a Goodknight and a HIT, which plays directly into the categories, but also in the other brands, what are consumers looking for at this time.
Understood. And the reason I asked on Protekt is because I was going through the presentation, and I saw a snap of Cinthol's Tamil communication, which essentially what I understood. I can read a little bit of that, because it appears to have repositioned actually as a family sort of positioning. Anyway, I just -- I also recall the...
I can't read that as I'm quickly looking at what they put in. But Manoj, Cinthol has -- this is a Tamil ad, because the original Cinthol is a very strong brand in just in Tamil Nadu and in little parts of Andhra Pradesh also and the positioning of the brand there is different than -- not different, but it's focused in a different way to the consumer than the brand is in other parts of the country. So that -- we haven't changed the positioning. That's how it's always actually been.
Very clear. Very clear. No, I think I remember, maybe listening to this 10 years or 12 years back, I think Mr. Godrej talking about. I think the old Cinthol packaging, I think, has remained for some 30, 40 years, if I'm not wrong, right? I mean that part of India.
Yes. So actually when we relaunched -- and now someone in my team is going to tell me to shut up. But like when we relaunched Cinthol, actually, if you look at the packaging and what we did is that we took the whole brand back to the original in terms of the clean lines and the strength of the brand. So yes, sorry. We can connect offline on this any time.
Next question is from Harit Kapoor from Investec.
So my first question was on the advertising spend. So obviously, if you look at the 45 new launches, it's probably the maximum you've done in a quarter in a very long time. Just wanted to get a sense from you is that did you see a material step-up now in your advertising intensity? Or do you still believe that this is more availability focused in terms of the way to sell the new portfolio in the current context because ad spend have come off way sharply?
Harit, Sameer here. No, I think we will see -- generally, our ad spend sort of moving up if your [ declining growth rate ] in the first quarter. Right. In fact, we did see sequentially also our ad spend moving up, but we also saw a substantial reduction in CPRP, right. So it's actually going to be a good mix of higher GRPs and lower CPRPs, and we will continue to invest, just on kind of Protekt and the new launches, but even on other categories, whether it be kind of select part of hair colors or household insecticides as well as aerosol. So we will continue to be, I mean, in investment mode, but we will also be entirely judicious, right? Categories where, I mean, we see, back end or front end, I mean, being a hurdle in terms of kind of getting it to consumer, our ad spend will be relatively on the lower side. Where the demand is kind of normal, we will sort of continue to invest. And hence, to that extent, we will see a step-up in our advertisement spend in coming months and quarters.
So I -- I mean, the better way to look at it is a sequential pickup rather than a Y-o-Y look at least for the next couple of quarters?
Absolutely, absolutely.
My second question was on the promotional intensity part. As it has been to the other players as well, it has contributed to your revenue growth for the quarter. I just wanted to get a sense of who you continue to see promotional intensity being fairly low in the marketplace, given there are some challenges on availability. And in that context, this was a driver or a lever you were using to drive some growth in share gain as well. So how do you see that in the current context?
Well I think it's going to be a mix of availability as well as kind of eventual kind of scalability, I mean, from our own end. So my sense is at least on very, very short term, this may continue. Of course, driven by mix impact also across categories. However, the larger point is, my sense is we should continue with the pricing-led growth, whether it comes in from kind of lower trade, kind of sales promotion spend or category kind of mix or even premiumization, right? I think the whole of last year, especially for India, we did see a kind of a mismatch between value and volume. And I think in quarter 3 call, we did call out that in '21, we should see convergence of value and volume. My sense is the way '21 is shaping up at this point in time, we should continue to see a pricing-led growth, with of course, different drivers to it for full year, which will be backed with sustainable stable volumes growth also.
And the last one was on the rural side. I think in your initial remarks, you mentioned that rural has done far ahead of urban. I just wanted to get the sense on how you're thinking about the portfolio currently, given that for the India business, rural is still sub 30%. So how do we kind of capture this opportunity in a larger manner? And what would be the key kind of categories or products that they're looking at to use this opportunity?
Yes. I think rural will continue to be a big growth sector for us, it always has been, right, because not just of having around 30 percentage of our play in rural, but also because of lower penetration in categories like hair color, as well household insecticides, right? I mean the categories are relatively low penetration in rural markets. And we have the portfolio, right? I mean whether it be hair color, we have powders, or whether it be household insecticides, we have the burning format. And so we have, I mean, portfolio to recruit consumers, we have portfolio to upgrade consumers, and we will kind of continue to build and double down on our distribution also. So rural has been, and I'm sure will continue also to be one of the lead kind of growth pivot for us.
Next question is from Latika Chopra from JPMorgan Chase & Company.
My question was more medium term. Nisa, you mentioned execution and growth is the focus for you, and that would clearly support our revenue growth. But what are your thoughts on the margin front? Considering over the last 2 years, though, the growth in domestic and maybe for initial few years, even in Indonesia was subpar, but we continue to see -- saw momentum on the margin front. So are you willing to invest disproportionately higher to drive the top line growth and want to keep margins more or less stable? Or the focus is going to be still on -- profitability is going to be a very key metric for you to evaluate when you take your decisions on the top line?
Latika, it's Sameer here. No, I think the thought process is very clearly to kind of drive sales growth. Whether that be driven by new launches or distribution or communication strategies, right? And if we see opportunities of disproportionate growth, we won't even shy away from an upfront investment. But my point is that once you have a sustainable scale, you will see a natural fallout of it, being a margin expansion. So it's an either/or, I mean to begin with, but at least internally, even as Nisa mentioned earlier, the big focus is driving growth across categories, across countries. And I think if that's in place, we should see kind of margin expansion, not necessarily again quarter after quarter. But at least on a kind of 9-, 12-month basis.
Sure. The second because in Indonesia, I remember your chalked out plans around expanding your product portfolio into more hair care categories post wash hair colors. And then, of course, there was this discussion around tapping into more markets in Southeast Asia using Indonesia as a hub. Any color on the strategy -- strategic initiatives on that front, please?
Yes. So I think to begin with, at least over the last 6 to 8 months, the push in terms of the entire hair care space, has also taken a little bit of a backseat, while we remain extremely committed to scaling it up because the overall growth opportunity itself in Indonesia is kind of quite sort of a big one. So we will sort of continue to invest on new brands as well as getting kind of new product launches within the larger hair care space. Also in Southeast Asian markets, we are exploring. I mean exports model. And it's not just kind of plain vanilla exports model, but also model where you have few feet on ground in terms of kind of creating brand awareness alongside maybe strategic distributor arrangement, who leads the entire go-to-market initiatives. So that's also happening, Latika, as we speak at this point in time.
Next question is from the line of Richard Liu from JM Financial Service.
Can I request your perspective on what you think is going on in Strength of Nature? The reason I ask is that this is the third write-back of the earnout liability for this acquisition. And of the INR 800 crore odd earnout that you originally estimated when you acquired it, half of it is already now written down. Can you just help us understand how much of the original forecast of this that has changed that stated this kind of a cut in the earnout? And on the related point, Nisa, if I may, with Dharnesh at the helm now, what are the kind of changes to strategy that you envisage for SON in particular and also for Africa in general?
Richard, so let me take the first one, and then I think Nisa will share her kind of thoughts on the second one in terms of strategy. I think we shared this in the past that we had conservatively baked in a higher EBITDA as well as kind of event in financial liability, right, I mean in the balance sheet for a kind of -- also a kind of promoter to have enough skin in the game, right? So that was 1 thing which we had called out earlier. And also, honestly, the performance has been relatively kind of weaker as compared to even our sort of internal expectations, and that's what we are working towards in terms of just scaling it up to begin with the kind of driving sustainable growth and also driving sort of efficiency from the business.
And to add to what Sameer said, I think the Strength of Nature business was strategic to our overall sort of Africa portfolio because it lets us solve consumers on a full-scale of what their hair needs are from -- we have the extension through Darling and through Strength of Nature, we got all the know-how on styling products, relaxers, care products. The truth of the matter is that we've executed in that business pretty terribly. So I think -- I think in Africa, I think there's 2 parts to this sort of turnaround on both growth and the bottom line. I think one is there are some strategic choices to be made, but I think those are actually -- those are not that difficult because we have some good categories. We mentioned that we need to build out something like HI, which is a huge strength for us and where you find actually not the kind of innovative Value For Money products, that you find in India. So I think the -- so while there will be some portfolio choice making, I think our execution needs to sort of get much, much, much stronger. And I think that's where sort of the Dharnesh comes in because of his vast experience. He was the Head of South Africa Sales for Nestlé. He was the CEO of Nestlé Nigeria. So I think his on the ground knowledge, correct, whether it's from pricing to GTM to how to run the factories more efficiently. And I think that's really what we need to be doing much, much, much more strongly. I think the other thing that would possibly be positive that even while the last couple of years in Africa, performance has not been good. We've not been sitting with our legs up, not doing anything about it. So I think from our product portfolio, strengthening the team, there has been quite a bit of work going on. So I'm hoping -- not hoping, we need to make it happen. But I say -- I'll tell you, taking over a CEO of the company and having a strong operator who knows the markets in and out, definitely lets me sleep a little bit better at night. But I think it's -- to my mind, it's actually more execution than strategy for that business.
Sure. And Sameer, one -- a follow-up on this, if I may. The earnout liability that you originally provided, that has now halved, right? I mean if I consider the 3 round of write-offs or write-back that you took. Does this also mean that your expectation of -- from the business in terms of, let's say, 5, 6, 7 years' profitability is actually half of what you originally estimated?
Well I think a lot of this is more of reflecting the past performance, right? I mean it's not necessarily an indicator of how the future performance will be. Also if you see the recent past financial liabilities is sort of 6% really, if I am mistaken, so what it originally was close to around 30 percentage. So yes, it's more reflective of how the performance has been over the last 3, 4 years, which we shared that has been relatively lower than our internal expectations, but not at all reflective of what the future performance will be.
Next question is from Amit Sinha from Macquarie.
Yes. My question was on the cost structure of both the India business and the Africa business. Last quarter, you had highlighted that on the cost management side, there will be accelerated savings, at least, that you will initiate. Now I understand that this quarter, there could have been some incremental cost coming in from an -- because of the business environment, et cetera. I just wanted to understand from your perspective, how should we look at the overall cost structure, both in the India business and Africa business, particularly when I look at -- I mean, obviously, there is a deleverage, disadvantage during the quarter. But even on an absolute basis, I don't see a significant cost savings in the consolidated financials. So just want some perspective there.
So, no, I think we should see meaningful cost reduction in SG&A expenses, right? And across the board, not just India or African markets as well in sort of Indonesia. Yes. I think in the last quarter, some of the reductions are getting offset by maybe a couple of one-offs, especially in India, which I think -- sort of think of. But in absolute terms, we have seen significant reduction on a year-over-year basis in the controllable SG&A spend across countries of our operations, and that's something which we will also continue going ahead. I mean experience over the last 3, 4 months has sort of taught us many things that we can work virtually, may not necessarily excessively wear trousers and stuff like that. So we are making all those kind of pieces into our ways of working going ahead. And essentially, that will be reflected in the overall cost, how they will pan out, I mean for many more years to come from here on.
And you said some -- there is some one-off in the cost?
Yes. I mean in India business, I mean, in other expenses, we did have a couple of one-offs which we are providing for fixed assets and also broadening for one-off customers' balance.
I understand. Okay. My second question is, you have highlighted in the results that there is a sale of certain brands within the group entities. Just wanted some details around that?
Yes. So this is basically...[Technical Difficulty]
Sir, can you hear us?
Yes, I can hear you.
Sorry, Amit, I'll just take that up. A loss of business is basically kind of intangible sales, I mean, which also happened in the Q1 of last few fiscal years. So it's obviously nothing different this time around. It's a sale of kind of assets happening from SPG eventually to Indonesian-based kind of entity because it's eventually -- the assets, I mean, which belong to the Indonesian kind of business. So we saw that actually, and that creates basically a deferred tax asset because we do get the tax benefit over a period of time in Indonesia or the recipient in the sort of country. It happened in Q1 of last fiscal year, Amit, and it also happens for us in Q1 of this fiscal year.
Next question is from Abneesh Roy from Edelweiss Financial Service.
Yes, a few follow-up questions. One is, how has been the mix in HI? You mentioned India mix overall margins were impacted. But within HI has always grown faster, has the lower end of HI grown faster? And is that the reason why rural is also doing much better?
Yes. So I think if you look at our format mix, Abneesh, within HI categories, we did see very strong growth in burning format as well as in electrics. Aerosol is actually into 2 halves. And then the mosquito part of aerosols did grow quite well. However, we had significant back end supply chain challenges in the roaches part of portfolio, which sort of struggled because of the back-end supply chain issue, but those have got resolved. And we have seen, I mean again, meaningful growth coming in that part of portfolio also or kind of past 30 to 40 days now.
So does it impact the HI margin? Or is the HI margin down Y-o-Y?
Well I would say, yes, I mean, in quarter 1, yes, because of adverse format mix, I mean, which we had in the household insecticides category. That to me, I mean, gets more than corrected now in the coming quarter. And also what are the reasons why we will see better gross margins in line with first quarter gross margins.
My second question is on CapEx in India, Indonesia, you're seeing very good growth in HI plus multiple new products. So are you outsourcing these currently? And what would be the plan for insourcing medium, longer term?
Yes. I mean it's very dynamic, Abneesh, to begin with, and there are different models from purely insourcing or outsourcing in hybrid ones actually, right? I mean -- I mean, we have historically, I mean, shared this that none of our categories -- [ bar ] soaps, I mean, are very kind of capital intensive, right? So to that extent, even in terms of scaling up or having new launches, assuming for a moment that we are insourcing it, we do not expect any meaningful capital expenditure, whether it be India or Indonesia. I mean in rest of the year as well as maybe the year thereafter.
My last question to Nisaba. Multinational companies are exiting the fairness world, not necessarily the proposition. But obviously, Fair & Lovely and all those. So you do have a soap called Fair Glow, I do see that on Amazon selling but it is not a focused brand. I understand that. But with these changes in the sector, would you scale up in terms of aggression, maybe not just in soap in at least medium, longer term?
No. We wouldn't. So actually, we didn't invest behind Fair Glow. We moved away from that brand for the very reason that other companies are doing that now. We have done it a while ago. And actually, even for the -- it is miniscule brand for us. We're actually sort of changing the name, so we're taking -- even on the miniscule brand that it is changing the name from Fair to something. So no, we don't want to take advantage of the situation than others. I think it's the right thing for the consumer, for us, all consumer product companies not to be doing this.
Next participant is Shirish Pardeshi from Centrum Broking Limited.
Yes. And it's a phenomenal growth, which we have seen in for household insecticides. Would you be able to share if this growth is more of a pipeline filling or ahead of season loading with a lot of promotions? Or it is a natural demand, which has come up in this quarter?
Yes, I think we are happy to report that it is natural demand. It is none of the other things. And frankly, in the -- like Sameer sort of mentioned in aerosols and stuff, we didn't even have enough supply earlier on in the quarter. There is a high consumer demand. People do not want to get sick and they want to protect themself. Sameer, do you want to add something?
Yes. Hi, Shirish. And just to add and build on what Nisa mentioned, not just for HI, but even for rest of -- for the entire India business, our primary and secondary sales mirrors largely. So there has been absolutely no change, I mean, in a way, between primaries and secondary from our entity in first quarter. Yes, it has been all sort of consumer kind of demand, consumption led.
So Sameer, if I understand correctly, the rural is driven by the burning format, and urban is more of an electric format which has driven this kind of growth.
That's right. So as I mentioned earlier, we did see very strong growth, both in electric as well as kind of burning format. Obviously, nothing much to pick and choose in terms of growth rate between both the formats. Rural, I would say it's also alongside kind of burning format upgradation play, right? I mean the consumers do sort of upgrade from incense sticks perhaps to coils and then gradually from coils to kind of electric, right, over a period of time. So that's the other growth factor also, I mean, which is very, very evident in the rural markets.
And then one of the growth -- obviously, the penetration of liquid vaporizers with the electric is much, much lower than the overall category. And obviously, it would be -- that would be lowest in sort of rural. And I think 1 other thing we need to think about is how is the electrification also changed in India over the years. And burning format whichever ones they are, the main reason for people's upgradation is, obviously, the electrics are more put down price, although on a per night basis, they work out quite economical if people do want to avoid smoke, correct? So there is a strong sort of upgradation story there. And we -- definitely, there is a long run for that in rural India.
Yes. My related question on this, if we have, say, value growth at 27%, how large would be our volume growth in this in HI?
I think for us, there is nothing much to choose in the last quarter, Shirish, in terms of value and volume. I think, again, value and volume growth would largely be more of the same.
Okay. Okay. One question on HI business to Nisa. What is the penetration level? And what is the lever we see in terms of penetration growth in India versus Indonesia? And if you can specify what is the penetration level?
So the penetration, I am going to give you the exact numbers -- exacts' numbers right now. Yes. But I think, obviously, rural penetration is behind urban penetration. And then it says something like liquid vaporizer penetration in urban India would be much ahead of what it is in rural India. So our business has always been on this coil upgradation sort of business. I think having this new liquid vaporizer in our portfolio was much needed because in the efficacy asked from consumers has been going up, correct? They are actually saying we have more of a product problem, mosquitoes are getting to be more sort of resistant. So I think this highly efficacious LV product will sort of let us drive penetration.
And any thoughts on Indonesia?
Indonesia, again, is -- it's a similar story, that aerosol penetration would be sort of behind coil penetration. So there's always an upgradation story. And I think in these markets, the value for money sort of really matters. So while you upgrade consumers, you still need to give it to them at affordable price, which we -- what we are good at. Actually, what we're seeing that electrics now in Indonesia is growing very strongly. So that's also a very good opportunity for us.
Okay. My last question on the new products. So not this 1 or 2 quarters, where do you see these new products? And you really have done a phenomenal work on this. So where do you see these new products maybe after 3, 4, 5 years in terms of size and scale?
Which ones are you referring to? Nature or...
Yes. Nature.
Yes. I think we see these as extremely big sort of opportunities, correct? And these are sort of value for money, high on sustainability. They have a good margin to us. So we really feel that there is a very large opportunity to build them out.
Next question is from Percy Panthaki from India Infoline.
Just a follow-up from me. Sameer, you mentioned that the primary and secondary for this quarter is the same. So if that is the so -- if that is so, it means that at the end of March, was your pipeline normal? And if it was normal, then what was the reason that Q4 saw sales decline?
Yes. So I think Q4, what we had mentioned, if I get it kind of correct, is we had primary decline of around 17%, 18 percentage and secondary decline of around 12%, 14 sort of percentage. I think if you look at our kind of distributor inventory, I would say it is relatively on the lower side, especially as of June end, compared to at least what it has been over the past year or few years. I think the way to also look at combined quarters, is that what you are getting towards seasonality, attached to the categories because at times, some of the categories are seasonal. And once you are out of the season, I mean customers don't come back. Of course, there were ups and downs in terms of distributor stock, especially because of the supply chain disruption, both in the back end and front end, but we wanted to keep the kind of distributor stock as much low as we can, which is what we did as of June end. And if we sense that, I mean, the supply chain is perhaps getting disrupted again, we will kind of be again very dynamic in terms of ensuring that there is no eventual sales loss, whether it be servicing to the channel partners or even look at the consumers.
So Sameer, March, obviously, was a little lower than normal in terms of the distributor inventory, and you are saying that June is continuing at that low level. So is it that you're comfortable with this level? And this is like a permanent cut in the distributor days? Or is it that you haven't got a chance to fill in the pipeline and therefore, in July, August or somewhere in those months, you will actually see some amount of distributor inventory fill in?
Well I think for us, I mean, distributor inventory will be more driven by, if any, supply chain disruptions, especially if it has to move up from June end sort of level, right? So that's going to be the single largest driver for distributor inventory, so based on the June levels to move up from here. And as I told you, I mean, the distributor level in June was relatively on the lower side as compared to, say, averages of last 18 to 24 months per se.
Understood, Sameer. I'm just saying that a lot of people are taking opportunity of this kind of disruption to sort of relook at their entire business model. And if they believe that it is possible to sort of do business at lower inventory levels, they are saying, "Okay, we do not want to fill in the pipeline anymore, whatever cut has happened, we are comfortable with that level." So I'm just asking, are you comfortable with the June level or do you plan to sort of take it back to a more normalized level, which was there pre COVID?
No, at this point in time, we are quite comfortable. I mean the June sales, but also keeping what distributors [ thought ] isn't really much improved ROI for our channel partners, right, which is also extremely important in terms of holding channel partners in such tough times. Yes, my sense is we should stick to those levels for the rest of the year unless, I mean, we see, again, some disruption happening on back end, kind of front end.
Right. And 1 last small point on this that while for the overall India business, the primary and secondary were equal. Was it different for any of the main categories?
Yes, I think there would have been some mismatches across categories, but I would say, nothing to meaningfully different per se and you are across categories, but yes, it would not be exactly [ metering ], I mean all the category in which we play.
But nothing to call out?
No, nothing to call out, Percy. Nothing to call out.
Next question is from Sangeeta Purushottam from Cogito Advisors.
I was hoping if you could give a little bit more color in terms of how you expect the performance of the Africa business to shape up in the months to come? And what are going to be the key initiatives being taken there to turn around the business?
Yes, I think to begin with, Nisa was mentioning earlier, execution is going to be one of the key sort of focus areas, right? And also our thought process is to drive gradual recovery to begin with all the sales growth and the drivers to that would be market initiatives, select launches. I think also 1 other thing which we should remember, and that's something which is playing out in June and July, at least is a significant competitive advantage, especially in dry air portfolio for us in multiple African markets, right? Because the competition over air is more of import and sell in the market competition, if not totally, at least some part of it. And there backbone, especially on supply chain is very, very disruptive at this point in time. And we are seeing that getting played out, especially if you look at June, wherein the performance is nearly flattish on sales as well as in July, when the performance was in the quite robust to begin with. But if it's more of how do we play this over a period of time. So execution to begin with, go-to-marketing initiatives, kind of launches, scale-up of wet hair portfolio, scale-up of household insecticides over the next [ few years ] and that's the way we are, and again, very tight control on costs. So these are the 4, 5 kind of drivers, which we are sort of working on. And that should result, I mean, at least what we claim in terms of gradual recovery, in Africa, U.S. business for rest of the year and make it with a strong base for us to take the growth to the next year or the next few years.
[indiscernible] supply chain of your competitors who are importing products has actually helped you because your supply chain has been relatively intact. So has that -- have to gain share? That's 1 question. And the second thing is, you're talking a lot about the execution challenges. But this business has been in the portfolio for a while. So what exactly have been the execution challenges and why is it taking so long to fix them?
Yes. I think to begin with, I mean, on your first question, we do have kind of on-ground manufacturing setup compared to a lot of our competition, which sort of imports and that is a significant competitive advantage, which is playing to at this point in time. I think execution is basically basic, I mean, to sort of begin with. It's not that we are discovering it here and now. We have been -- I mean there's different pieces over the past period also, but there is a real focus and more so kind of very precise, the do's and don'ts in terms of how do we go at executing, a lot of tactical as well as medium-term strategy, which we have sort of charted out on whether it be go-to-market initiatives, whether it be within go to market, a channel kind of prioritization, feet on ground, and when you top leveraging technology and stuff like that or whether it be even launches, how do we go with some of the launches and pricing and the margin profile of it. So it's all that, we are baking in and making it happen on ground rather than just being extremely prescriptive, I mean, to each of those local countries at this point in time.
So I'm actually just trying to link a more before and an after picture. I mean many of the things you're talking about should be like a normal part of running a consumer business, and I'm sure you're doing a lot of this in India, in Indonesia and the other markets where -- which -- where you've been successful. So I'm still not getting a handle on what were the challenges. Was it a leadership challenge? Was it an issue of not having the right people in place? What exactly was it that went wrong? And what is it that's going to be fixed now? Hello?
Sameer, can you hear us?
Yes, I can hear you. I thought Nisa wanted to comment, but I think she just got disconnected. So okay, let me just take that question, Sangeeta for you. No, I think there is -- it's a mix of kind of many things, I mean, which we are sort of working upon having realized the experience of the past, at least few years, right, from whether it be sourcing to manufacturing efficiencies, to even go to market. And again, it's not like everything in 1 country or we are sort of...
What are you all doing -- am I in or no? Yes. I am in now. Okay. Sorry. Sorry. Can I come in? Sorry, I've been trying to get back on this. So I think the execution challenges have happened in the Africa business over the last couple of years, I think some of our execution challenges even in India have been over the last sort of 18 months also. And we're seeing a turnaround on that. And you're asking, obviously, running a company, we're not sending rockets to the moon. So it is sort of basic stuff that we've not got sort of fully right. And I can't -- it's a mixture of leadership. It's a mixture of getting your GPMs, right. So I think there's a lot of pieces to that. I mean that we have a new CEO in Dharnesh Gordhon, who is very experienced on the Africa market. So it actually tells you about our commitment to the geography and what we should do. So I don't think -- look, I've been sharing the bad news and stuff, but the bad news has not been there for 10 years. The bad news is from the last sort of 18 months to couple of years. And we're pulling up our stocks, rolling our sleeves and getting it done. And I just -- to the best of my capabilities, of this company's capabilities, we're not going to now say, "Oh, COVID came, and that means we sort of couldn't grow." So I think the idea is to focus on growth, make sure we're brutally honest with ourselves about -- and it's not that -- it's not like this illegal incense stick did happen to us. It is a difficult sort of situation, but perhaps from an execution point of view, we hadn't pushed back hard enough. We hadn't got our full muscle to it, and that's what we really are trying to do at this time. So I think some of it might be leadership, some of it might be other things, but I think it's also our attitude at this time is to say we don't want to externalize things because there are always external issues, including a global pandemic. But we are a strong company. We have products and categories that consumer wants. And let's go for growth.
And once you've set the business right, would you be introducing the HI products in Africa post that? Or is that going to be in parallel?
It's going to happen. It's happening right now. I -- like I said, we took it off the slides because we didn't really want to fully tell the competitors what exactly we were doing, but we're at it as we speak.
Our next question is from [ Sayjal Kapul ] from [ Risk Advisors ].
Most of my questions have been answered. Just got one, which is slightly medium to longer term. So I understand that as an organization, today our focus is firmly on driving operational efficiencies and on earnings growth. And we got that message in the annual report, and we've been hearing through yourselves, Nisa and Sameer. So that's very encouraging. And on the back of that earnings growth, hopefully, using our better innovation engine that kind of offers or formulates the products that benefits the bottom of the pyramid people, because that's where the majority of our consumers are internationally and give them those products, superior quality products at a price point, which is very appealing. So that kind of gives our business from stickiness. But my question mainly is around the return on capital on a consol basis. Can it revert back to where it used to be or close to that before we started diversifying internationally? So driving both earnings growth and making the balance sheet leaner, perhaps by sort of faster deleveraging. So what aspirational target do you have maybe on a 5-year basis for this consolidated ROCE?
Sure. So I think to begin with, we are quite focused in terms of driving ROCE. No targets, to be honest, at this point in time. Of course, ROCE, as what we see today, which was around high teens is also deflated because of the capital employed or the capital which we invested, right? I mean in buying out the business. So operating ROCE would be close to around 60 percentage plus. I think what is important to peep into is the lever of ROC, which is sort of capital employed, whether it be capital expenditure or working capital, which we are working to in terms of -- and as can be seen also in our results over the past couple of years as well as margins, right? I mean margin flow is driven by cost levers, but also margins, which are more sustainable and driven by sales growth lever. So there is absolutely a big focus in terms of driving ROCE, up pressing upon some of these growth levers as well as reduction in working capital.
So that's helpful, Sameer. Just to clarify, so directionally, our aim is to drive these margins upward. We, of course, cannot quantify what that number would be, let's say, 2025. But given the fact that we accept the mistakes, and we are putting in place the remediation plan, and the message was very clear even on the annual report and several places. Directionally, I think, come 2025, it should be much better than in the business. Is that the message we can take away?
Absolutely.
Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing comments.
So thank you all for taking the time out for the call. In case of any incremental questions or suggestion inputs, feel free to revert to anyone of us within the Investor Relations team. Thank you so much.
Yes. Big thank you for being with us on the call today, and we look forward to continuing talking to you, and please stay safe and stay healthy. Take care.
Thank you very much. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect.