Earnings Call Transcript Analysis Report #
Financial Performance #
Key Metrics #
- Revenue: India business reported “robust high teen revenue growth.” International business sustained “double-digit constant currency growth momentum.” Consolidated revenue growth reached a “13-quarter high.” On track for “double digit consolidated revenue growth for the full year.” Foods business scaled to ₹1,000 crores ARR; Digital first portfolio reached ₹600 crores ARR.
- Volume Growth: India business saw a “sequential uptick in underlying volume growth,” also reaching a 13-quarter high. Parachute volume impacted by ~1% due to shrinkflation. Aiming for “top quartile volume growth in the India business.” VAHO declined 2% in value but improved sequentially.
- Margins: “Transient pressure on profitability” acknowledged due to higher-than-expected input inflation (copra). Currency headwinds had a “2% impact on consolidated EBITDA.” Gross margins in Foods expected to improve gradually with scale. Digital first portfolio targeting “double digit EBITDA margin… by FY27.” Beardo specifically “on track to deliver double digit EBITDA margins.” The overall digital portfolio has moved to a “very-very low burn… low single digit” negative EBITDA, targeting positive EBITDA next year.
- Profitability: Management aims to “hold about 20% operating margin for the year” (revised slightly down from 20.5% mentioned implicitly due to cost pressures). Foods portfolio gross margin stated as “definitely far higher as compared to edible oil portfolio” currently, with operating margin expected to follow suit with scale.
Comparison #
Performance marks a significant improvement, with revenue and volume growth at 13-quarter highs despite the inflationary environment.
Guidance #
Reiteration of aiming for double-digit consolidated revenue growth for FY25 and near/medium term. FY25 Operating Margin guidance adjusted to ~20%. Confident of delivering double-digit revenue growth and “healthy profit growth” for FY26, though specific margin guidance deferred.
Growth/Decline Areas #
Strong growth in overall India revenue, International (constant currency), Foods, and Digital First portfolios. VAHO portfolio remains subdued (-2% value YOY) but showed sequential recovery and grew 3% excluding the bottom-of-pyramid (BoP) segment. Parachute showed resilience despite price hikes impacting volume slightly.
Strategic Initiatives & Business Updates #
Diversification #
A core strategic pillar. Foods and Premium Personal Care (including Digital First brands) now constitute 21% of the domestic business revenue (9M FY25), clocking a combined ARR of ~₹1,900 crores. Management views this as a “phenomenal shift in the growth trajectory.”
Foods Business #
Reached ₹1,000 Cr ARR target set in 2020. Saffola Oats leads with double-digit growth. True Elements and Plix scaling well. Focus on building scale in 3-4 key categories (Oats, Honey, Soya mentioned, Muesli/Snacking potential noted). Strategic focus on improving GT distribution for Foods via Project SETU.
Digital First Brands #
Reached ₹600 Cr ARR. Beardo nearing double-digit EBITDA margins. Portfolio targeting double-digit EBITDA by FY27. Emphasis on “sustainable profitable growth” (25-30% target) rather than high-burn growth. Specific GT strategy involves limited hero SKUs and differentiated packs. Plix leveraging D2C, diversifying beyond ACV, positioning as ‘hair and skin food’, and exploring international markets (ME, US). Marico providing supply chain/R&D support.
Channel Strategy #
Proactively addressing GT sluggishness via “Project SETU” (extended to 11 states), segregating packs, MOP implementation, and easing working capital pressure for distributors. Aiming for differential growth in urban/premium portfolios via organized retail and e-commerce. Alternate channels (MT, E-comm incl. Quick Commerce) are key growth drivers (~30% salience).
Core Portfolio Management #
Taking price hikes in Parachute due to firm copra prices, monitoring consumption impact. Saffola Edible Oils stable despite price hikes. VAHO strategy reset: focusing ATL investment on mid/premium segments, avoiding unsustainable BTL competition at BoP.
Brand Building #
Commitment to investing in A&P across input cost cycles, resisting cuts for short-term margin management.
M&A #
Highlighted unique M&A strategy involving founder earn-outs as a win-win.
Sustainability #
Sustainability 2.0 framework progressing.
Market & Competitive Landscape #
Industry Trends #
FMCG sector shows “reasonably steady demand.” Rural improving (“growing at 2x suburban”) driven by government schemes, MSPs, good crops. Urban stable but sequentially soft, especially mid/bottom pyramid due to inflation/wage growth. HPC categories outperforming Packaged Foods YoY. Pricing growth up sequentially across sector due to commodity inflation.
Competitive Positioning #
Marico claims over 90% of its business gained/sustained market share (MAT). Parachute gained share & penetration. Saffola Oats maintained #1 position. VAHO gained value share but facing “unreasonable competition” via “disproportionately unsustainable BTL” in the BoP segment. Management explicitly stated, “We don’t want to compete with [this] because we believe in long term equity building.” Foods market seen as having high growth potential despite competition due to low penetration; Saffola brand equity seen as key advantage. Plix navigating a “crowded” personal care space via differentiated ‘skin/hair food’ positioning and D2C focus.
Market Challenges/Opportunities #
Key challenge is navigating input cost inflation and its impact on margins and consumer demand (especially BoP). GT channel sluggishness is another major challenge being addressed. Opportunity lies in continued rural recovery.