Jyothy Labs Ltd

NSE:JYOTHYLAB

Earnings Call Analysis

Jyothy Labs Reports Strong Quarter with Revenue and Profit Growth

Jyothy Labs experienced stable growth in all channels, with key input prices normalizing compared to the previous year, despite increased competitive intensity. Advertising and promotion spending rose by 36% to support brand investment, product innovation, and geographical expansion. The company's revenue increased by 11%, comprising 9% volume growth and 2% value growth. EBITDA margin stood at 18.5%, and net profit surged by 59% to INR 104 crores. The distribution reach expanded to 1.1 million outlets, aiding growth and market share gain across the portfolio. Categories like Fabric Care, Dish Wash, Household Insecticide, and Personal Care saw growth rates of 10.6%, 10%, 3.4%, and 22% respectively. The healthy balance sheet maintained with a cash balance of INR 440 crores and a reduced net working capital of 5 days bolsters operational agility. Looking ahead, the company anticipates consistent double-digit sales growth, primarily volume-driven, and expects to maintain the EBITDA margin at 16-17% for the fiscal year 2023-24.

Business Environment and Growth Trajectory

The company has observed stable growth across its product portfolio, with input prices normalizing compared to the previous year and an 11% revenue surge for the quarter. This includes 9% volume growth and 2% value growth. Competitive intensity has risen, prompting increased brand investment and a significant 36% rise in advertising and promotion (A&P) spend. Strategies like product innovation and geographical expansion have driven this growth, with the company leveraging its direct reach to 1.1 million outlets.

Profitability and Financial Health

Profitability has improved, with EBITDA at 18.5% for the quarter and net profit soaring by 59% to INR 104 crores. The company boasts a strong balance sheet with a cash balance of INR 440 crores and a minimal net working capital of 5 days, underscoring its financial resilience and capacity to sustain growth in the face of a slowing consumption environment.

Category Performance and Future Strategy

In Fabric Care, revenue grew by 10.6% for the quarter, with a focus on both affordable and premium products reflected by targeted advertising campaigns. The Dish Wash category also showed a robust 10% growth, driven by strategic focus on low unit packs and larger packs which fortify brand equity. The Household Insecticide category experienced a 3.4% growth, while Personal Care rose by 22%, indicating strategic bets on authenticity and brand investment are paying off.

Potential for Improved Margins

In the Personal Care category, increased initial launch expenses are expected, but margins are anticipated to improve going forward.

Pricing Strategy Amidst Rising Costs

Recent price cuts have been made in the Detergent and Personal Care portfolio, but future pricing strategies will need to adapt to fluctuating crude oil prices and competitive pressures. The company remains attentive to the raw material cost dynamics, which constitute approximately 40% of purchases, and plans to respond appropriately to maintain its EBITDA margin targets.

Consistent Profitability Outlook

For the fiscal year, the company expects to maintain its double-digit sales growth trajectory, primarily led by volume, and aims to preserve its historical EBITDA margin of 16% to 17%, provided commodity prices remain stable.

Capital Allocation and Growth Initiatives

The company plans to adhere to its existing capital allocation strategy, preserving cash for future growth opportunities, which may include inorganic acquisitions in alignment with its portfolio strategy.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Jyothy Labs Q2 FY '24 Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.

I now like to hand the conference over to Mr. Karan Bhuwania from ICICI Securities. Thank you, and over to you, sir.

[Karan Bhuwania, analyst]

Hi, good evening, everyone. It's our pleasure at ISEC to host Q2 FY '24 earnings call for Jyothy Labs. From the management today, we have M.R. Jyothy, Managing Director; and Mr. Sanjay Agarwal, Chief Financial Officer.

I would like to hand over the call to management team for the opening remarks, post which we can open the line for Q&A. Thank you.

[Sanjay Agarwal, executive]

Thank you, Karan, and good afternoon, friends. I welcome you all to the conference call of Jyothy Labs to discuss the financial performance for the quarter ended September 30, 2023. Our results and our investor presentations are available on our website as well as all the stocks we have shared with the stock exchanges. I hope you all had a chance to look at it.

To summarize our results, on the business environment front, we have observed stable growth across all channels for our product portfolio. The key input prices have been normalizing over previous year. However, there is an increased competitive intensity to drive volume growth. And therefore, to sustain our growth, we stay focused on our brand investment.

Our A&P spend for this quarter is up by 36%. We are focusing on our product innovation and geographical expansion. This is reflected in our overall performance in the revenue growth of 11% plus for this quarter, which is 9% volume growth and 2% value growth as well as our profitability metrics have further enhanced, i.e., the EBITDA at 18.5% for the quarter. And our net profit is at INR 104 crores, up by 59%.

As our results demonstrate that we are stronger than ever, and we have delivered now consistent double-digit growth -- top line growth for this quarter as well as if we look at it even on a 2-year and a 3-year CAGR basis. We have been -- I mean, what we have done is we have leveraged our expanded distribution platform of direct reach of 1.1 million outlets, which is growing, which has helped us in mitigating the slowing consumption environment by focusing on sales of our existing product portfolio in new geographies, higher BTL activities and focusing on relevant SKUs for each market.

We have seen market share growth across our portfolio and -- which is backed by our overall agile business operations, and we'll continue to see this journey to build further scale by focusing on execution across all business parameters with a healthy balance sheet and cash balance of INR 440 crores as of September 30, and net working capital of 5 days. This will help us or enable us to be more agile in our operation, and we'll aim for a consistent healthy revenue and profitability growth for the future.

In terms of the category performance, Fabric Care is doing well. We are a double-digit growth at 10.6% for this quarter. We're seeing segment -- this segment has seen improvement across all our brands. We are focusing on both value offerings in detergents as well as on the premium portfolio of our liquid detergents. And our strategy is to build scale across categories. In specific, in our Fabric Care portfolio, Ujala Supreme, the ATL campaign featuring superstar, Taapsee Pannu, is aired across key markets, and we're also using digital medium to increase more usage awareness. And it is helping us continuously grow the brand.

In Ujala detergent powder, we -- Ujala IDD, we are continuing to push on driving liquid detergents across the southern markets. Similarly in Henko, part of our Fabric Care portfolio, our media campaigns may have looked at them or featuring superstar Kajal Aggarwal, and focusing on retail activities. Both of these things is helping driving a higher consumer engagement and visibility, which has led to a healthy growth of the brand. In addition, we continue to drive distribution aimed at increasing presence in the mass category of our Detergent Powder segment with Mr. [indiscernible] as well.

Moving on to dish wash category. Again, here, the sales have increased by 10% for the quarter. The growth is backed by both our brands, Exo and Pril. And in both the brands, our strategy is to focus on LUPs, which has helped us in onboarding new consumers. Further, we're also focusing on consumers seeking larger packs in the short liquid category. Hence, put together, this is overall strengthening our brand equity and gaining market share as well as just to give more emphasis on our Exo brand, we've been investing across outdoor media like wall printings and out-of-home apart from the conventional medium.

Moving on to the third category, which is household insecticide. Our sales increased by 3.4% for this quarter. And we have witnessed -- we're witnessing consistent recovery after a challenging last year. So we are focusing on innovation and a liquid vaporiser portfolio registered positive growth. We have launched a new campaign for Maxo Genius, featuring our new brand ambassador Kareena Kapoor. So subject to the seasonality issues, we hope to see or have a steady performance in each.

Finally, our Personal Care segment increased by 22% for this quarter. And our century old neem-based Margo portfolio soap that continues to be the consumer preference for its authenticity. And we are building the brand with a larger -- with an aim to build a larger portfolio and the launch we had of Margo Neem Naturals having 3 variants that's doing good. And in Margo, we've been increasing our brand investment across mediums. And again, here, the campaign, which is featuring Superstar, Raashi Khanna propagating Margo as "Ek Aachi Aadat (a good habit)." That's also helping us to build a brand into a larger portfolio.

So in summary, we will continue to focus on volume-led growth and achieve higher scale of business operations with a superior margin profile. We'll continue to invest more towards strategic brand building exercise for all our brands, driving higher scale of direct distribution, which obviously takes time and resources. However, this is -- which is a critical source of competitive advantage and barriers to entry. So as we have consistently delivered double-digit growth for the last 2 years -- last few years and expanding our profitability metrics.

Our business model or mantra will be focusing on superior execution. And therefore, we'll strive to build scale with relentless execution and gain market share. So as we move along for the next 2 quarters of this financial year, we will expect or we expect our sales growth trajectory to be double digit, primarily led by volume for the full year, which is FY '23, '24. And on the margin front, with stable commodity prices, we should be able to hold on to our historical EBITDA margin of 16% to 17% on an annual basis.

So friends, with this, I finish my opening remarks, and we are happy to answer any questions or clarifications you may have. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Mr. Vishal Gutka from PhillipCapital.

[Vishal Gutka, analyst]

Congratulations to the entire management team of Jyothy Labs on excellent set of numbers. I have 3 questions. First is on reduction -- substantial reduction in working capital days. If you can please explain what is driving this, how sustainable it is because the substantial reduction has happened from 20-plus days to 5 days now.

Second question is on Personal Care. Margins have remained flat despite very strong momentum and sharp correction in PFAD prices. Shall we expect a similar momentum to continue margins? Shall we think upstick in second half given the commodity price are corrected? I believe that it has happened mainly higher spend.

And third, this is especially for Jyothy madam. Just wanted to understand more with regards to HI portfolio, the change of brand ambassador from Rajkumar Rao to Kareena Kapoor. If you can explain what has driven this. And within HI, losses more or less remain the same level despite uptick in the liquid -- high-margin liquid portfolio.

[Sanjay Agarwal, executive]

So thanks, Vishal. There are any questions. So I'll attempt a few of them, and then maybe Jyothy will add on to your questions. So now housekeeping questions on working capital, yes, I mean, we've been improving it with stringent elite financial discipline. Our supply chain, everything has been on the toes to make sure that the operations become far more efficient. However, on a longer-term basis or a medium-term basis, I mean, there will be some volatility in the markets and everything. I would expect that, I mean, 10 to 12 days could be the working capital cycle on a normalized basis.

Now your second question on the Personal Care, yes, the margins -- see, this is a quarter -- this was a launch quarter for our -- the new variants, which we have introduced. And hence, the A&P spends have been higher in this particular quarter. And as the palm oil prices stabilizes or normalize, we should see recovery in the margins in this particular category.

The third one is on HI. We -- the business is still to make EBIT profit. I mean as we've explained in the past, our HI portfolio, I mean, now at the top line, now it is only $600 million business. But the coils business has not done that well. And we are in the in the process of moving more towards the liquid side of it. And we hope that things will improve from here on.

[Moothedath Jyothy, executive]

Yes. And on HI, yes, the brand ambassador has changed. One is the contract of Mr. Rajkumar Rao is -- was coming to an end. We also wanted a female ambassador this time and more a celebrity who has a family, who has kids as -- in their family. A mother's concern for the health of the kids is more important. And we have Kareena, who is known -- well known in the country, and we wanted her. And obviously, all of you know that she is a mother of 2 kids and we felt that will be better for the brand to convey why Maxo is better. It's a better choice. So that's the reason we have gone in for a change of brand ambassador.

[Operator]

Next question is from the line of Mr. Percy from IIFL Securities.

[Percy Panthaki, analyst]

Congrats on a good set of numbers. My question is on the segment margins. This Fabric Care margin at 26%, it's very high, isn't it? I mean, typically, when we see such high margins, it tends to attract competition. So just wanted to understand what's your plan? Are you planning to cut prices? And if so, what is the reason why it has still not happened? Like when the input costs were going down, we took quite a long time to take price increases also. And now when it's going down, we are sort of a little late in taking price cuts also.

And also the second part on the segment margins is that with palm prices coming down, everyone in the soaps business, the other listed players are having a huge amount of margin expansion and are making like so kind of margins on the soaps portfolio, whereas we are at 10% only. So is there some huge amount of ad spend in this, which is bringing down the margin? Or is there some other reason for that?

[Sanjay Agarwal, executive]

Percy, on the Personal Care, as I just explained to Vishal, again, this being the launch quarter. So there has been higher level of expenses or the A&P expenses. I think on a recurring basis, you will find the margins should improve in the Personal Care category. So that should not be a concern. And also on the Fabric Care, as you said, the margins have been good. So it's also a function of scale at some point of time because our portfolio has been growing double digit at -- on a consistent basis. It is -- it does give us a higher operating level. And we have also taken some price cuts both in the detergent and in the personal care, which is soaps category. And so that will definitely be -- as time passes by, the impact will start coming through in the next few quarters.

[Percy Panthaki, analyst]

Understood. And finally, on margins, I'm looking at a slightly longer term here, not the next couple of quarters, but let's say, over a 3-year period, where do you see the EBITDA margins of your company stabilizing, assuming a stable input cost scenario? Do you think like most of the FMCG companies are close to around that 20% mark? So do you think that we would be going towards that number? Or do you think that thought process itself is wrong because your product mix is different or because you have different priorities, et cetera, et cetera. I mean any kind of thoughts you could share on this, not looking for exact guidance, but any sort of way of thinking about this question, please?

[Sanjay Agarwal, executive]

See, structurally, where our focus is more is towards building the volume growth and increasing the A&P spends. The byproduct of it definitely will be a healthy margin profile also. So that is how we would look at it from a medium to long term. I hope that has answered the way we are building the business.

[Percy Panthaki, analyst]

Right. But like, see, as I said, you have a huge amount of input cost benefit, probably some of it will get passed through, et cetera. So do you think that the margins that we are doing now are sort of definitely on the higher end of the band? And therefore, I mean, even on a 2-, 3-year basis, what we have done this quarter, that number sort of would not be exceeded? Or do you think that's not necessarily true?

[Sanjay Agarwal, executive]

See, Percy, it's difficult for me to give you a number. But if we are able to build a scale better as what we have been doing for the last few years, then definitely, the healthy margin profile should improve from here on. And as you said, to increase the scale, we would not shy away from increasing our A&P spends, which definitely has been more productive in our case.

So we will do both look at our margin profile to improve from here on and increase our A&P spends. And in this process of whatever midterm, whatever you're looking, the variable will always remain the input prices. So that is how we'll have to look at both market share, margin expansion and at the same time, increasing our A&P spends.

[Percy Panthaki, analyst]

Right. And last question on household insecticides, at what -- kind of, what are the sort of parameters at which this business will become a sort of breakeven business? Is there a particular rupees million scale of turnover? Is there a particular percentage of liquid vaporiser as a part of the revenue? Can you give some kind of sort of ratio or parameter on which basically the breakeven will be achieved?

[Sanjay Agarwal, executive]

So first, Percy, the HI category has to start doing well. We know the challenges with the category has been facing. So once those challenges are out of us, then yes, our mix needs to be more favorable towards liquid, which should be in the range of 50%, 60% and where we will definitely have profitable operations in HI as well.

[Operator]

Your next question is from the line of Mr. Kaustubh from Sharekhan by BNP Paribas.

[Kaustubh Pawaskar, analyst]

Congrats for good set of numbers. Sir, my question is on Personal Care category. This quarter, we have achieved a strong growth. So what led to this above 20% growth? Have we gained any market share from some of the large players in the second quarter?

[Moothedath Jyothy, executive]

So we -- one is the brand has done well on its own. One is the mix and then the distribution. These are the two contributions for the brand to do well. Our original name, which is the basic soap, that has done well. That has also clocked double digits and our new introduction have also added to the overall growth.

[Kaustubh Pawaskar, analyst]

Okay. So what is -- is the contribution of new introduction substantial to the growth?

[Moothedath Jyothy, executive]

No, no. It is only new. That's why I said the original -- the base variant itself is doing well, and that itself has clocked double-digit growth. This has added to it. That's all.

[Kaustubh Pawaskar, analyst]

So should we expect this kind of growth momentum to sustain?

[Moothedath Jyothy, executive]

I can't say that. But yes, we do want to do well, and we'll continue our efforts and focus on distribution and brand investment. Hopefully, that should continue then.

[Kaustubh Pawaskar, analyst]

And Sanjay sir, in your initial comment, you mentioned that we have seen competition intensifying in some of the categories. So can you elaborate in which categories you have seen of yours where you're seeing competition increasing? And what kind of steps have you taken?

[Sanjay Agarwal, executive]

The operating environment is what it is. There will be competition. There has always been competition. And in an environment where we are seeing some challenges from the rural market or some volume growth being a constraint, you will -- the challenges are there in all the categories. HI in our specific case has different challenges. But other than that, the rest all are large categories. There are many players, and we'll have to work in each market differently and that is what we are doing, yes.

[Operator]

The next question is from the line of [ Mr. Umang Shah ] from Banyan Tree Advisors PMS.

[Unknown Analyst]

Sir, first question was, have we taken any price cuts in the last 3 months in any of our products?

[Sanjay Agarwal, executive]

I think price cuts in the details that I just mentioned in the Detergent and in the Personal Care portfolio. And those are more in line with what the competition is. And also sometimes it's on a wait-and-watch approach because the cool prices. I mean when we were doing Q1 quarter, what, let's say, around $75, now it is running at around $90. So it will be a function of how the normal prices are and the competition actions. But yes, we have taken some price cuts in the last few months, and we'll have to wait and watch how we do it in the next few months as well.

[Unknown Analyst]

And could you give a rough range for the sale?

[Sanjay Agarwal, executive]

No sir, it will be difficult to quote the number.

[Unknown Analyst]

Okay. No problem. No problem. The second question was how has the market response to Exo Gel? How far -- like how successful have you been in expanding both Exo's and Pril's distribution?

[Moothedath Jyothy, executive]

So Exo Gel is right now only in Kerala, and we are still testing in the market. And there are a few learnings, which are there. And we'll -- I mean, that will go as per the thing. And Exo and Pril both in terms of distribution and different package sizes, all of those things are happening. And both of the brands are growing at double digits. So that's doing well, yes.

[Unknown Analyst]

Okay, okay. And one last question was what percentage of our detergents would be Henko?

[Sanjay Agarwal, executive]

It's a good business. We don't give any specific brand numbers.

[Unknown Analyst]

Okay. Sure. Not a problem. And just one part to it was that in terms of Henko, you have a brand ambassador who is Kajal Aggarwal, who I would not say the pan-Indian recognizable person, right? While in case of Maxo, you have someone like Kareena Kapoor who is a pan-India brand ambassador and -- but the product that you have is in certain states, right? So like how do you explain this difference between the 2?

[Moothedath Jyothy, executive]

See, I think you're wrong on Kajal Aggarwal. I think it's South and North market. I think she has done a couple of Bollywood movies as well. She is also well known in the south. So I mean, she's known in the country. And on Maxo, yes, for us, the market is majorly Northwest and East. And so the right person is on the brand.

[Operator]

The next question is from the line of Ms. Rucheeta Kadge from iWealth.

[Rucheeta Kadge, analyst]

My question was related to the raw material. So just wanted to understand how much is the crude links or raw material basically as a percentage of your whole raw material.

[Sanjay Agarwal, executive]

So crude and crude derivatives would be around 40% of our total purchase.

[Rucheeta Kadge, analyst]

40-60. And right now, sir, as the prices are inching up, how do we see our gross margins going ahead? Like have we hedged this or how this is exactly?

[Sanjay Agarwal, executive]

We'll have some -- it's a constant challenge where the prices if they are going up, then we'll have to take corresponding actions. But as we stand today, as I mentioned earlier, there has been some price cuts, which have been done. And if required, we will react accordingly if from the levels of crude, it should again moves up.

[Rucheeta Kadge, analyst]

So the reason I'm asking is it is that we've given you kind of a rough guidance of around 16% to 17%. So today, when today -- as of today, where do we stand? Like do we feel that we can still achieve it even if the crude prices inch at $80, $90?

[Sanjay Agarwal, executive]

Yes. So at current levels, we believe that for the full year, our margins could be in the range of 16% to 17% with the current level of crude prices.

[Rucheeta Kadge, analyst]

Okay. Okay. Understood, sir. And sir, just to understand, on a longer-term perspective, is the 15% to 16% margin fair to assume?

[Sanjay Agarwal, executive]

Ma'am, for now, we are looking at it from this year's perspective. And as I mentioned earlier in somebody else's question, we would. I mean our focus will be more on volume growth and increasing our A&P spend and also keeping an eye on improving our margin profile as well.

[Operator]

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

[Harit Kapoor, analyst]

I just had 2 questions. The first was on Fabric Care. So there has been a comment about lower price detergents, regional players coming in both lower-price detergents and dishwash bars and competitive intensity sharply increasing there. I was just wondering how you've seen it in the marketplace and what kind of actions that you've had to undertake to take care of part.

[Moothedath Jyothy, executive]

So Harit, yes, you're right. There has been a lot of intensity both from local regional players and also from competition. I mean that has always been there. Now it's a little more intense and -- but we are focused on our brands. We are focused on our distribution and our brand spend. And we are tackling each geography, each with different strategies and that has worked for us so far.

[Harit Kapoor, analyst]

Understood. Understood. And the context was really, is there a risk to the gross margins that we have done in the first half of the year? Or you've already seen this, you've dealt with it and you're dealing with it and it's still -- you still deliver this kind of margin. Is that the way to think about it?

[Moothedath Jyothy, executive]

See, we will have to, what is that, be proactive and take actions as and when required, depending on how the scenario is. And if that -- will it have an impact, that will have an impact. I mean we need to grow our brands. We are -- the intent is to grow our market share. The intent is to grow the brand. And if that helps temporarily, then maybe that will take a small listing. But our aim long term is to grow the brand. And whatever it takes to grow the brands, we'll do it.

[Harit Kapoor, analyst]

Great. Second question is on innovation. So now you have a fairly good amount of gross margin tailwind as well in the business, so I was just wondering whether the next, say, 6 to 12 months or even beyond, you start to see a higher kind of innovation intensity in the portfolio. And if yes, which parts of it do you think will get the most momentum?

[Moothedath Jyothy, executive]

See, Like we are at a stage where, for us, every category that we are present is important. And we have projects and innovation pipelines each of our categories lined up. As and when we feel the market is ready, and we are ready to invest behind those innovations, we will be investing behind those innovations as well.

[Harit Kapoor, analyst]

Okay. And my question is only from the context that you have more money to spend really from a P&L perspective now. So whether some of those initiatives get upfronted or they were already in the pipeline, you couldn't do it now, you can, just to diversify my question.

[Moothedath Jyothy, executive]

Yes, yes, it is there. So right, this year, we have chosen Margo and the variance to be focused. And like that, we will be taking as and when required, we'll be doing that. So things are there at the -- in the pipeline, and we'll be doing it.

[Operator]

The next question is from the line of Mr. Harsh Shah from InCred Capital Financial Services Private Limited.

[Harsh Shah, analyst]

I had 2 questions. First, basically, just trying to understand the growth of Fabric Care segment. so how divergent are the growth between the mass brands like Mr. White and More Light compared to the overall growth, which you have reported for the Fabric Care segment. I'm just trying to appreciate the kind of work which you've done behind Mr. White and More Light.

[Sanjay Agarwal, executive]

So all of them have done well. And as you know, I mean, Google category has gone double digit. So everything is in line with what our expectations are.

[Harsh Shah, analyst]

Okay. No, but I mean not looking for an exact number here, Sanjay, let's say the 10% is the growth which is lots of Fabric Care then. What would be the growth for the value brand within this segment? Will it be ballpark in that -- I mean, I'm assuming that it will be much higher compared to that, right?

[Sanjay Agarwal, executive]

Yes, yes, correct. So both -- I mean, all the brands were done in the same ballpark rate, what of the double digit.

[Harsh Shah, analyst]

Okay. Got it. And second question is basically on the margins. Now fundamentally, when we look at the business over a longer time, right, our HI share of overall revenue has come down from, let's say, mid-teens to now high single-digit, right? And that itself should aid EBITDA margin, right? Because when I look at your guidance of 15% to 17%, I think that probably there is some scope or itself to kind of exceed those levels given the kind of change in mix in our business.

[Sanjay Agarwal, executive]

Yes. So that's a fact. And we know the challenges, which are there in the category. And as Jyothy mentioned, and you see we have done -- we're trying to do incremental effort on our LV business so that it grows and we work towards the profitability.

[Harsh Shah, analyst]

Correct. No, no. My question was more from the overall EBITDA margin perspective, right, even, let's say, 5 years back when the share of HI was in mid-teens, we were in the 16%, 17% ballpark EBITDA margin range. And now that the share of HI has come down to high single-digit overall business, right? Fundamentally, because HI is kind of a loss-making business for us, fundamentally itself the margin directly should go up for us, right?

[Sanjay Agarwal, executive]

Yes. So Harsh, I mean, see, you'll have to look at each business categories. And if we look at it overall, our A&P spends have gone up. So yes, the overall business is giving us a higher absolute profit and one of the business is just making lesser margins or negative margins. And we are compensating on a portfolio basis.

[Harsh Shah, analyst]

Okay. So the structural thing here is basically to invest behind brands to get more volume growth for whatever website it is getting, right, and to hold on to the low level of margins?

[Sanjay Agarwal, executive]

Yes, that's correct.

[Harsh Shah, analyst]

Okay. And the third -- last question is basically now we have close to INR 250-odd crores of cash on our books, right? So how do we kind of intend to view that maybe probably, I mean, returning to shareholders? Will that the dividend policy continue to remain same? Or I mean, are we looking at acquiring something? I mean your comments on that.

[Sanjay Agarwal, executive]

So nothing new. We'll keep our capital allocation strategy same and we'll be conserving the current cash and the future cash for our future growth initiatives, which could include inorganic opportunities at the right time.

[Harsh Shah, analyst]

Okay. But it's basically within organic, if I could just switch your brain basically, would we look at more like a B2C kind of company or more like a traditional brand basically established with positive margins? What basically is the thought process here of the management?

[Sanjay Agarwal, executive]

So Harsh, it's too early to comment on that. It will depend on what opportunity comes in and how it fits into our overall portfolio. So that is where -- we are open for everything. And we'll see what -- I mean, time will tell what we will be able to do. And it has to make sense. It's just not to be done only for making usage of cash. It has to actually add value to our overall portfolio.

[Operator]

[Operator Instructions] The next question is from the line of Mr. Ravi Purohit from Securities Investment Management Private Limited.

[Ravi Purohit, analyst]

Most of my questions have been answered. And all the best.

[Operator]

The next question is from the line of Mr. Amit Purohit from Elara Capital (India) Private Limited.

[Amit Purohit, analyst]

Congratulations on a good set of numbers. I just wanted to know on Crisp & Shine, Henko Liquid and Ujala Liquid. All these put together would be what portion of the total Fabric Care, just an indicative would it be low single digit or mid-single digit and the acceptance of among this, what is the acceptance beyond South market from consumer perspective?

[Sanjay Agarwal, executive]

So I think all the liquid portfolio is doing well. Crisp & Shine, Henko Liquid, and Ujala, all of them are growing well as per our expectations. And difficult to give a number, specific number. All we can say is that we are investing in all the 3 brands the subcategories you mentioned. And they all are doing well, and we are very optimistic on the future growth for each of these brands, which you mentioned.

[Amit Purohit, analyst]

Okay. And this is beyond South as well, right?

[Sanjay Agarwal, executive]

Yes, that's right.

[Amit Purohit, analyst]

Okay. And any channel specific, which is doing well, maybe modern trade or e-com where the salience is higher for these kind of products? Or you're saying across GP also we are seeing the growth?

[Sanjay Agarwal, executive]

No, obviously, I mean, liquid portfolio will be doing much better, more in the urban cities and metros and your modern trade and e-commerce. And that is where the target market is there. I mean GP also is available. so it is growing well in all the categories. Numbers are very small, I mean, at this point of time.

[Amit Purohit, analyst]

Okay. And in terms of pricing action that we have taken, what is the time line in which we have taken some pricing action that you indicated on the detergent portfolio?

[Sanjay Agarwal, executive]

It's a moving thing. So there will be some things you have to use. Something would have been taken 2, 3 months back. Some would be, as we speak, things are getting done. So it's a constant thing because the pricing or the raw material prices have also come off after long point -- I mean, after a long time. And we have to be in line with the competition and the best value [indiscernible].

[Amit Purohit, analyst]

And lastly, on the ad spends, you indicated that you would continue to invest beyond brands. So is there any specific number that you want to reach out to, say, maybe 9%, 10% or 8%, 9%? Any range that you're looking at? Or do you take it as it comes?

[Sanjay Agarwal, executive]

Yes, I think maybe more as it -- as time passes by.

[Operator]

[Operator Instructions] The next question is from the line of Mr. Vishal Punmiya from Yes Securities.

[Vishal Punmiya, analyst]

Congratulations on strong numbers. I actually had a question on the distribution. If I look at the 4-year CAGR for all those categories except HI, we have had kind of very similar growth of around 13% across big care, the short and personal care. And you did mention that one of the key drivers has been geographical expanding.

So if you could share some insights in terms of the quality of distribution expansion? Are this totally new markets or are these markets where we were present at a smaller level, and now we are basically coming on with the entire portfolio in those markets? Any insights will be really helpful. And also, if you could share your internal targets or the number -- numeric distribution target that you aim to achieve in the next couple of years in terms of total distribution and also your direct reach numbers, that would also be very helpful.

[Moothedath Jyothy, executive]

Yes. So last 3, 4 years, we have been consistently adding outlets. And that addition is across the country. No specific geography as such. For us, we need to grow all across pan-India. And right now, we have reached at 1.1 million outlets in direct reach, and direct reach put together at 2.8 million outlets. We don't share targets, sir, but we are on our journey to keep increasing outlets year-on-year.

[Vishal Punmiya, analyst]

Okay. So looking at the current total reach versus what the industry reaches, there is a long way ahead. So I would assume that this would keep on growing at a very high rate or at least for the next 4 to 5 years, right?

[Moothedath Jyothy, executive]

Yes, we have to continue our distribution, and that will be one of our focus areas.

[Operator]

Ladies and gentlemen, that was the last question for this session. I would now like to hand the conference over to the management for closing comments.

[Sanjay Agarwal, executive]

So thank you all for attending the call, and I hope we have answered most of your questions and your queries. If you still have any further queries, please reach out to us. We'll be happy to address all of them. Wishing all the participants Happy Diwali and all of you have a joyous celebration with your family, friends and colleagues. Thank you, Karan and team at ISEC for organizing this conference call. Thank you very much once again.

[Operator]

Thank you, sir. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.