Transcript DaburIndiaEarnings Call-Jul28-09 Call/100096_20090729.pdf · quarter. Dabur’s largest...

“Dabur India Limited Q1-FY10 Results Conference Call”

July 29, 2009

Dabur India Ltd.’s Partipants

Mr. Sunil Duggal - Chief Executive Officer Mr. Rajan Varma - Chief Financial Officer Mr. Ashok Jain - General Manager - Finance & Company Secretary Mrs. Gagan Ahluwalia - AGM - Corporate Affairs

Dabur India Limited July 29, 2009

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Gagan Ahluwalia: Thank you Marina. Good afternoon ladies and gentleman on behalf of the management of

Dabur India Limited, I have pleasure in welcoming you to the post results conference call of

the company pertaining to the 1st Quarter of fiscal FY2010. Present here with me are Mr.

Sunil Duggal, CEO, Mr. Rajan Verma, CFO and Mr. Ashok Jain, General Manager,

Finance and Company Secretary. We will start the conference with a brief address by Mr.

Duggal followed by a Q&A session. I now handover to Mr. Duggal for his address. Thank

you.

Sunil Duggal: Good afternoon, ladies and gentleman. I welcome you to the Dabur India conference call

regarding the results for the Quarter ending 30th June 2009. Dabur India has delivered a

growth of 22.1% in consolidated sales during the 1st Quarter ended 30th June 2009. The

company continues to witness strong volume offtakes with 16% volume increase during

the quarter. Net profit on consolidated basis registered an even higher growth of 29.4% for

the quarter. On 25th June, 2009, the company completed the acquisition of Fem Care

Pharma thereby consolidating its financials for six days of the quarter.

The top-line growth has been led by robust performance of our domestic business of

Consumer Care Divisions (CCD) and continued momentum in the overseas business,

which witnessed a growth of 17.5% and 52.9% respectively. Contribution of the overseas

business to overall sales for the quarter stood at 20%.

Consumer Health Divisions, CHD, which is our domestic Ayurvedic and OTC products

divisions, reported a growth of 12.5% for the quarter. The growth in domestic FMCG

business of CCD was more or less uniform across the categories. It was particularly strong

in categories such as Hair Care, Toothpastes, Foods, Skin Care, Digestives and Health

Supplements.

Hair Oil continued the momentum in the Q1FY10, reporting a growth of 15.8% for the

quarter. Dabur’s largest domestic brand, Dabur Amla Hair Oil reported a 14.3% growth.

Anmol Coconut Oil posted a growth of 42.7% lead by marketing activities focused on

some of its strong markets. Vatika Hair Oil, our value-added coconut oil offering

registered a growth of 15.5% for the quarter with the new brand campaign connecting well

with the consumers. Two new products which went into test markets during the previous

quarters that is Dabur Amla Flower Magic and Vatika Enriched Almond Hair Oil have

been well received in the market and will be rolled out nationally during the coming

months. Shampoos continue to outgrow the category with a strong growth of 48.6% for the

quarter. Dabur brands gained further momentum with its market share going up to 7.3%

during the quarter vis-à-vis a 6.4% for the year ending March 2009 as per AC Nielsen.

Dabur Total Protect Shampoo, a health shampoo having Ayurvedic ingredients, which was

under test market has been launched in July 2009.

Health Supplements reported a growth of 17.2% during the 1st Quarter. Dabur Honey grew

by 15% and Dabur Glucose by 34.1%. Glucose brand was supported by a new flavor


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launches of Lemon and Orange, A National Level Bowling Talent Contest, Ace of Pace

and the signing of Zaheer Khan as brand ambassador. Growth of honey was sustained

through new packaging, activation campaigns and attractive promotion strategies.

Chyawanprash sales for the quarter were moderate as summer is traditionally a lean period

for the category.

Baby and skincare witnessed a growth of 19.7% during the quarter. Dabur Gulabari along

with its variants grew by a strong 47.2%. New variants of Dabur Gulabari, cold cream,

lotion and face freshener have been well received by the market and are driving the

brand’s growth. Dabur Lal Tail recorded a moderate growth of 4% but it is expected to do

well with the new campaign going on air soon. The category is gearing up for the launch of

its new Ayurvedic skincare range under a new brand, which is going to be unveiled in the

next few days.

Oral Care category recorded a growth of 7.8%. However toothpastes grew by impressive

20.7%, which is three times the category growth of 7.25% as reported by AC Nielsen

during the same period. Babool Dabur’s largest toothpaste brand reported 22.8% growth

led by new initiatives in the brand. Dabur Red Toothpaste continues to post impressive

performance with 18.4% growth. Meswak Toothpaste recorded a strong growth of 31.8%

continuing with its thematic communication. LDM the toothpowder brand however

declined by 8.6% as the category contracted during the period.

Digestives posted good performance with growth of 18.4% in the Hajmola brand including

both tablets and candies. Growth trajectory in Hajmola has gained strength post the new

positioning of Hajmola. New variants along with launch of 0.50 paisa SKU and new

positioning has led to revived momentum in the brand.

Homecare reported a growth of 7.9% for the quarter. Homecare’s growth was impacted

due to slowdown in modern trade channels as 20% to 25% of the category sales come from

these channels. Sanifresh the toilet cleaner brand grew by 50% for the quarter. Odomos

recorded a growth of 6%, which was lower due to unprecedented heat wave across the

country resulting in reduced incidents of mosquitoes. Odonil the air freshner brand has

been under pressure. However some new interesting initiatives are lined up for the rest of

the year to revive the brand.

Foods despite the modern trade slowdown delivered a robust growth of 21.6% for the

quarter. Real franchise including Activ grew by 17.7% with Real Juices growing by

19.1%.

Homemade the culinary brands had another strong quarter of 37.8% growth. Growth in

Real franchise was led by aggressive ad campaign to establish a superiority and also the

launch of new variants under the real franchise namely Peach, Blackcurrant and Apple

Nectar. Activ brand has been promoted with no added sugar campaign and has grown with

the consumer franchise.


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The international business reported impressive 52.9% growth during the quarter. This was

led by a strong momentum in the core markets that is GCC, Egypt, Nepal and Bangladesh.

The company’s strategy to invest aggressively in these markets and enter new adjoining

markets has continued to deliver and the business is experiencing good volume led growth.

Volumes accounted for around 60% of the increase in sales.

On the operating front, Dabur’s consolidated EBIDTA margin expanded by 70 basis points

to 16.9% for the quarter led by savings in material cost and operating leverage despite

increased investment behind its brands in the form of higher adpro expenditure. The

company is continuing to invest behind its brands and new product initiatives to drive

strong revenue growth in the coming months. Overall I am delighted to share with you the

company’s performance, which is one of the best in the recent times. As we go into the

year we remain committed to building our business and capturing the opportunities that

exist in our markets. With this I would now open the house for Q&A session, thank you.

Abneesh Roy from Edelweiss Securities

Abneesh Roy: Sir, Congratulations on extremely good set of numbers. My first question is on the

international revenues, which have grown by 53%. What I wanted to understand was

growth in terms of existing products, that is, if we don’t take the new products, which have

been launched, and the new countries, which you have entered, what would be the growth

in same geographies YoY?

Sunil Duggal: It would not be very much different from what is the overall reported growth, because,

new geogrtaphies have just begun. So the sales volume there is very, very low. So it’s

basically existing geographies but there is a very rapid growth in some North African

markets which I would not consider new because we have been there for a couple of years,

but they continue to show growth of around 50% to 60%. But markets like Egypt, Nepal,

Bangladesh and even Saudi Arabia, which are doing extremely well. So we are getting a

very good growth from there. And the only market of significance, which did not do well

was Nigeria which showed flat growth inconstant currency terms.. Other than that we have

seen very good growth across the whole set of markets, which we are operating in.

Pakistan is another laggard because of obvious reasons so apart from Bahrain, Pakistan and

Nigeria every other market has done well

Abneesh Roy: Sir, do we have any target in mind in terms of how much international sales will be say

three or five years down the line? Because the international sales are growing much faster

than the Indian business sales. So is that a planned strategy or is it happening more because

you are entering new countries?

Sunil Duggal: There is more headroom there. India I wouldn’t say is saturated, far from it, but he markets

there are in a growth phase, which is a little bit ahead of India at least in terms of consumer

staples growth. So while in India you can take FMCG growth in the low teens. In many of

the countries it is almost twice of that. So I do see at least a few more years of growth in


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international business, which would be at least 50% ahead of India growth and therefore

the share of the international business would creep up perhaps to about 25% three years

from now.

Abneesh Roy: Sir coming to Homecare, we have now seen two quarters wherein the growth has been

much lower than other segments, but if I see the modern retail clearly some of the big

listed players are reporting good same store growth month-on-month which has not been

seen in your numbers. And you said one of the key reasons for home care slowdown was

the slow down in modern trade. So wanted to understand where is the disconnect?

Sunil Duggal: Same store growth presents only a very limited side of the story because the same stores

obviously are the ones, which are doing well. What is not revealed by this is a large

number of stores who are not performing well and which have been closed down. So I

think one has to look at modern trade in an aggregate term and not just in terms of same

stores sales.

Abneesh Roy: Sir coming to your A&P spends we have seen a 190 bps increase in ADPRO, now since

you are very confident of the Fem Care business and Adpros are expected to rise up in

second half, what is the kind of overall number you have in mind in terms of A&P spends?

Sunil Duggal: For the year, in between 14% to 15%. We will try to hold it more like 14% but if need be

we will spend closer to 15%. So I think we have front-loaded the spends because of some

new initiatives which are there either in the pipeline or in the market. For the full year I

think 14-14.5% is a decent figure which we probably will endup spending.

Abneesh Roy: And sir lastly my question is on Real Burrst if you can share some numbers?

Sunil Duggal: It is really at the test stage. We have not even advertised, we have just done some ground

level promotions and activities, because we managed to catch only the tail end of the

season because of logistical reasons. So there was no point in doing a full fledged launch

going into the monsoons. So what we will do is a very large launch perhaps in the month

of March and that is what the plan is and maybe we will do regional launches in the month

of September-October. So the numbers are small, but then that was the plan.

Abneesh Roy: No but is there any delay in the national launch sir?

Sunil Duggal: No it is just the seasonality issue. Brands like Burrst unlike say Real or Real Activ is a fruit

drink; they tend to be far more seasonal in terms of their consumption patterns. So doing

the extensive spends off-season does not make much sense. So we have done about 2

Crores of sales but that is not reflective of the potential of the brand. I think we will do

much better than that, once we get into national rollout which I said will happen just before

the season begins around March of next year.

Abneesh Roy: Why I am asking this is I see a very good growth in your Real franchise which is 19%, and

modern trade has also slowed down which was eating away some part of your growth. Is


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that a planned strategy or is it that Real Burrst has met the internal benchmarks? You did

say that it has met, but has it met all your internal benchmarks?

Sunil Duggal: I think it has met most of our internal benchmarks. Little bit of fine tuning required

regarding the flavor profile which is inevitable, but by and large we are very satisfied with

the mix. We intend to continue with it more or less in the way it has been put into the

market, but it is a high investment category so there is no point putting in the investment

when the season is not right for you.

Abneesh Roy: Okay, that is all from my side.

Percy Panthaki from HSBC Securities

Percy Panthaki: Hi sir, I know that Fem has been merged with Dabur only towards the fag end of Q1, but

can you just give us an idea about the profits and sales of Fem for the period April to June?

Gagan Ahluwalia: April to June sales were in the range of around 30 Crores and there was a very small profit.

Actually there were some extraordinary expenses, which reduced the profits.

Percy Panthaki: What was the extra ordinary item?

Sunil Duggal: There were one time expenses that were provided on a number of aspects like provisions

for implementation of SAP and few other IT licenses that were bought and some Adpro

that we have spent. So all these one time expenditures really brought t profit down for the

1st Quarter.

Percy Panthaki: Okay. So is it a positive number in terms of profit or is it a loss?

Sunil Duggal: No it is a positive number; it is a very small positive number.

Percy Panthaki: Secondly sir, on the commodity cost front, can you give what is your view on how you see

commodity prices panning out and also can you sort of give an understanding as to what is

the general time lag between commodities prices going down and the time at which this

actually affects your P&L, generally is it about one quarter or is it more?

Sunil Duggal: Typically I would say average is around 60 days that is kind of timelines we have, unless

you do a cover. If you cover commodities, which we have in many cases for up to

September/October/November then of course the picture is different, but if we are buying

spot then typically we have around 45 to 60 days of further inventories or commitments.

Percy Panthaki: For the commodities that you use where are you seeing, are you seeing first of all any

inflation happening in the last two to three months or not?

Sunil Duggal: Not significantly there were some petroleum inflation on the back of higher oil price, at the

end of the year it went around $40 it is more like $65 now, so there was some inflation on


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that front but we have got most of our hydrocarbon products covered till around

August/September and going forward if oil prices go northwards then there would be some

inflationary impact but that may not be the case. The other items which are mostly agri

products, the ones which have really been impacted by inflation are the sugar and sugar

related products including honey, so that has a been a bit of a drag and it has been there in

the 1st Quarter and it is likely to continue going forward. Other big items, which are edible

oils the picture is little bit unclear as to which way the price movements would be. There is

a scenario which says there would be high inflation another one, whichsays that no

inflation. So it is a little unpredictable but I think the material cost environment in the 1st

Quarter has been very benign and it may not remain quite so much in the quarters to

come.Certainly in the 2nd Quarter we will not see any significant impact but outlook for the

3rd Quarter is hard to predict. Having said that there could be some prices increase, which

we could take I think there is pricing power available to us even now to neutralize the

impact of any significant amount of inflation. So, on the margin front I am not particularly

worried at this point in time.

Percy Panthaki: Okay. And secondly your volume growth this quarter of 16% is probably one of the best in

the last few quarters, what would you attribute that to?

Sunil Duggal: It is basically big investments behind our brands. One of the reasons you see a high

advertisement ratio is that it has moved the brands off the shelves into the consumer

homes. And if we continue to spend ahead of our competitors I think our volume growth

will continue to be robust. Second thing is that the, rural story continues unabated and

hopefully it would still do so. So we are still seeing considerable amount of rural demand

happening and there is no let up of that at least in the 1st Quarter. Now you may say that

there could be some flattening of rural demand if the monsoon in particular parts of the

country is not so good, but we believe we could be compensated by revival in urban

demand so it might net itself out, but this volume growth which we have seen is perhaps

the highest which we have ever done and even though it may not always be possible to

sustain this level of growth, it is unlikely to slacken in any significant way.

Percy Panthaki: Sir what would you attribute a pickup in urban demand to?

Sunil Duggal: I think the urban economy has faced a kind of revival compared to where it was one year

ago. So in the context of the past the urban scenario does look better in terms of demand,

in terms of availability of cash with the consumer, there have been some improvements.

Percy Panthaki: My understanding was that urban demand never really slowed down and the difference

between urban and rural happened because rural actually accelerated whereas urban

remained at where it was few years back?

Sunil Duggal: You are right it remained in the lower teens and rural went up to around 14% so in the

sense there was a disconnect, but I think the urban demand was a little disappointing last

year and we would like to see it pickup and there is every possibility of it doing so.


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Percy Panthaki: Okay thanks a lot sir and all the best.

Vivek Maheshwari from CLSA

Vivek Maheshwari: Hi sir. First on the IBD, the growth is like 50% plus, is this on a constant currency basis?

Sunil Duggal: This is translation into Rupees. In constant currency there would be a 17% translation of

currency gains. So effectively it is 35% in constant currency.

Vivek Maheshwari: And Mr. Duggal if I remember correctly you had mentioned last year that you would

expect international business to perhaps grow at 25% in FY2010. So now do you think that

this kind of momentum of even 35% on a constant currency basis is a very good growth?

So do you expect this momentum to continue for the balance nine months or we could see

some slowdown there?

Sunil Duggal: 35% constant currency over the full year appears possible there would be fluctuations on

account of base effect as we go forward, but 30% to 35% is definitely predictable. Of

course the currency gains will now start coming down as and when the differential

becomes narrower between the last year exchange rate and the current year, but 30% to

35% growth appear to be visible, I do not see, that being impossible.

Vivek Maheshwari: Okay sure. And on the volume growth, 16% volume growth is for the consolidated entity,

how much would be the volume growth in case of domestic business? Is it around the

same?

Sunil Duggal: For Consumer Care Division, the numbers are 3.5% price and 14% volume. For Consumer

Health it is 4.3% and 8.2%, for overseas 6% price, 30% volume and then translation gains

of 17%. So that’s how it stacks up.

Vivek Maheshwari: Okay sure. On your skincare business you have mentioned that you would be launching an

Ayurvedic skin cream in the 2nd Quarter. Now this would be under Gulabari range or it

would be under any other separate brand? Because i believe you are contemplating

something under Vatika.

Sunil Duggal: No, Vatika will remain siloed into Hair Care; it will not ever have any skincare offering at

least in this part of the world. This will be a new brand under the overall umbrella of

Dabur. So it will be Dabur sub-brand, a little bit like Dabur Gulabari, but it is not going to

be either the Vatika or the Gulabari franchise, it is going to be a separate sub-brand

altogether, but it will draw sustenance from the Dabur equity and it will be housed under

the Dabur equity.

Vivek Maheshwari: Okay. And basically when you say 2nd Quarter you would be test launching it in the 2nd

Quarter and then how do you go about the launch further?


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Sunil Duggal: It will be in market in test launch form in parts of the country. Then we will see how it

performs and then accelerate its introduction into other parts of the country.

Vivek Maheshwari: On the retail business sir, I mean what are the plans for this year or maybe for next 12 to

18 months?

Sunil Duggal: Well we have been shutting some stores, which were unprofitable and we continue to do

so. At the same time we are opening new stores, which will almost guarantee good

profitability by virtue of the fact that they will be on revenue sharing business. So the

whole business model is being reconstructed in favor of revenue sharing approach. And in

the current realty environment that seems to be working fine because there is enough

quality property available on a revenue share basis. So we have 10 stores now, I think we

will open between 5 to 10 more. So obviously the ramp-up is going to be slow, as the

realty environment still is fairly rocky at this point in time, but we end the year with a very

moderate losses and what is more important is that at the store level at least for the new

stores would be more or less breaking even. So I think the business model in this current

avtaar seems to be capable of being scaled up, perhaps next year when the environment

becomes more normal. And we have far more confidence now in the rigor of the business

model then anytime before.

Vivek Maheshwari: Which means, store, if it opens today it will breakeven in the first year itself, that is what

you are trying.

Sunil Duggal: In the first 12 months of the business, it will breakeven and even to begin with the bleed

would be very-very moderate because it is revenue sharing so there is no upfront cost in

terms of rentals.

Vivek Maheshwari: Okay understood. And lastly on the Oral Care, the growth in toothpaste is back to 21% but

overall Oral Care has grown at 7.8% which means that the volumes have contracted quite a

bit in toothpowder category, am I understanding correct?

Sunil Duggal: That is right, toothpowder contracted by 8% to 8.5%. Now that is a category issue and

there seems to be no easy solution to that and I have been repeating this that this is a

category which is certainly not on a growth path and we have to manage the decline, but

the decline has been a little bit more severe than what we anticipated in the current quarter.

We believe that the things would be better in the next three quarters form LDM and we

would be close to having 0% or flat growth, but the 1st Quarter has been a big drag as far

as toothpowder is concerned. So path again for us remains to manage decline and to

continue robust growth in toothpaste to make up for that loss, but I think that the revival in

the toothpaste has been very heartening, last year we did around 1/3rd of this kind of

growth. And some of the brands were not doing well, but all the three brands are now

firing and we are getting very strong growth in brands like Babool, which grew by 5% to

6% last year. So we indeed remain the fastest growing major player in oral care category,


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our growths are almost three times that of category. And I think we will be now steadily

strengthening our position as a strong number 3 player.

Vivek Maheshwari: Okay. And one last question on Fem Care what is the plan because when you had

announced the acquisition you had mentioned about margin expansion that there is a lot of

cost rationalization that can be done. So where can we see Fem by the end of FY2010, I

mean if you can give some maybe possibly a guidance or something in terms of either

profits or top-line?

Sunil Duggal: Well not a guidance, but I will give you some feel of how we see the business. We believe

this is an extremely attractive business which has been under invested in the last two years

and urgently requires a fairly massive dose of investment in the form of A&P. And that is

one of the reasons why you see not very great numbers at least as far as bottom-lines are

concerned in the 1st Quarter, but we believe that the payoff from these investments would

be very quick. So I am not looking at a huge amount of profitability coming from the Fem

acquisition in the current year, we probably will wind up the year doing around the same

as what we have done last year in terms of profit but this would be on the back of very

significantly higher investment in adpros. So obviously there would be a margin expansion

on the back of lower raw material cost and lower SG&A, but most of it will be sucked up

by a higher A&P. So I think the next year we would be poised to really expand this

business, both in terms of revenues and profitability certainly in terms of profitability but

we have to build the foundation. And it is too valuable a property to not to invest in so that

is what we would be doing in the current year.

Vivek Maheshwari: And there would be opportunity both in terms of penetration led growth as well as new

launches under Fem Care, right?

Sunil Duggal: Yeah I think the new launches are already on their way out, there is a herbal bleach and a

herbal depilatory cream. The herbal bleach has hit the market, the depilatory cream is

going to do so any day. So we need not look very aggressively at new product

introductions. I think it’s more in terms of consolidation of existing portfolio and renewed

investment in the core brands of bleach and depilatory. So these two new products would

probably be enough for the next 12 months or so, then of course there would be smaller

introductions in terms of handwash, soaps etc, but I think we really have to get the

business back in terms of regaining its brand position in the consumers mind, it can only

be done through very high investments and A&P.

Vivek Maheshwari: Understood, thank you so much sir,

Shirish Pardeshi of Anand Rathi

Shirish Pardeshi: Good evening Sunil, congratulations. Just a couple of questions, in the Shampoo category,

if my understanding is correct, the antidandruff segment is showing negative growth, when

I am talking about category growth, and the Shampoo overall if you see it is showing


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positive growth. However you have consistently grown more than 30% to 35%, what could

be the reason for the same, I mean is there any profile change of the products or is there

change in consumer profile which is preferring Vatika brands or is there any new activities

you have scheduled for Vatika?

Sunil Duggal: I think we are very aggressive in launching new variants of Vatika, now there are five

variants and fortunately everyone of them has done well, normally when you launch a

couple of variants you normally kill one of the existing ones so as to keep it balanced, but

here everyone that we have launched whether it is the White Shampoo or the Black Shine

or the earlier Green, have all performed well and all have developed their own franchise.

So that has really kept the portfolio alive and kicking. Also I think we have been very

aggressive in the last mile distribution for shampoos and that has driven a lot of our growth

particularly in the rural areas in most of the country where the demand for shampoo has

been surprisingly very strong. The next leg in our growth story would be to completely

revitalize antidandruff part of a portfolio which was the bit of laggard. Earlier on we had

an antidandruff shampoo which was the yellow one as just another variant. So we have

taken it out of the current shampoo portfolio and re-launched it in three variants as a

independent entity that is how the antidandruff category operates. So I think in the next

three quarters a lot of growth would come from the antidandruff piece. So I am pretty

confident of maintaining this traction. And one of the reasons why we are able to grow

very fast is that we are still only at 7% share so I think there is a lot of headroom for us. The

growth also would be little bit harder to come when we are in the double digits etc, but that

we have some way to go before we reach there.

Shirish Pardeshi: Would you be able to share how much volume we draw from the sachet as a percentage to

the overall sales of shampoo?

Sunil Duggal: Around 70% to 75%, which is typical of the category so it is not that we are more sachet

driven than the market.

Shirish Pardeshi: Is it higher in antidandruff?

Sunil Duggal: It is, well it used to be higher now basically what happened is that antidandruff used to be

a Re.1 sachet and we were not too happy about performance of our antidandruff portfolio.

So we re-launched it and did some major improvement in terms of product and the whole

marketing mix and put it at Re 1.50/sachet, which is a category price. So as a consequence

our revenue has gone up, but our tonnage has shrunk, but that is not unsurprising. So in

antidandruff the mix would be more like 55% to 45% in favor of sachet, which is

considerably different from the regular one. So I think but that it will take time for the new

prices to stabilize, but overall the revenue growth in antidandruff is very strong.

Shirish Pardeshi: My next question is on oral care, if you can just share, we have done whatever is required

for the category. What kind of oral care growth we can expect and I just hear that the

category is not growing that significantly, what is working for us, actually at this time?


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Sunil Duggal: I would like to divide this into two parts, I could see the toothpaste category growing at

15%. I think that is the reasonable level to look forward to, and I will be happy if

toothpowders we can have a flat growth rate, that would be pretty decent performance but

it is more likely to be in the range of 0% to -5%. So the blended growth would be more in

the region of 10% to 12% that is something which is fairly conservative level of growth.

Shirish Pardeshi: In the presentation you have mentioned that the growth has been made by launch and re-

launch, is there any new variant of Babool we have launched or what is it?

Sunil Duggal: We launched a new variant but that has not contributed to the sales during the quarter as it

was launched at the fag end of the quarter. It is basically the Rs.10 price SKU, which did

badly last year. That has staged a strong revival in revenue, as it was a matter of time

before we were able to revise the portfolio, which is what has been happening. Now red

toothpaste is a very steady performer. It is already growing at 15% to 20%, so that has not

changed. And Meswak of the small base has been typically growing at around 25% to

30%. So the revival basically has come from Babool. Even last year when the oral care

portfolio, did not do as well as it should have, the drag was really Babool. So that is what

we really had to fix, the other two brands are very-very distinctive and have very loyal

franchise so you would not find huge movements up or down in terms of the growth rate.

Shirish Pardeshi: Just wanted to check because the competition is going to come back again and Unilever is

also trying to re-launch the entire oral care portfolio, these are all the reports we have been

hearing from the market. What is going to be the impact on the overall category? Because

we are at the low end and Babool is now re-positioned to look at the growth. What would

be the category growth would it be higher than what we are estimating at this point of

time?

Sunil Duggal: I think the growth we have seen in the current quarters of 20% to 21% is a little bit on the

higher side, so again I would like to moderate my estimates to more like 12% to 15% as I

said for toothpaste. But having said that we have demonstrated our ability to defend our

portfolio as well as go aggressive on our portfolio when it needs to be so we can play both

offense and defense. And the recovery, which you have seen over the last year’s

performance I think is a point in that direction, we are able to play with the big boys and

compete with them and we have got enough armour to handle that.

Shirish Pardeshi: Okay, just lastly, with the change in MAT rate, we have seen in this quartert tax rate has

gone up, so where will you see the tax rate for the end of the year?

Rajan Verma: We believe about 17% average towards the remaining part of the year - that can be the

percentage tax rate during the current year.

Sunil Duggal: Okay, thank you that is it from me.


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Hozefa Topiwalla from Morgan Stanley

Hozefa Topiwalla: Hi, Just three question from my end, the first is the international business you mentioned,

35% underlying growth is possible this year. If you can explain the drivers for that growth?

And from a three year perspective what kind of growth you expect? The second question is

on shampoo, your core Vatika Smooth & Silky has basically grown by 66% this quarter,

was there any major change in price point, sachet pricing or anything that significantly

drove that segment? And the third is on the distribution side, has there been a significant

increase in distribution reach for Dabur this year?

Sunil Duggal: Okay, the first part on international business, I do see visibility of 30% to 35% growth

because most of the geographies are actually performing quite well. The two which did not

perform were Nigeria and Pakistan and we just put into place a revival plan which will at

least arrest the decline if not get back into high growth but certainly they will not perform

as badly as what they did in the 1st Quarter. So the aggregation of these geographies would

translate into that kind of growth. You may not see it on a quarter-to-quarter basis because

it is a little bit more volatile business than of India one, but over the years that’s what

seems to be likely as we speak. Also the translation gains would start getting lower as we

go forward, unless there is again a big change in the whole currency alignment.

In the case of shampoos really no change in price point, the Re.1 is almost embedded and

not likely to change for a long time, so that piece has not happened but what like I

mentioned earlier we have taken up the price point for the antidandruff sachet from one to

a category median of Rs.1.50, which has led to some short term erosion in terms of the

shampoo tonnage. But that has no impact on the revenue, so it will take a little bit of time

for this price to stabilize and we should get back to strong tonnage growths in the

antidandruff portfolio as well. The third part in terms of distribution, again nothing

dramatic I think we have continued to now creep forward in terms of the last mile, the big

changes which happened, happened two to three years ago, the change is now more

evolutionary and incremental rather than being very dramatic.

Hozefa Topiwalla: And just a follow-up on that on the international front, what will be the three year growth

outlook for the international business in your view?

Sunil Duggal: I wish I knew that. It all depends upon the inorganic opportunities and I believe a lot of

them exists at this point in time which we are pursuing. So that would change the picture

considerably but let us not get into that area because it is hard to predict. The organic

growth for the next three years could be in the region of around 20% to 25%. I would say

25% is a reasonable number to look at in the constant currency terms.

Hozefa Topiwalla: In terms of profitability the business margins are about 13% compared to the domestic

business of 18%?

Sunil Duggal: No they are higher now.


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Gagan Ahluwalia: Around 16%

Sunil Duggal: They are converging now with domestic margins so I would not worry about the higher

growth in international business doing damage to our margins. And in fact for the first time

at least in terms of PAT margin international business is beginning to become helpful for

us, because they are effectively a zero tax environment. So the blended tax rate when you

think 17% actually would have been higher had there been no international business.

Hozefa Topiwalla: Okay. Now just coming back to that Vatika Smooth & Silky growth of 66%, the growth in

a large variant appears, pretty aggressive number. So I am trying to understand, there has

to be some big change for driving this sudden growth, it just cannot be more of the same,

right?

Sunil Duggal: Well we have seen this level of growth in last two or three years so it is not that it is

happened out of the blue. We have seen 50% growth in shampoos, for the third year in a

row, I am not saying that this will be continuing forever but there is a huge amount of

headroom for shampoos and in terms of two elements, the way I look at it, one is the

consumption intensity which is still abysmally low. And second is our market share so it is

just 7.3% so why can’t we get to 10% and continue to grow at 50%, there is nothing which

logically prevents us from doing it if we are able to offer a superior proposition and

superior execution. So I am pretty optimistic, I think I would never go on a limb and say

that we will grow at 50% for the next five years but inherently there is no reason why we

can’t, there is no constraint.

Hozefa Topiwalla: Okay, perfect, got it, thanks.

Aniruddha Joshi from Anand Rathi

Aniruddha Joshi: Hello sir, good afternoon. Congratulations for excellent set of numbers, just one doubt, our

majority of sales are coming from north and eastern part of India…?

Sunil Duggal: East is 25%, west is 25%, North is around 37% and south is around 12%. So that is the

breakup, But West is very important to us, MP, Maharashtra particularly these two states

are very big markets.

Aniruddha Joshi: But if we look at the monsoon, monsoon is particularly weak in North and East part of

India. I guess a big chunk of revenues are coming from there. So do you see anything on

that? Plus from some of the other con calls we have heard that the cooling oil is getting

market share from regular hair oils also. So are we doing anything on that front?

Sunil Duggal: Well, the part of your question about monsoon, as we are speaking it is pouring outside

and we have been kind of waterlogged. So I think there has been a significant revival in the

monsoon, which will mitigate a lot of the earlier concerns. Now I am not saying that there

will be no impact on the agri output but it is not likely to be catastrophic. I do not think the

things are so bad. The farmers are already changing their cropping patterns from paddy to


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more drought resistant crops, etc. So I think a lot of impact will be mitigated. There are

huge buffers in terms of food grains, which will come in extremely handy, in fact the

government is almost facing a problem of plenty in terms of the food grain stocks and

reserves. So the monsoon is not going to change the dynamics of the market in any

significant way, it is certainly not a drought like situation out there. It is a deficient

monsoon situation. So, you are right that it has impacted the north part of the country a

little bit more than the others but I am not seeing any slowdown in demand at least as of

now happening there. And there is a second part, which is cooling hair oil and I have not

seen the latest numbers of cooling oil but I can imagine that in a very hot and elongated

summer the cooling oil sale would have been extremely good.

Gagan Ahluwalia: Yeah that’s right. Actually this moved up between May and June. I think this was more of

a seasonal factor.

Sunil Duggal: But it has not really impacted Amla Hair Oil. I think if you just track our shares, where are

they, they have gone up despite a very high base. That is pretty flat.

Aniruddha Joshi: But cooling oil is still is a pretty big category and it is growing rapidly also. We do not

have a strong franchisee over there. So are we working on it?

Sunil Duggal: We are working on some thing there and we have not gone big bang into this category. But

I think as we e look at cooling oil,, it is a fairly archaic oil. And I think what we are doing

is rather than to follow established platforms of heavy very sticky cooling oils we are

planning to get into more modern format. So we are launching brands like Vatika enriched

almond hair oil, then Amla Flower Magic Hair Oil which are fairly evolved products and

we believe that ultimately the future of hair oils is more in evolving the category rather

than regressing towards products like cooling hair oil.

Aniruddha Joshi: Okay fine. Very lastly on tax rate, Our tax rate for the quarter is around 17% and despite

removal of FBT, so where do you see tax rate ending for FY10 and probably FY11 as

well?

Sunil Duggal: Well we believe it will end at 17% approximately at the end of this year. Going on to next

year I believe it looks probable that it will remain at same level as well. No major change

will take place.

Aniruddha Joshi: Okay and if maybe excise gets reversed in around lets say by next budget do you see that

we will have some concern on increasing prices or do you think that most of the FMCG

companies would have gained substantial pricing power by then?

Sunil Duggal: I think excise is pretty level played field. Most companies now are paying almost no

excise. So even if lets say excise is reintroduced it will take the whole pricing table

upwards by some percentage which may lead to some temporary demand contraction but

from the context it is not likely to change the rules of the game.


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Aniruddha Joshi: On an entire industry per se basis do you see that excise hike will have some impact if it

gets hiked in next budget?

Sunil Duggal: I think let us say if excise is re-introduced at 12% or 16% then the whole pricing table goes

up for the industry, short term demand impact will be there. I think people will resist a

sharp sudden price increase but it takes a few months to get used to. Ultimately I think the

more important thing is that are we going to be at a competitive disadvantage? The answer

is no because everybody is enjoying the same benefits as we are.

Aniruddha Joshi: Okay Sir. Thank you.

Jaibir Sethi from Noble Group

Jaibir Sethi: Good evening sir. Congratulations on an excellent set of numbers. Just a couple of

questions. First you mentioned that you haven’t really noticed any meaningful impact from

the mixed monsoon performance so far. Do you think that the possible impact from the

poor monsoon has been offset by the slew of measures that the government has announced

which benefit rural India?

Sunil Duggal: Most certainly yes. The employment guarantee scheme particular has mitigated a lot of this

impact. And I think if monsoon is deficient and the yields are low, it will only have an

impact in terms of higher prices, which will benefit the farmer in some other way. But I

think the government has enough armoury now to mitigate the impact of a poor monsoon.

Maybe not of a complete drought but of a poor monsoon and that is what is this ultimately

emerging at. It is certainly not a drought like situation. It is really a deficient monsoon

situation.

Jaibir Sethi: Sir and secondly on the distribution front you mentioned that there has not been any major

push in distribution over the last 2-3 years. It has all been evolutionary changes.

Sunil Duggal: Yeah, I have to qualify that with one or two caveats. In the context of consumer care

division actually we have made a fairly significant change on the ground by segregating

the portfolio into two pieces into health care and food in one basket and personal care and

home care into another basket and in our core markets of North, East and West, which are

in the high density areas we have actually created a parallel distribution network which is

manned by independent set of people. So yes there have been actually some changes with

regard to structure but not with regard to reach perhaps. Since the portfolio was becoming

little bit unwieldy at least in our big markets, which account for something like 2/3rd of our

total revenues, we decided that it is better to invest in higher distribution costs but keep the

focus very sharp on to a smaller portfolio. And that is what we have done over the last six

to nine months and it has actually driven a lot of higher growth in CCD. So that is one

change, which we made in terms of structure. What I meant earlier to answer that question

was that the growth in reach has been incremental. It has not been revolutionary.


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Jaibir Sethi: Is there any plan to push the reach particularly in Southern India?

Sunil Duggal: Yes there certainly is. For example the Fem portfolio will be consolidated with Dabur in

South India and not to begin with the rest of the country like with foods. So that the

aggregate foods, consumer care and Fem would give us a business size which could enable

us to reach the much higher level of distribution than what we currently do.

Jaibir Sethi: On the ground bifurcation that you mentioned did you see any push back from the

distributors on that or were they OK with it?

Sunil Duggal: What we did was, we kept the distributors the same. There was no point in changing

distributors because these guys in any case look after another two, three, and four

company’s generation throughout. So we just asked them to treat them like two different

companies with their own billing systems, their own receivables, and their own sales

organization. So in terms of the logistics it really was not very difficult to do. And it did

lead of course to higher costs because we had to replicate a distribution organization which

will be duplicated in many of these markets.

Jaibir Sethi: But presumably that is offset by your ability to effectively launch new products and push

them…

Sunil Duggal: Yeah, the smaller products, which often used to not get adequate amount of mind share

have now become important in the smaller portfolio. So the success of new products will

improve. But overall I think it is something which is very accretive in terms of profitability

because the cost impact is actually quite marginal given the high margin business, so really

the key driver of profitability is top-line.

Jaibir Sethi: That is all from my side sir. Thanks a lot.

Ritika Shewakramani from ICICI Securities

Ritika Shewakramani: Good afternoon sir. I have been noticing is that in terms of your division contribution to

sales from IBD has been increasing. I think CHD also has been probably a new focus area

specially after you have transferred some of your products in CCD like Pudin Hara and all

to CHD how do you see that growing?

Sunil Duggal: I think next year I would say that this is going well ahead of CCD business and the reason

is that a lot of new initiatives in health care are going to come into play and I would not

speak about them in detail because they are still work in progress but many of them would

actually be put to market in the next fiscal and a lot of that would be in the OTC domain

which is really the prerogative work for consumer health division. So I would be surprised

if we did less than 20% growth in consumer health provided of course we put the

initiatives into play in the market. So the outlook for this division is actually very bright in

terms of prospects because as I have mentioned earlier we are going to now re-emphasize

on our heath care credentials and revitalize the heath care portfolio particularly in the OTC


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domain and we have been working very hard to build a good strategy to implement next

year.

Ritika Shewakramani: So you do see the contribution increasing…..

Sunil Duggal: I see this increasing yes. As it ought to be because it is a smaller division so it should grow

ahead of the larger division. While international business may still be in the pole position

in terms of growth but certainly consumer health should be number 2.

Ritika Shewakramani: Okay and naturally your CCD division would be contributing but with Fem care

consolidation would you be adding any further things to CCD like you had done with

Foods earlier? You have consolidated this with CCD and then give it some growth, so

would you be doing anything on that front?

Sunil Duggal: Not in the current year. The current year I think is more in terms of understanding their

portfolio, and the integration of Fem with CCD will happen next year. In the South the

integration has already proceeded to a considerable extent and in the other parts other than

the clearing and forwarding agents, which we have converged, the stockist and the sales

force at the front end remains independent. They report at the regional level to the CCD

management of course but other wise on the ground we have a separate sales force for

Fem.

Ritika Shewakramani: Okay. So we will not necessarily see any sort of integration with CCD?

Sunil Duggal: Well, not this year. That we will check at the end of this year and we will see whether we

need to integrate it further or keep it separate, Whatever works. as I said that it is a 70%

gross margin business? So I am not worried about costs here, I am more worried about

getting the top-line growing. So I am willing to incur extra costs whether in the

organization or whether in the form of A&P. I just want to move the portfolio forward.

Ritika Shewakramani: Okay. And sir my last question. Your capital expenditure is on track? I think you were

planning to expand capacity this fiscal if I am not mistaken.

Gagan Ahluwalia: Yes our CAPEX on the new project has started. We have incurred something like 10

Crores of CAPEX on that and total CAPEX for the quarter has been at around 31 Crores.

Ritika Shewakramani: Okay and in the last con call you had mentioned that it will be around 225 for the whole

year.

Sunil Duggal: That will be the total expenditure at the end of the year. That will be the total expected

CAPEX.

Gagan Ahluwalia: But the range is more like 175 to 200 crore.

Ritika Shewakramani: Okay. Thank you.


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Ruchita Maheshwari from Nirmal Bang Securities

Ruchita Maheshwari: Good evening sir and congratulations on good set of numbers. Sir my question is that,

government has increased 8% excise duty on coconut oil on less than 200 ml pack so what

is your say in this matter?

Sunil Duggal: Well the matter is still before the court. Around 2 Crores would be the impact of the higher

excise if this were to become law.

Ruchita Maheshwari: Okay sir and so if the government is to impose its excise duties, are you going to increase

the prices so as to pass on this increase in excise duty to our consumers or you are going to

increase the 200 ml pack? What is your strategy?

Sunil Duggal: We have not thought that far. We would have to see what the law permits in terms of

increase in pack size and I think there are some issues which are not very clear but since

the matter is before court we will like to continue the business the way it is and then make

the changes only when clarity emerges as to what the road ahead is. So both are possible.

Ruchita Maheshwari: Okay sir and how is your Chyawanprash Junior is performing?

Sunil Duggal: That is doing well. The real sales would begin in the winter months and we are very

hopeful that this would prove to be a success.

Ruchita Maheshwari: So currently I believe you have gone for some market share in this MFD category So how

much increase in market share you are planning from here?

Sunil Duggal: We are not looking at exponential growth in this category. It is a very high investment

category and I think we are doing a lot of work on the ground in terms of building

consumer franchise market by market. So this will take time to really gain any

considerable market share. It is not something, which we are going to take up very quickly.

Ruchita Maheshwari: Okay sir. Thank you so much.

Kavita Rawat from Systematix Shares

Kavita Rawat: Good evening sir. Firstly regarding Fem, there has been I believe a growth in sales of

around 33%, however, the EBITDA has gone down significantly. Could you tell us what

would be the reason for the same, the EBITDA margins declining?

Gagan Ahluwalia Yes, increased investments in adpro, which also relate to certain one time expenditures and

also we have made some expenses which are one time in nature in overheads. Those have

been incurred the IT licenses and SAP, and some write-offs, etc., that have been done. So

basically the EBITDA has come down because of higher adpro and other one time

expenditures.


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Kavita Rawat: Okay. What the results mentions is that the impact of SAP is not estimated to be material.

So it is only because of the higher A&Ps expenditure?

Gagan Ahluwalia: Well the A&P expenditure is higher by about 3 Crores almost. So last year the A&P

expense was around 5 Crores. This year the expenditure is more like 8 Crore. So t 3 Crore

is because of higher adpro and about 2.5 Crores impact is on account of higher indirect

overhead. This has led to lower Profits for Fem during the quarter.

Kavita Rawat: There is also a significant rise in the employee cost, some 80% growth.

Sunil Duggal: It is towards bonus payment which is again one-off cost which was carried forward from

the pervious year and which we had to pay out in the current year and that there is fairly

large Rs 1.5 Crores if I am not mistaken on account of implementation of SAP which again

is a non-recurring item. So basically while we had expected this business to be with us by

the 1st of April so a lot of investments went into the 1st Quarter but the consolidation

happened only by the end of the quarter. But these expenditures are committed and I think

they are all in the interest of business growth so they will pay for themselves in the year.

All the SAP implementation or higher A&P expenses or even higher employee costs

would yield results. So it is not money, which has been wasted.

Kavita Rawat: Okay. Sir with respect to the skin care, you had just mentioned that the products, which

would be launched, will be under the Dabur umbrella.

Sunil Duggal: That’s right.

Kavita Rawat: What my understanding was that, we are coming out with the separate brand altogether in

the ayurvedic range.

Sunil Duggal: Well its like actually if you call Gulabari a separate a brand and it will be in the same

genre as Gulabari but I see these brands as being housed under the master brand of Dabur.

So it is a nomenclature issue. It is going to be Dabur xyz so that is how the architecture

would look like.

Kavita Rawat: Okay sir. And sir with the MAT rates being hiked, what do you think is going to be the

likely impact?

Sunil Duggal: I think Rajan had mentioned that the current aggregate tax rate of around 17 odd percent is

likely to remain at least for the next few quarters.

Kavita Rawat: Okay with the hiked MAT and the FBT going?

Sunil Duggal: Yeah the elimination of FBT, the higher MAT and the blended rate consequent to the

international business growth. International business as I mentioned pays a very little tax

because it is housed in Dubai, which does not have income tax. And that profitability is

growing at around 50% odd. The blended rate is coming down which is mitigating the


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MAT impact to some extent. I think 17% to 18% is what we can visualize for the next few

quarters.

Kavita Rawat: Sir we are not expecting any kind of reversal of deferred taxes?

Sunil Duggal: That will happen later.

Rajan Verma: But deferred tax in terms of the overall thing is relatively a smaller portion so it will

change within the band that Mr. Duggal has spoken about between 17% to 18%. So there

is not much change here that deferred tax will have an impact on the percentage that has

just been spoken about.

Kavita Rawat: Alright. And sir lastly we have been seeing a very good growth rate for the past few

quarters. So if you could I mean how confident are you going forward in the next couple of

quarters? Are we for overall for Dabur I mean are we going to be able to maintain this kind

of growth rate?

Sunil Duggal: I will not talk about quarter-on-quarter that is too volatile but I have been saying this for

the last few conferences that we envisage a growth rate of between 15% and 20%. If we do

close to 20 it will be a good year and if we do close to 15 to be an average but that is a

band, which we see ourselves delivering. I am talking about organic growth not including

the acquisitions and we are likely to end the year in that band.

Kavita Rawat: All right sir. thank you.

Abhijeet Kundu from Antique Stock Broking

Abhijeet Kundu: Good evening sir. Congratulations on a good set of numbers. I just had two questions

primarily one was on foods and another was in homecare. In foods we have seen that

culinary has picked up quite substantially during the quarter. What has really gone into it

and what kind of growth could be seen going forward? Because this homemade has been

there for quite sometime but I believe that the focus was less. The focus has increased in a

way that could be one of the reasons and secondly my question was on homecare. What is

the strategy of the company to bring about revival in this category?

Sunil Duggal: Yes the first part on culinary is that this is a category which we have not advertised and we

do not intend to advertise in the near term because it is comparatively low margin business.

But it presents good growth opportunities simply because of its convenience nature. We

are pretty satisfied in growing that at a good pace but without incurring the consequent

expenses, which keeps then the margins attractive enough for us to continue with it. I think

a lot of growth has come consequent to the merger of Foods with CCD and that has given

culinary a much larger platform to operate in. Also there has been great deal of

improvement in terms of the management of the packs and the whole procurement process.

And we are currently in the middle of revitalizing a plant in West Bengal, which makes

many of these products. So the point may come when we will say, okay now let’s take


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culinary off the closet and make it main stream in terms of putting in advertising and

another support. But it is an interesting though small part of our portfolio as of now and

not something, which we invest substantially behind.

Abhijeet Kundu: And in case of homecare?

Sunil Duggal: Home care I think was significantly impacted by modern trade. Modern trade especially

few large chains which went out of business were large buyers of homecare products and

then suddenly that whole franchise disappeared. So this is what happens when a business is

heavily dependent upon a single channel but to some extent that happened even in foods.

But homecare was the most impacted because 25% of business comes from modern trade.

In terms of revival I think we have revitalized the portfolio considerably by launching a

slew of new products particularly in air fresheners. I think air fresheners is the only

category which has really dragged which we need to revive and I think we have enough

plans to do so. Also I think air fresheners and all are a little bit discretionary so in an

economic downturn, now people tend to stop buying them or buy less of them. So these are

categories, which gain a lot of momentum in up turn and also gets cut in the way when the

things are bad.

Abhijeet Kundu: In case of food business when we look at our PBIT margins they have shown a decline

during the quarter.

Sunil Duggal: Because of higher advertising otherwise in terms of the whole margin profile it is still

pretty much intact. But I think foods business I have always maintained has been under-

invested in and if you have seen the activity, which we have been put in the 1st Quarter it

has been much higher than what we have done in the past. So we need to continue to invest

in foods and I think if there is some margin compression here we can live with it.

Abhijeet Kundu: Okay. Sir in case of CHD we are looking at a growth of about 20% in FY11….

Sunil Duggal: Yes that would happen if our new initiatives perform as expected.

Abhijeet Kundu: But in case of FY10 a growth of about 13% to 15% would continue or?

Sunil Duggal: I think so. I see no reason why 13% to 15% growth should not happen.

Abhijeet Kundu: Okay. That is all from my side.

Richard Liu from JM Financial

Richard Liu: Hello Mr. Duggal good evening. In terms of foods sales growth we have seen quite robust

growth now over the past couple of quarters. Just want to understand as to what could

happen that could probably derail this growth going forward?


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Sunil Duggal: Nothing which comes to mind. The modern trade part cuts both ways. If offtake in modern

trade happens at around 18% to 19% that will boost our total foods business but at the

same point modern trade also plays the game in terms of trying to push cheaper products,

which offer higher margins. So significant increase in modern trade is not something

which would necessarily help us better so that is the only thing which is pretty dynamic in

nature. Other than that most of the material in puts are imported so let us say if we were to

get back into the 50 plus rate for the rupee vs dollar that would prove dilutive in terms of

margins and there can be some cause of concern.

Richard Liu: Okay we have seen quite a lot of volatility in this particular segment in the past.

Sunil Duggal: Yes. It has become far more stable now, it is now housed in the CCD and part of the

volatility last year was on account of supply dislocations. I think that is pretty much behind

us now. So I would look to steady 20 odd percent growths for this business and that does

appear to be visible. The margins are little trickier because it is depending upon so many

factors although most of the materials are imported and the currency issues and the

commodity price issues and so many others factors, so we will have to manage that

volatility. But in terms of revenue growth things are pretty much under control.

Richard Liu: I am not sure if you have dealt with this in earlier part of the call but CHD is it just because

of base effect or is that something about the 10% growth at this point of time?

Sunil Duggal: The base effect to some extent was responsible for a very high growth last year. Because

of that now it is sitting on actually pretty high base so your growth is becoming little bit

harder than what it was last year. So I think 12% to 15% growth is quite creditable because

these are from very mature low growth kind of categories. But we are looking much

beyond that. We are looking at really rebuilding a complete OTC franchise in a completely

new kind of manner but that would begin next year.

Richard Liu: Can we expect pick up from this rate going forward?

Sunil Duggal: Not in the current year. I think 12% to 15% in current year is what I would visualize but

because the initiatives which we are thinking of will come into implementation only next

year. Next year it’s early days yet but I would look at a much higher growth rate.

Richard Liu: Okay. Next one on shampoo. Have you actually seen a kind of decline in antidandruff

shampoo ex-P&G?

Sunil Duggal: I think antidandruff positioning was never on a strong front. It was a variant of let us say

the existing range of shampoos and if you see all the successful antidandruff offerings

whether from Proctor or from Unilever or from anybody else, they are standalone

offerings. I think that was the learning which we have imbibed and we have taken dandruff

and put it in a standalone product with a completely different price, a completely different

marketing mix. Packaging is also very different. If you would have looked at the new


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antidandruff range which is three variants you will find that to be almost a standalone

entity and we have gone through the process of re-engineering the dandruff portfolio not

because we were declining or anything like that but the reason is that we were never a

significant player in the antidandruff space. I think we need to change that because this is a

very important part of our whole shampoo universe.

Richard Liu: Okay but from the category standpoint it is not a problem with the antidandruff category or

the higher price or any such things.

Sunil Duggal: No, this operates at a 1.50 price point. The lead players are all there so that price point has

been in a sense accepted by the consumer and it makes sense to play there because then

you have that much more space to advertise, to manage the whole value chain.

Richard Liu: Sir, last question for Mr. Verma actually. This 17.5% tax rate that we are talking about

because of the increase in the MAT rate won’t we be entitled to MAT credit for the tax that

we pay going forward lets say after this thing gets over?

Rajan Varma: Yes the range of 17.2% that I am referring to it is taking into account the MAT credit that

was applicable during the current year which is restricted by the minimum tax that I have

to pay under MAT anyway. So that is net tax paid after netting off the credit available to

us.

Richard Liu: Okay so we are actually of the opinion that the entire MAT would not be creditable at a

later point in time?

Rajan Varma: No, the way the tax planning has been done for this financial year is that we are a normal

tax paying company as reduced by the tax credit available which must be restricted to the

MAT rate. So we are paying normal tax less the MAT credit available to me. Under a new

budget that was recently announced, I can now carry forward another three years worth of

MAT into a future date for another three odd years.

Richard Liu: What percentage of the domestic sale is enjoying this tax benefit?

Rajan Varma: I think close to about 85% to 90% is covered under the 80I benefits.

Richard Liu: And it is likely to remain that way or there could be a change?

Rajan Varma It could be a change. It could go up slightly with the new projects coming up from next

year. That is in the financial year of 2010-2011 onwards.

Richard Liu: All right. Okay thanks for taking my question and all the very best.

Gagan Ahluvalia: Thank you everyone for participating in this conference call. The transcript of the call and

an archived copy of the web-cast will be put up on the website. Do let us know if you

require any further clarifications. Thank you and have a nice evening.

Transcript DaburIndiaEarnings Call-Jul28-09 Call/100096_20090729.pdf · quarter. Dabur’s largest...

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Transcript of Transcript DaburIndiaEarnings Call-Jul28-09 Call/100096_20090729.pdf · quarter. Dabur’s largest...