In October-December quarter (Q3FY26), Marico reported
revenue of ₹3,537 crore, net profit of ₹460 crore, and margin of 16.7%.
Q: How much will the margins improve because of just raw materials, and how much will it improve because of the mix? We have seen value added do well as well alongside that, you are seeing some recovery in the operational performance of your digital first and premium brands too?
A: We will give you a longer-term perspective - obviously, the value added hair oil growth, which we are confident about delivering. Now, consistent double-digit growth is leading to a mixed improvement. As far as the digital business is concerned, we expect digital business to grow 2.5x of the run rate and moving into a 10% plus EBITDA.
I believe that at least in the immediate term, next year, mid-teen kind of a growth in bottomline is a base case, and we will aspire to try to do more, which will translate into at least a 150 to 200 basis points margin expansion.
Q: Copra prices have softened in recent months. How is this impacting Parachute’s pricing strategy, volumes, and margins going ahead?
A: Obviously, the copra prices have corrected, and we need to ensure that we take some pricing action, maybe as we move towards the next quarter. The hyper-inflation obviously had an impact on Parachute volumes because of the absolute pricing also we had taken some MLH correction, which led to a 2-3% volume drop. Volumes going forward is going to stabilise. We will continue to aspire for delivering a high-single digit volume growth as a base case, and try to improve upon it. Obviously, as the copra price has come down, margins will continue to improve in the subsequent quarters.
Q: It was very interesting when just a day before your results board meeting, you announced the purchase of 4700BC, and it's a business that does an annual run rate of, what about ₹140 crores on the topline? What can you scale it to? Are you looking to include it in the Marico overall distribution system, because that's not something that you have been doing with a lot of the acquisitions that you have made so far? You allow them to run their own course. What's the scalability, margin, synergy and opportunity out here?
A: Firstly, we are very excited about this acquisition, because if you really look at it, we have been focusing in the food business with wellness and health. This is a better for you, gourmet snacks, and therefore it opens the total addressable market (TAM) significantly. We are seeing a very great tailwind of people wanting to do in-home consumption of snacking.
Now, if you look at this brand, obviously there was a some part of the business which is a very small part which was being sold in PVR cinemas, which will continue to have that arrangement. There's some business which is sold in some of the International Airlines, which I believe is a very good market, because it drives trials and saliency for the brand and there was an online sale.
As we move into the Marico system, it gets access to definitely to the entire modern trade, which will be a driver and premium food outlets, we see significant synergies in cost and other operating model between some of the other food brands, like true elements and this. And therefore, while there will be an accelerated pathway for both true elements and 4700BC to break even, we also will generate enough cash from this savings to drive investment for accelerated growth in these brands.
Q: So multiple of the current number we can expect shortly itself, given the sort of distribution unlock that happens?
A: We aspire to move it to ₹500 crores in next three years.
Q: What about the other acquisitions that you were eyeing? It's widely reported that you are in talks with plant protein maker as well. Anything that we can hear in the very near future? Can you tell us whether talks are at an advanced stage or there are no talks either?
A: We can't comment on speculative reporting. We continue to look at acquisitions in the digital businesses to plug some of our gaps in our portfolio. We can't comment on anything specific which is speculative.
Q: What about competition in the hair oil space, it's now increasingly mature market, and one of your peers, Bajaj Consumer, reported industry leading performance, obviously, on a very favourable base. How's competitive intensity been and how do you plan to keep your edge ahead in a post GST world?
A: Two things. One, I believe there is enough opportunity and headroom for growth in the value-added hair oil space, which includes premiumisation vectors of problem solving like hair fall. It is good that there are multiple players wanting to invest behind growing this category. This category has enough opportunity for growth. The GST rationalisation has helped in affordability, in pricing, which moves some of the volumes from unbranded or smaller brands to larger brands. Therefore, we are extremely confident.
Even on a two-year CAGR, we had ex of Shanti Amla, which is a bottom of pyramid where we are not investing and defocused a bit, we have a double-digit growth in volumes. Therefore, we are extremely confident of value added hair oil is driving double digit value growth over the next couple of quarters and even the next two to three years. It's good that there is competition, because what had happened in the past two years, that too much investment was happening below the line, and too much of irrational competitive activity was happening. So we welcome the fact that multiple companies investing behind growing the category.
Q: You have been on this diversification journey from Marico, and as we look at it right now, about 25% comes in from foods, digital first and premium personal care, around 20% plus comes in from international so nearly half of your portfolio has diversified away from the oil business. And in that as well the oil business, you have rigids, which are a lot lower than, say, food or value-added hair oil. How much more diversification is on the cards from here on, and what's your overall aspirations, say, over the next three to five years.
A: There are three vectors of diversification, one which you alluded to in India, where we are driving foods digital and as well as premium personal care, is extremely critical that this continues to grow while also becomes profitable. We are keeping a sharp eye on the profitability. There is also two other diversification which is happening within international business. We are reducing single country risk at the same time a portfolio- we are now offering shampoos in multiple markets. We are there in baby, we are there in skincare therefore, there is another level of diversification that is happening.
We believe that there are very few global Indian brands and Parachute Advansed as a huge opportunity to become a global Indian brand. It's available today in 48 countries, and we want to push that envelope as a brand which drives care and nourishment.
