dabur india limited q4 and annual earnings … call/100096_20100429.pdfdabur chyawanprash registered...

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"Dabur India Limited Q4 and Annual Earnings Conference Call”

April 29, 2010

Dabur India Ltd.’s Participants MR. SUNIL DUGGAL - CHIEF EXECUTIVE OFFICER, MR. RAJAN VERMA - CHIEF FINANCIAL OFFICER. MRS. GAGAN AHLUWALIA - AGM-CORPORATE AFFAIRS MR. ASHOK JAIN - GM-FINANCE & COMPANY SECRETARY. MR. SAIBAL SENGUPTA - GM-FINANCE

Dabur India Limited April 29, 2010

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Gagan Ahluwalia: Thank you Ladies and Gentlemen. On behalf of Management of Dabur India Limited I welcome

you to this conference call pertaining to the unaudited results for the year ended March 31, 2010.

Members of Dabur team present here with me are Mr. Sunil Duggal, CEO, Mr. Rajan Varma

CFO, Mr. S. Raghunathan our new Chief Financial Officer- Mr. Raghunathan will be taking over

from Mr. Rajan Varma who will be retiring in May this year- , Mr. Ashok Jain, General

Manager, Finance and Company Secretary and Mr. Saibal Sengupta General Manager Finance.

We would now be starting with a brief overview by Mr. Sunil Duggal post which we shall have

the Q&A. I hand over now to Mr. Duggal. Thank you.

Sunil Duggal: Thank you Gagan. Good afternoon ladies and gentlemen. I welcome you to the Dabur India

Conference call regarding the results for the 12 months and quarter ended March 31, 2010. Dabur

India Limited has delivered growth of 19.6% in consolidated sales and 28.7% in profit after tax

during fiscal 2010. Growth in sales during the fourth quarter was 16% and that in PAT was

29.7%.

The company witnessed a strong expansion in margins lead by decrease in material cost and

higher operational leverage. The company registered a double-digit volume growth in the

domestic business of consumer care and consumer health as well as the overseas business. The

pricing component was low as the company focused on volume growth and did not go in for any

significant price increases.

Sales in the consumer care division CCD recorded 14.6% growth during the year and was led by

strong momentum in categories like shampoos, toothpaste, health supplements, skin care and

foods. Hair oils grew 9.6% during 2009-10. Dabur's largest domestic brand Dabur Amla Hair Oil

reported a growth of 10.6% and Vatika Hair Oil grew at 6.1% during the year. Anmol Coconut

Oil registered a growth of 15.4%. The newly launched light hair oil Amla Flower Magic and

Vatika enriched almond hair oil received good consumer response and will be scaled up further

during next fiscal.

Shampoo category posted growth of 26.9% during 2009-10. Excluding the antidandruff range

which witnessed some pressure the growth in normal shampoos was around 40% for the year.

New variants of Vatika shampoo such as black shine shampoo contributed to growth and share

gains.

Health supplements recorded growth of 20.4% during the year. Dabur Chyawanprash registered

strong gains in market shares of 80 basis points and grew by about 13.0% during the year. The

brand continued its good growth during the fourth quarter although it marked the end of the

winter session. Dabur glucose posted an impressive performance with 52.1% growth during the

year and came close to becoming a 100-crore brand. Dabur Honey grew by 15.1% during the

year, driven by strong activation programs highlighting the use of honey for a healthier lifestyle.


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Oral care recorded a growth of 11.5% during 2009-2010, this was due to strong sales

performance in toothpastes, which grew by 19.4% during the year. Dabur Red toothpaste

recorded a growth 17.4% backed by its differentiated product proposition being an ayurvedic

toothpaste. Babool brand also reported excellent sales with growth of 19.4%. The new gel variant

Babool Mint Fresh has received good response from the consumer. Meswak, the premium herbal

toothpaste in Dabur’s fold continued to perform well and reported a strong growth of 26.8%

during the year.

Skin care category posted an excellent performance recording growth of 33.2% during the year,

led by Gulabari Rose Water brand along with the newly launched skin creams, moisturizers and

fresheners. Uveda, Dabur’s new skin care range based on ayurvedic and herbal formulations

providing holistic solutions for everyday skin care needs has been test marketed in Delhi NCR,

and Maharashtra. The brand has received positive response and will be launched in other markets

in FY 2011.

Digestives category grew by 10.8% for the year. The Hajmola brand reported a steady growth led

by new positioning “complete your meal with Hajmola.” Aggressive activations across

restaurants, dhabas and railways and launch of new variants like pudina and kaccha aam have led

to steady up trend in the brand.

Home care recorded a growth of 3.3% during 2009-10. This category has higher exposure to

modern trade and gets impacted when modern trade sales are under pressure, which was the case

this year. Odonil which had earlier witnessed compression due to the emergence of local

competition and private labels has picked up in the second half on the back of a re-launch and

more attractive packing and new fragrance. Odomos grew by 10% while Sani Fresh recorded

growth of 15.2%.

Foods category reported good growth of 20% during the year lead by strong performance by Real

juice portfolio. Dabur’s culinary brand Hommade had a good year posting 36% growth. The

brand took off after being launched in new contemporary packaging and improved formulation

with increased shelf life. Real Burst which was test marketed during the year has performed

satisfactorily and would expand its presence in FY 2011.

Consumer Health Division witnessed a growth of 15% during fiscal 2009-2010, led by good

overall performance of OTC as well as the ethical portfolio. A number of new brands were

provided media support and experienced healthy increase in sales. Key OTC brand such as Pudin

Hara, Honitus, Dashmularishta, Badam Tail, etc., performed well led by vigorous marketing

support.

Dabur's international business continued to grow at a first pace posting growth of 26.3% during

the year. While the currency gains have come down in the second half due to appreciation of the

rupee, overall growth in volumes remained strong. The core markets that is GCC, Egypt, Nepal


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and Bangladesh continue to perform well. This was led by aggressive new product launches,

media initiatives and significant investments in the core brands, Dabur and Vatika. Vatika has

now become the largest brand overseas with a good presence in hair care segments like oils,

creams and shampoos. Some of the new products that have been launched this year are the new

Vatika shampoo range, Vatika hair treatment products, Vatika enriched coconut oil, Vatika

DermoViva moisturizing soap and Amla hair creams. The business is showing good momentum

through deepening presence in existing markets of Middle East, North and West Africa and

South Asia as well as exploring other new markets in these regions.

The newly acquired skin care company Fem Care Pharma Limited posted revenue growth of

16.6% in three quarters under Dabur management. This growth was in spite of discontinuation of

the specialty chemicals division, which was sold to the promoters and rationalization of the

portfolio especially in the prescriptive derma range of Fem Care. The core skin care portfolio

recorded a strong growth of 29% during the 9-month period ending March 31. EBITDA margins

in this period have recorded handsome gains increasing to 28% from 11.9% during the same

period previous year. Profit after tax also witnessed a significant expansion by increasing to Rs

18.5 Crores from 5.3 Crores in the same period previous year. This expansion on the margins and

profitability was led by better cost management, operating leverage and integration benefits.

Overall on the profitability side, Dabur saw a strong growth of 28.7% during the year led by

lower material cost and operating leverage from stable overheads. The consolidated EBITDA

margins expanded by 150 basis points increasing from 18.3% to 19.8% during the year. This was

despite increased investments in adpro which went up from 12.1% to around 14.3% as a

percentage of sales. Improved margins contributed to strong growth in profits, which was also

aided by reduction and losses in the retail business. 2009-2010 has been one of our best years

both in terms of revenues and profit growth and also in terms of improving all round metrics such

as EBITDA margins, market share in key categories and operating efficiencies. These were

achieved in spite of an erratic monsoon leading to drought-like conditions, high food inflation

and intensification of competition in terms of increased advertising and promotional activity. The

sustenance of double-digit volume increase has kept the business in good stead in addition to

efficient cost management. Going forward, we would continue to invest strongly behind our

brands and businesses in order to keep the company on an aggressive growth path. With this I

now open the Q&A and invite your questions. Thank you.

Percy Panthaki from HSBC

Percy Panthaki: Hi Sir, congrats on a good set of numbers. My question is on the hair oil segment I believe that

for Q4 it has been more or less flattish, so I just wanted to understand the reasons behind that

given the fact that one of our competitors who have reported on the same day have posted good

results in their hair oils division of about 16% top line growth, 27% volume growth, so it does

not seem to be a problem with the industry growth per se, so I just wanted your views on that.


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Sunil Duggal: I do not know about our competitors, in our case it is largely on account of a very high base last

fourth quarter. March Q4 2009 we witnessed a 23% growth in hair oil, so this was off that base

that we had pretty moderate growth. The second thing was that we did some corrections in terms

of sales to institutions which we postponed from March to April because of operational reasons

and also some pipeline corrections consequent to introduction of a new software for forecasting,

so I do not think there is anything materially different in this quarter’s performance in secondary

sales terms as compared to the earlier quarters, it is just that it is not reflecting the numbers.

Percy Panthaki: So this pipeline correction, which you said has been across all categories or is it only affecting

hair oils?

Sunil Duggal: It was more in hair oils because that is the biggest category and it is easier to take correction in

the largest category rather than to spread it thin across the whole portfolio, so it was

disproportionately higher here.But I think I would attribute the low growth to be on the very high

base, 23% growth last quarter of 2008-2009 meant that growth in this quarter would be hard to

go by. I do not think this problem as being structural. I see growth reviving in the first quarter

and continuing forward from there.

Percy Panthaki: Okay and on the cost front do you think you will require to take any price increases and if so in

which categories and approximately at what timelines?

Sunil Duggal: I think we will be taking price increases; they would certainly be higher than what we took last

year. Last year on an average we took a price increase of 2.5%, most of it was a flow through

from the previous year. This year I estimate price increases to be in the region of anything

between 4% and 5%. We will try to hold it at 4%, but it may be closer to be 5%. I do not think

there should be any problem in getting these price increases through because like I said, last year

we did not take any price increases and these would be required to neutralize the margin

compression, which would be inevitable because of higher material costs unless we do resort to

this.

Percy Panthaki: Would you be able to throw any light as to which particular categories are likely to be more

impacted by the cost inflation and therefore which categories you could see more pricing action

compared to others?

Sunil Duggal: Hair oils are going to be more impacted because the entire spectrum of input materials is showing

an upward trend, whether it is liquid paraffin or plastics or even edible oils, so that is one area.

Then all the supplements particularly Chyawanprash and attendant products are witnessing cost

pressures on account of very high prices of herbs, so we would see some price increase, in fact

some price increases have already been activated and we will see whether we need to resort to a

second round price increases later in the year perhaps in the third quarter. A lot would depend

upon inflationary pressures which might ease off if the monsoon is good and then price increases

may not be required. On the other hand if inflation continues to be close to double digits as it is


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today then we may require another around of selective price increases perhaps in the early part of

third quarter or late part of second quarter.

Percy Panthaki: Okay. Just one last question when we spoke a few weeks back you had mentioned that probably

EBITDA margin expansion in FY 2011 versus FY 2010 is something that should not be looked

at, so are you sort of the same view even today or has that view changed?

Sunil Duggal: Let us put it this way. We are not aggressively seeking expansion of EBITDA through price

increases. If there is a flow through in terms of lower material cost to the bottom line and that

results in higher EBITDA as as it did in 2009-2010 that would be a bonus, but using pricing as a

tool to increase EBITDA we would be a little cautious here because we do not want to fall into a

margin trap> We are sitting at on 20% EBITDA, I would be pretty happy to end the year with

20% provided we get a good growth in the top line.

Percy Panthaki: Okay. Thanks Sunil and all the best.

Pritesh Chedda from Emkay Global

Pritesh Chedda: Hello Sir congratulations for the good set of numbers. If you could help us dissect the Q4

revenue growth in terms of volumes and pricing actions if any both in domestic and international

market and similarly for the full year FY 2010 domestic and international.

Sunil Duggal: Yes you can just note this down - Q4 Dabur consolidated volume increased 16.1% and this is of

course including Fem, which is around 2.7%, price 0.9% and a translation loss of 1%. For the

year it is 16.6% volume, 2.3% price, and 0.7% translation gain aggregating to 19.6%. The gains

which we had particularly in the first two quarters have translated in to a loss, of course this only

impacts the top line as I mentioned in earlier conferences, there is no impact in terms of

profitability because all our costs are in the local currency, having completely localized supply

chain for overseas business.

Pritesh Chedda: Now this 16.6% FY 2010 volume growth, what it would be for domestic and international

business for full year? (16:47)

Sunil Duggal: Now, let us take international first, international would be 19.8% volume, 2.4% price, and 4.0%

would be the translation gain, that means in other words in local currency the growth overseas

would be 22.2% or so and there is a translation gain of 4% which makes it 26.2% or 26.3% in

rupee terms.

Pritesh Chedda: For local?

Gagan Ahluwalia: For domestic business the volume growth is 11.8%, price change is 2.2% and no translation so

14.1% growth.


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Pritesh Chedda: I just want your outlook on the volume growth for local and international business?

Sunil Duggal: I think 12% to 14% volume growth is what we believe is possible for the domestic market and

18%-20% growth is what we seek for the international business.

Pritesh Chedda: Many thanks to you and all the best.

Vivek Maheshwari from CLSA.

Vivek Maheshwari: Sir, first is on the domestic business you mentioned that volume growth was 11.8% for fiscal

2010. What would it be in the fourth quarter of this 12.8% revenue growth?

Sunil Duggal: Fourth quarter is 11.7% volume and 1.1% price aggregating to 12.8%. In other words you see the

trajectory of volumes is very predictable and very stable, you have a little bit of movement up

and down on account of price, on account of translation, but I think the backbone of the business

which is volume growth is showing a very predicable trajectory and hopefully we can even

accelerate it from current levels.

Vivek Maheshwari: I was talking to some of the companies and the management there have mentioned some kind of

slowdown perhaps on account of high food inflation, so in general, although your numbers

obviously do not seem to suggest that, but in general is there any slowdown whatsoever in the

sector as a whole?

Sunil Duggal: Not as we speak. The demand side continues to be pretty robust, there obviously is some pressure

on margins on account of COGS but the demand side is good. We expect a good first quarter in

terms of that and the challenge really in near term is how to manage cost. Going forward I think

the monsoon would play a very important role in terms of both the inflation piece as well as the

demand front and I would not stick my neck out and give a forecast beyond the first because we

will really have to see how the monsoon pans out by the end of the first quarter but if the

monsoon is good as the earlier forecasts say, then I think it should be a very good year for us.

Vivek Maheswari: In your response to the first question you had mentioned about perhaps margins would at best be

maintained, any chances that you know?

Sunil Duggal: I am pretty confident of maintaining margins. I would be cautious of increasing it. I see very little

possibility of margin slipping.

Vivek Maheswari: Third thing is on the Gulabari side, could you give a number as to what would be the top line of

Gulabari in fiscal 2010 if you can share this number?

Gagan Ahluwalia: Gulabari sales in FY 2010 were about 54 Crores.

Vivek Maheswari: And would it also be possible to share the fourth quarter number if you have it?


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Gagan Ahluwalia: It is around 9 Crores.

Sunil Duggal: It peaks at third quarter, so 9 Crore sales in the fourth quarter is a pretty decent one.

Vivek Maheswari: What is your outlook on the A&P expenses, would it say at around 14.5% which is the case for

you in fiscal 2010 or?

Sunil Duggal: I think a lot would depend upon the inflation. If you find inflation tapering off and coming down

to say low single digits or perhaps in the region of 5% or so, I believe that the competitive

intensity would necessitate A&P spends of around 14%, but if there is very high inflation, then I

think the situation similar to 2008-2009 is going to happen that people are going to compress

A&P and we will probably do the same and it is going to be more in the region of 11-12%, but I

think the baseline is 11 or 11.5% and it could go up to as high as 14-14.5 depending upon the

whole margin profile.

Vivek Maheswari: Lastly on Fem, I mean the year obviously since your acquisition, the performance has been pretty

good, so what are the plans for FY 2011 there?

Sunil Duggal: We have renovated the portfolio and now is to just scale it up, so I think we have been very busy

in building a completely separate distribution vertical for Fem and now that is more or less ready.

There is a lot of activation work which has to go on in the form of promotions etc.So we are now

trying to have a very good year for Fem, we are looking at growth in excess of 20% and very

profitable growth. Business is on track, I think it is a question of how well we scale it up, we do

not have to do many things differently in Fem than what we have been doing.

Vivek Maheswari: The margins had been at 28%. Do you anticipate these margins to sustain?

Sunil Duggal: Yes, we do.

Vivek Maheswari: Okay, all right, thank you very much sir.

Margaret Kalvar from Harding Loevner

Margaret Kalvar: Hi, thank you for the call. Two questions, first of all could you comment on working capital? In

your presentation you showed a swing from working capital having been a positive one-day to a

12-day user funds, that is the first question and then the second will be on your international

expansion?

Rajan Varma: Well as far as the first question on working capital is concerned, I would like to add that we are

really having a comparison at this stage vis-à-vis last year, which is not a correct comparison.

You will recall that we have actually produced unaudited accounts which we are waiting pending

the merger with Fem which has meant that the number of activities which led to the reduction of

the working capital in the current year are yet to happen on the merged accounts. When these


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entries are passed later next month when we produce our audited accounts, we are expecting that

the working capital will be slightly better than the previous year.

Margaret Kalvar: And then the other question on international expansion, you mentioned a large variety of

companies both in Asia and I believe one in Latin America, I was curious as to what criteria you

use for deciding what is a good market to go in to and whether Cambodia and Bolivia will

present serious challenges in terms of distribution marketing, local preferences and tastes

catering to that or whether I have a misunderstanding.

Sunil Duggal: I think we perhaps have not clarified this particular point, markets like Bolivia, Cambodia etc.,

are pretty much at the periphery of our business. They are what we call opportunistic markets and

that is a term we use when we do not really invest in the markets, we do not take any trouble to

build distribution, we just have a distributor who picks up products and we just ship it, we do not

even have perhaps people going there. So the process of appointing a distributor is for opening

up of a market but beyond that we may not choose to do anything further. Our core geographies

are Middle East, all of Africa and South Asia and this is really where we are seeking to do

business in terms of building infrastructure and management capability.

Margaret Kalvar: Okay, thank you and obviously they are continuing to grow even more strongly than the domestic

market.

Sunil Duggal: Yes, they are growing and they definitely will continue at least in the near future to grow ahead

of domestic market.

Margaret Kalvar: Thank you.

Hemant Patel from Enam

Hemant Patel: Hi Sunil, I had one question on the CCD segment as a whole. The hair care segment did actually

pull down the growth rate for the overall segment, just a little bit concerned in terms of the

overall growth rate for the category as a whole, where do you see this going ahead and if so do

you think that the price increases that we are likely to take effect in probably the third quarter

could have some sort of an impact in terms of volumes?

Sunil Duggal: I do not think so and I think hair oils growth is very visible and we are on top of the situation. I

do not think there is any thing other than some margin pressure on account of high input cost,

which we are neutralizing through some price increases. Shampoo as a situation is getting a little

bit different (a) for some inexplicable reason the whole category growth has slowed down to

single digits and I am not able to understand why, secondly the competitive intensity in

shampoos has increased considerably. So perhaps going forward the days of 30% growth may

not happen, but we still grew the portfolio at around 25-26% this year and we are looking

forward to growth at least in the high teens even in the current year despite all these adverse

factors. So overall the hair oil and the hair care trajectory would be definitely mirroring that of


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CCD when we are looking at something like 12-15% growth in hair care in aggregate terms,

perhaps 10 odd coming from hair oils and another 20 odd coming from shampoos.

Hemant Patel: CCD category as a whole, could you help us dissect the volume growth rate as where is this

coming in from, is it still coming in from increase in rural reach or the growth rates are better off

in the rural markets versus the urban markets?

Sunil Duggal: Yes, they are, if you look at the Nielsen numbers the rural growths are at 18% as against 11% for

urban, so obviously there is much more growth coming from rural. I expect this trend to continue

especially if there is a good monsoon and rural folks are definitely going to be ahead of urban, so

that works to our advantage. We have very strong presence in rural and also the competitive

intensity there is lower but the rural markets obviously are very dependent upon good monsoon

and all the attendant factors so we will be keeping a close lookout for that but I suspect even this

year the rural growth should outpace urban growth.

Hemant Patel: How much of your growth is coming in from distribution extension?

Sunil Duggal: Not too much, I think basically around two or three years ago we went to the last mile and then

the growth in distribution has been pretty incremental, we have not done any big bang

expansions. I think what we have done is to improve the quality of our distribution in terms of

individual portfolio focus, we have done a lot of work in terms of building two verticals within

consumer care division, one to cater for half the portfolio, other one to cater for the other half and

both operate fairly independently of each other even though they go to the same distributor. They

almost are like two separate companies within CCD, so these are the changes which we made.

Distribution is an evolutionary area and you have to keep altering the structure to meet the needs

of the market and the portfolio complexity.

Hemant Patel: All right Sir, thanks a lot and best of luck.

Anirudha Joshi from Anand Rathi

Anirudha Joshi: Hello Sir, congrats for an excellent set of results. Can you share the quarterly growth in major

segments, hair care, oral care, and health supplements?

Sunil Duggal: That is a big one; we have got so many segments.

Anirudha Joshi: All the segments from CCD maybe?

Sunil Duggal: The major segments Gagan will just walk you through.

Gagan Ahluwalia: Hair care growth is 3.2%, oral care is 9.4%, health supplements 43.9%, digestive 5%, skin care is

flat, home care is –10% and food is 13.6%.


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Sunil Duggal: These are fourth quarter numbers.

Anirudha Joshi: Thanks for this data, just one more question, now with P&G coming in very aggressively and

probably cutting prices of shampoos as well, plus the expectation of launching some oral care

brands, do you see any competitive pressure or do we in advance decide to take any A&P or

price cuts in these two categories?

Sunil Duggal: No, not at all. We are still not seeing any signs of disruptive competition and that is something,

which could pull back business, but this is business as usual. As I mentioned earlier we are

seeing heightened competitive activity in Shampoos. Unilever is lowering the prices to trade,

Procter has increased the grammage, this is nothing which is very extraordinary, this is part of the

game. So we are taking appropriate measures to counter it to protect our share but so far no signs

of anything very disruptive in nature which could alter the whole dynamics of the category

whether in oral care or shampoos.

Anirudha Joshi: Okay Sir, thank you.

Amneesh Agarwal from Motilal Oswal Securities Limited

Amneesh Agarwal: Congratulations on a good set of numbers, I have a couple of questions, Sir my question is

regarding our international business, if we look clearly first of all the top line there has increased

by 26%, how much margins are we making over there because as per my calculations the profits

there have nearly doubled during the past one year, am I in the right direction?

Sunil Duggal: There has been an aggressive EBITDA margin expansion. Now the EBITDA are at 19.8% which

is almost identical to that of domestic, one year ago they were 16.3%, so while the consolidated

EBITDA have gone up by around 150 basis points the margins for international have gone up by

350 bps. The profitability here has grown very rapidly and unlike India I believe that we can get

more EBITDAs from here than perhaps what the India market can sustain because many of these

markets operate at a very high price point and this is very high gross margins. We can look

forward to international EBITDAs moving substantially ahead of India, I would not at this

moment say how much, but there is certainly more head room for growth in international as far

as margins are concerned.

Anirudha Joshi: In this scenario then when we are already at say 19.8% what could be say a steady state EBITDA

margin which you see in these territories in one or two years down the line?

Sunil Duggal: You know the international business is very diverse, it is not like India. You have some of the

richest countries in the world in terms of GDP and some of the poorest all in the same bucket, so

obviously you can get more margins in Saudi Arabia then you can say in Nigeria, so I think it

will all depend upon where we expand, how much we expand and perhaps the margins in African

markets may not be as high, but having said that it depends upon which categories we enter.

There are new categories in skin and healthcare which afford very, very high margins, but overall


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I do see the margins moving northwards. Given this trajectory where just three years ago we

were hardly at 11-12% EBITDA and now we are at 20% shows that there is momentum here and

now the rate of growth may not be as rapid, but certainly there is room to grow.

Amneesh Agarwal: Sir in the light of this very thing particularly what initiatives are we taking to further propel the

growth and enter into new geographies in the related markets where we are already operating?

Sunil Duggal: There are two elements here to our strategy, one is organic, the second one is acquisitive.

Entering larger more evolved and obviously more competitive markets is probably facilitated

more by acquisitions. Entry in to geographies which are comparatively less evolved is best done

through organic means, so we will use a mix of both and I believe that if we are able to execute

well, there is enough potential in the overseas market to continue growth at 20% plus even in

organic terms and substantially higher than that if you were to add any M&A activity to it.

Amneesh Agarwal: Sir, few minutes back you were talking about the rural urban demand scenario where you said

that the rural demand has grown by 18% and urban by 11%, so the low growth in urban India, is

it indicating that the urban poor has been hit somewhat whereas NREGA and high food prices

have saved the rural people?

Sunil Duggal: I think so yes, I think the urban poor has been the most affected by inflation particularly and also

by the economic downturn but much more so by inflation because he has really no other

resources other than what the income he gets.Of course the income levels have also risen partly

on account of NREGA and the impact of that even in the urban areas, but the rural people

certainly seem to be better off than the urban poor at this point in time. There is very little safety

net for the urban poor.

Amneesh Agarwal: So, in light of this sir if the inflation continues to remain in double digits and can it be a situation

that the rural demand will further accelerate and the urban demand can dip further?

Sunil Duggal: It depends upon the stimuli, I think the worst case scenario is that you have very high inflation

and the economic stimuli is not adequate enough to counter that and the government does not

improve things like MSP because of further fueling inflation and then you have the worst

possible scenario of high inflation and low demand, that is really a doomsday scenario but it is

never to be ruled out.

Amneesh Agarwal: Sir, my final question is regarding the skin care business where we had launched Uveda last year

and Gulabari brand has also done well, can you throw some light on what kind of growth are you

expecting in this particular category and what sort of product pipelines or new range you are

looking at in this segment?

Sunil Duggal: At the moment I think the whole idea is to consolidate rather than to be very aggressive, that is

the theme which you will see in the current year, it is to consolidate the initiatives which we put

in to play last year whether it is Uveda or the new hair oils or the new beverages or culinary etc


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rather than to go pell-mell in to large number of new categories. (a) There will be some pressure

in terms of A&P on account of the inflation, on account of the margin issues and secondly I think

we have got enough on our plate which we need to expand rather than to do a lot of new thingsSo

you will see skin care definitely expanding both in the back of the Fem portfolio, Gulabari should

continue with strong trajectory and we will continue to invest and grow Uveda, so I am looking

at growth in excess of 25% in skin care but it could be much higher than that.

Amneesh Agarwal: Sir, would you like to comment on the rising competitive intensity in skin care particularly from

the multinationals?

Sunil Duggal: I think the intensity is mostly at the top end of the market and we have been careful to stay away

from that space but let us say for Fem, I do not see any huge increase in competitive activity, of

course more players have got active, but we still have so much domination of that space that it

does not affect us too much. And Gulabari operates in a fairly niche market which is a small

town and even the rural areas where the rose equity is very strong, it has got its own niche which

we do not believe would be impacted by competition, so we are steering very clear of the top end

of the urban market skin care where the competitive intensity is very high with everybody being

there.

Amneesh Agarwal: Thanks a lot.

Moderator: Thank you. The next question is from the line of Abneesh Roy from Edelweiss, please go ahead.

Abneesh Roy: Sir, good set of numbers, my first question is on your home care business. Odonil is facing some

slowdown and you said modern trade is partially the reason, but in all the other segments like

Sani Fresh, Odomos you have grown well, so why the divergence?

Sunil Duggal: I think there was some delay in the renovation of products, so if you see the new Odonil

portfolio, it is actually very nice both in terms of air fresheners, the aerosol air fresheners, the

block air fresheners etc., and what we have put in to play now is growth in the low teens for the

home care portfolio, low to mid teens and certainly the air fresheners part would contribute. I

would see last year as an aberration on account of delays in introduction of new products,

because of technical issues, we were not able to get, the perfume stability right etc. But things are

now in place and home care certainly will do a much better job this year than what it did last

year.

Abneesh Roy: Could you comment on your test marketing on Babool gel, how is it doing because the price

point is very attractive.

Sunil Duggal: It is doing extremely well. We should be doing something like 15-20 Crores in the year which is

2010-2011 and it has been a pretty unqualified success. I think it has got unique positioning and

that is what is important and like you said the price point is very attractive and at the same time it

gives us reasonably good margins, so we want to put effort behind it.


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Abneesh Roy: Are the margins better than your other oral portfolio?

Sunil Duggal: It is better than Babool White but not as good as say Red or Meswak.

Abneesh Roy: Lastly you just mentioned something on the international acquisition, now the other FMCG

companies have become very aggressive, though not in the same segment, are we also

consciously looking at international market?

Sunil Duggal: Our measures are very; very different. We seek profitable acquisitions, which can be accretive

very quickly and we have some very stringent measures to filter out the prospects, which are not

scalable or accretive literally from the first year of acquisition. So I think that reduces the number

of targets substantially and also the value which we put on the targets may be little bit different

from others, but having said that I think it is a matter of time before we do a deal. I think we

have perhaps demonstrated more than any other company, our ability to make acquisitions and

more importantly to manage them well and internationally our management strength is as strong

as it is in India so our capability to manage international acquisitions is very high. The caution

here, which we will exercise, is that we will keep our acquisitive searches on the geographies in

which we are currently present and not really expand into entirely completely new geographies

outside the scope of where we are.

Abneesh Roy: And which segments will it be, all your current domestic segments?

Sunil Duggal: Not all I think the focus would be substantially personal care but we would also look at

healthcare opportunities which I believe will be far less in numbers than personal care. We will

steer clear of food and home care because at the end of the day we will really stick to our two

major categories of health and personal.

Abneesh Roy: And lastly you said in personal care top end is very competitive suddenly in urban India and you

also said that in Uveda you will continue to invest. So was there any problem of the timing of the

launch of Uveda or you think Uveda inspite of the MNC will getting very active does have good

sizable presence going forward?

Sunil Duggal: No I think why we have been a little slow to role out Uveda very aggressively across the whole

country is that around the time we launched Uveda we also acquired Fem and I think we needed

a lot of synergy to assimilate that business before we rolled out some Uveda nationally and then

after a few months what we decided is to build a separate cosmetics vertical, which would be

able to run with the some of the Gulabari SKU’s, Uveda as well as most of the Fem SKU’s. With

the creation of this cosmetics vertical which is almost ready we believe that Uveda would get far

more traction and visibility and focus than it would be under the larger CCD umbrella. So now

we have say three verticals in CCD - one is health and food, other one is personal and home and

the third one is much small of course is cosmetics and Uveda which sits now with the third

vertical and we believe it should do extremely well there.


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Abneesh Roy: And lastly on the retail can you tell us how your retail ventures were?

Sunil Duggal: Retail has definitely picked up a lot of momentum, there is a huge increase in footfall and

velocities partly on account of the revival in the economy but I think substantially on account of

us, of fine-tuning and perfecting in the business model over the last couple of years via trial and

error. Now I think we have got our act right, both in terms of managing capability in terms of the

business models, store size, portfolio etc., and we are now beginning to open up substantially

higher number of stores. We have gone on from 7 to 14 in literally three months and we are

looking at now going rapidly up to around 45 by the year-end and we will cap the losses at what

you saw in the current year that would not be higher despite significantly higher size of business.

So I think after a couple of difficult years we are now on the right track and we are looking

forward to grow the business and then we will see what to do with it.

Abneesh Roy: What is the current number of stores, you said?

Sunil Duggal: Current number of source is 14.

Abneesh Roy: 45 by year-end?

Sunil Duggal: Let say between 42 and 50 that is the range.

Abneesh Roy: Okay sir. Thanks a lot.

Aditya Mathur from Citigroup

Aditya Mathur: Sir first question on the CHD business, what sort of growth are we expecting there especially in

light of the new initiatives in the new OTC launches that we will have in the second half?

Sunil Duggal: See we will be launching some of the (44:38) OTC products in the second half and I am not

including that into the numbers, which I will be now sharing with you. We are looking at both in

the region of 15% to 17% for the current CHD business and then there would be some extra top

line impact on account of new products and we still have to map that out but I think what you

will be definitely seeing is a fairly substantial number of new launches in OTC healthcare in the

latter part of the year.

Aditya Mathur: Moving on foods do you think that first how is Real Burrst, are you happy/ with the performance

and what are your plans of actually taking this at a much larger scale and what is your outlook in

terms of volumes and everything on the food business?

Sunil Duggal: We do not see Burrst as being central to our business plans, which are concentrated around the

Real portfolio both Real and Real Activ. So there is not any advertisement money which is spent

on Burrst. It is purely a modern trade brand and it is done for tactical reasons because there is a

large market for fruit drinks here. We do not even manufacture at our own facilities, it is out


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sourced. So the whole effort would be behind brand Real which we believe has got immense

amount of potential. Of course the larger part of growth has come from the fruit drinks area,

which is basically people transitioning from carbonated to fruit drinks but we believe that a lot of

people would upgrade when they realize their health benefits of fruit juices vis-à-vis fruit drinks

and as and when the income level rise this market is bound to expand and grow and we are the

market leaders here we intend to maintain the leadership position and grow with the market. Our

investments both in terms of CapEx and in terms of A&P would be around the Real brand and

not on Burrst.

Aditya Mathur: Do you think this 20% sort of growth levels are sustainable over the next two or three years?

Sunil Duggal: Most certainly they are.

Aditya Mathur: What would you think about the competitive activity in the foods business?

Sunil Duggal: Well in beverages there is a lot of activity in the fruit drinks areas because that is by far the larger

business and the beverage majors, since they have got a bit of a problem at their hands with the

carbonated drinks, have to go for this part of the market. The juice market quite frankly, is not

big enough to stem the lack of growth in the carbonated segment. So they have to go here but it is

a very low margin segment and given the high margin profile we have for the rest of our business

it does not even make sense for us to invest in businesses where you have EBITDA’s in the low

single digits and make 5% to 7%. So that is the reason why we are steering clear of this area but

we are reasonably happy with the margins we get from our fruit juices business, which may not

be as high as personal health care but it is not very substantially lower either.

Aditya Mathur: Right sir. Thank you.

Asit Desai from B&K Securities

Asit Desai: Good evening sir. Most of my questions are answered. Just one question on Fem how much of

this growth is led by distribution that has increased in parlour network, we have given that we

have increased the network from 18000 to 25000?

Sunil Duggal: Some of it definitely is, it is hard to put a number, but I think over the last year we were

developing and building the distribution network and perhaps not rapidly scaling it up that will

come this year when we will have perfected the distribution model, we would have resorted with

the independent set of people and now you would see distribution expansion which would be in

line with the growth of the segment so I think it is a bit of a push and pull approach here. There is

no point in just expanding distribution if people do not understand what bleach is so you have to

go to the consumer first and it is a long process that you build franchise through the parlour

networks and persuade people to try it out at home with small packs and get them to use it more

regularly so there is no big bang here and that distribution growth will drive business necessarily

for bleaches atleast I mean you might do it for toothpastes or shampoos but not here. So that is


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why the third vertical which we have created which will be more in terms of building the

franchise of bleaches and demonstrating it as a superior way for skin lightening.

Asit Desai: So how much does this parlour network contribute to overall sales?

Sunil Duggal: At the moment it is around 7% of Fem sales. I think it is not really the size which is not very high

which is important is the fact that this where the trials happen, this is where the business is

generated which then moves to in home. So we spend this proportionately higher amount of time

and resources here than we would normally do because this is where you get the consumer in.

Asit Desai: And what is the scope to increase or take this number to?

Sunil Duggal: We at the moment cover comparatively small number of parlours. We should be doing at least

three to five times as much. This is a process in terms of recruitment and training and then

management of the parlour network girls, which cannot happen overnight so it takes time to build

that infrastructure and we are progressing well towards doing that.

Asit Desai: And secondly we spoke about the consumer health division that we look at a 15% to 17%

growth. We have also given that we completed the review of this division, just want to know

something on what is the kind of change in strategy if any and what action plan do we have for

this category?

Sunil Duggal: I think the future of this category of this business lies more in OTC healthcare and this 15-odd

percent growth which I have spoken about will be a blend of around 10% from the generics

business the traditional business and 20% from the OTC so the OTC piece obviously will be

where the investments and growth will come from and I think the growth of this business would

depend upon how well we are able to execute our OTC strategy.

Asit Desai: Sir could you also give the performance of the Shampoo category for us in this quarter?

Gagan Ahluwalia: Shampoo category has posted 9.4% growth in the fourth quarter.

Asit Desai: This is against the industry growth of?

Gagan Ahluwalia: Industry growth the category growth has been pretty modest. The growth in the category is

around 5% for the quarter.

Sunil Duggal: As I said earlier there is some inexplicable (51:26) reduction in growth of shampoos and we are

still trying to figure out why but, there seems to be some structural issues here but I think we

should be able to grow shampoos much ahead of what the category growth is irrespective of what

it is.


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Asit Desai: And Sir lastly just wanted some sense on the rural and urban split in terms of volume growth

particularly for your hair care category, which area have we seen a slowdown?

Sunil Duggal: I think our growths would be not very different from what the rural urban split is in terms of 18%

odd for rural and 11% for urban aggregating to around 14%-15% for the domestic business.

Asit Desai: For this quarter also?

Sunil Duggal: We do not really have the numbers for this quarter but I will be surprised if it is very different

this quarter as compared to the full year.

Asit Desai: Thanks a lot Sir and all the best.

Richard Liu from JM Financial

Richard Liu: Thanks for taking my question. Good evening Mr. Duggal.

Sunil Duggal: Good evening Richard. (52:38-unsure whether to keep or delete this)

Richard Liu: Sir just one question on the topline and one at the bottomline really if you can just help us

understand the volatility and the growth in oral care I mean second, third and fourth quarter , we

have seen quite a bit of swing there what would that be because of?

I think we have seen some kind of a single digit growth in oral care in the second quarter which

accelerated to 20% 25%?

Sunil Duggal: This quarterly volatility I would caution you in to reading too much into it lot of it is account of

base effect. You give a quick promo on Babool in second quarter of previous year and you

certainly don’t have much growth in the current year. So I think you should see the trend lines

over a longer period may be two or three or a six-month MAT kind of projections and then see

where the growth is coming. There were problems around a year ago when we went wrong in

terms of some pricing, and so I spoke about which has been corrected. Oral care remains one of

our, when I say oral care I mean toothpaste, it remains one of our most predictable and steady

drivers of growth and we are growing way ahead of category, we are by far the fastest growing

brand in the country. We are gaining share every quarter now despite the fact that the tooth

powder continues to be a drag and we get flat growth from tooth powder, Overall oral care is a

very steady source of business.

Richard Liu: But what is happening there on the tooth powder front, I mean we have seen quite some time of

degrowth now.

Sunil Duggal: See we have learnt to live with it and I think what we see internally is to have flat growth and not

degrowth. There is a structural issue in tooth powders, which would not go away no matter how


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hard we try so I think we really have to manage its decline. We have been so far able to do it

well. Today toothpowder is by far the smaller piece of the pie as compared to toothpaste but it is

decreasing every year in terms of importance

Richard Liu: But whatever is getting lost in toothpowder do you think it is adequately getting captured in the

toothpaste segment?

Sunil Duggal: If you take our aggregate oral care growth of around 12% I believe it is given our fairly high

exposure to toothpowders. This ratio if you continue this trajectory of growth our growths will

only increase as and when the share of toothpowder goes down, which will happen quarter-on-

quarter.

Richard Liu: I mean given that let us say even if I have to take Colgate's example which is present both in

toothpowder and toothpaste, but they still land up with the pretty much mid teen kind of a growth

and in overall sales level?

Sunil Duggal: But again you know their toothpowder component would be about 5% to 10% of the total

business, ours is 30%. Of course 100% five years ago but it is now 30% and declining, but I think

that pulls the overall growth rates down but our toothpaste growths are far ahead of anybody else.

Richard Liu: Sure, got it Sir, and second question is more the margin you can just help put in perspective for

us the divergence in the gross margins trend between standalone and consolidated. We seem to

have seen gross margin compression in standalone but an expansion in consolidated?

Sunil Duggal: At gross margin level?

Richard Liu: Sales less cost of goods sold?

Gagan Ahluwalia: Basically there was this marginal inflation in domestic business in the fourth quarter and

deflation in the international business of about 100 basis point.

Richard Liu: Sure but if I were to look at the 100 basis point compression in standalone and 150 basis point

expansion in the consolidated, would it imply that there is some kind of 10% point or higher

expansion in the international business?

Gagan Ahluwalia: Sorry I will correct myself there, the, GC expansion in international business is almost about 7%

or so in the quarter.

Richard Liu: What would be the source of that considering that there was?

Sunil Duggal: a) The inflation in the gulf and other markets has been much lower than in India and secondly the

big price hikes and distribution, which we took in 2008-2009 we have managed to retain despite


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the slowdown, which has happened to gross margins here. So that is why the EBITDA’s have

grown by 350 bps in international business because of these factors.

Richard Liu: So I mean you are seeing quite a bit of divergence there actually for the same point in time?

Sunil Duggal: Yes there is but we believe that those divergence may not be so severe going forward. We are

looking at maintaining now the gross margins in at least the domestic business and perhaps get

shrinking A&P a little bit and having some operating leverage to fuel the profit growth.

Richard Liu: Yes but that if you have to take the fourth quarter's domestic margin compression as an indicator,

I mean it already seems to be signifying some kind of a tough time ahead as far as margin is

concerned. I remember that if you were to look at the period of FY’09 I think Dabur as a

company managed very, very well vis-à-vis competitors in terms of the degree of compression

that one sees because of some kind of aggressive hedging policy that you had undertaken. I mean

what is the scene like I mean for let us say for a short term ahead?

Sunil Duggal: I think the one weapon, which we have to improve the gross margin is pricing which we did not

exercise last year and if you were to increase prices by say 2% to 3% that would effectively

neutralize the margin compressions almost entirely, so whether we choose to fully excise that

whether or not remains to be seen. But I think already as I mentioned as the first set of price

increases have already happened in many of the brands, and this might even accelerate while the

gross margin part may be under some pressure because there are enough other elements which

we have in terms of A&P and the most importantly in the indirect cost like SG&A etc., to keep

our EBITDA at the current levels which is really what we are looking at. So I would not lose a

lot of sleep over some compression at the gross level, so long as they are unable to manage it at

other points in the P&L.

Richard Liu: Last from a maintenance point of view there have some worry on account of the increase in MAT

rate just wanted to check if would this just be a front ending of cash flow impact for you in the

sense that would you be able to offset this some time in the future as and when you become

taxable for I mean higher than MAT level. What I mean is would you be building at a deferred

tax asset for this the higher rate of MAT?

Rajan Varma: No but the higher rate of MAT has really been quite independent of the deferred tax, so if the rate

of tax goes up that is the reality that the P&L will have to face and if we need to find a positive

on the bottom line other actions will have to be taken, so deferred tax has nothing to do with it.

Richard Liu: You would not be able to offset this sometime in the future, let us say in the year 2017-18 or

something like that? What I am trying to say is that, if you were to look at it I think you have

some seven to eight years for you to offset this as a tax credit going forward, will you remain in

the tax free zone for the full seven to eight years or you will come out of it within that?


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Rajan Varma: Certainly we will certainly carry it forward and offset against the then payable tax at a future date

assuming that the tax policies do not change and that option we will maintain as we have done

this year.

Richard Liu: But then for the time being you would not be creating any deferred tax asset for this?

Rajan Varma: No you cannot. As I said that they are two separate independent variables and so we would just

avail of that credit as and when the normal tax gets paid in the future.

Richard Liu: Okay got it. Thanks a ton for taking my question. All the best to you. Thank you, bye-bye.

Shirish Pardesi from Anand Rathi

Shirish Pardesi: Hi, Sunil, hi Gagan. Congratulations for the good set of number and thanks for taking my

question. Just a couple of questions, when we met last time, we saw that oral care trend with the

launch of Mint, we are on the uptick. Now we are seeing that suddenly for the last four or five

months, or rather last two to three quarters our numbers share remains stagnant and what I see

that now last month if you see that now Lever is picking up share in the oral care. Now how do

you see that this competitive pressure from Lever because so far the fight was between Colgate

and Dabur Babool at the low price point, now you see that Pepsodent is also moving up in the

share, how do you see this competition panning out in the next two, three quarters?

Sunil Duggal: I think our share has been constant, it has not moved up, I mean its actually moved up by around

1% in value terms from Q4 last year to Q4 this year. So 9.5% to 10.6% is what I see, so there has

been a reasonable improvement and you know obviously everybody cannot go up. But I do not

see - say Colgate has gone up from also by around 0.8%, but Unilever seems to have gone down,

so I think we have got different set of numbers, so Dabur and Colgate have moved up. We have

moved up more than others followed by Colgate and Unilever seems to have come down.

Shirish Pardesi: I am saying with the increased pressure on the price point from Lever in the last two to three

months and they are showing some upward signs in terms of picking up market share, is this a

big worry or concern or we can just ignore at this point in time?

Sunil Duggal: I do not see any sign of that.. Take Pepsodent 11.1% to 9.9%, Close Up 16.6% to 15.9%, I mean,

these are not indicative of any uptrend, so I really do not know. Colgate definitely continues to

move up and so do we.

Even Colgate is moving up on the back of Cibaca and not really this CDC is actually going

down, so overall they have degrown share by 0.8 and we have grown by 1.1% and Unilever

obviously has gone down. Sorry continue your question.

Shirish Pardesi: In terms of food business after a lot time we are now seeing the steady quarter-on-quarter growth

maintained, and now we have a new ammunition coming up through Burrst, now my biggest


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question is that where do you see this growth in the next two to three years, is Burrst segment

going to be a big driver for our business or still Real and Activ would continue showing some

positive signs?

Sunil Duggal: See Burrst would not be a real driver because we will deliberately not keep it as a driver. I do not

want our focus to be taken away from the higher margin juices business to the much lower

margin drinks business. So this will be a tactical ploy which will be there to complete our

portfolio and to gain entry into market segments which otherwise would not have got our

products, but the entire investment whether it is capital or whether it is A&P would be deployed

behind Real. Then the second vertical which we will be building in F&B would be culinary

which we will put into play at a point in time through Hommade. Hommade is now almost a 30

Crore brand, but it is growing very rapidly, and we believe there is a lot of headroom here for

growth, so we will explore possibilities in culinary segment, ready to cook or ready to eat,

actually ready to cook type of products and there may be some value which we can create there,

but otherwise the focus would be on both Real and Real Activ.

Shirish Pardesi: Okay, on the retail business front, I heard in the earlier part of the concall, we have now moved

up to 14 stores, and we are planning to move up to triple the current number of stores, I just

wanted to understand what has really gone wrong in the first set of strategy and now we are

having a confidence that we can roll out the business model and get the numbers up?

Sunil Duggal: In retail since there were so few precedents in this type of format or let us say organized retail in

any form, there was a learning curve which we had to go through and there were errors which

were made in terms of what the business model should have been and what it was at that point in

time, and I think we have learnt quickly from those errors, we have built up management cadre

(01:06:07) which is very much on the ground and really able to push the right button, so it is as

simple as the question of that. It has also been helped by some revival in terms of footfalls, so

particularly in malls where almost all our stores are and that has also helped things along, but I

think what we have today is a fairly robust business model which can be scaled up very

substantially without really putting too much stress on our numbers.

Shirish Pardesi: Slightly putting little bold statement, how much cash it will burn in the next three years, these 45

stores?

Sunil Duggal: Well let us put it this way that if you lose say around 10 Crores in the current year and I do not

expect the losses to be higher, probably lower in the next three, so it will burn that much cash

equivalent to the loss.

Shirish Pardesi: But you are very confident opening up 45, if not 42?

Sunil Duggal: I think the current momentum is such that we should be able to open up between 40 and 50.


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Shirish Pardesi: Very lastly, we heard in the Fem Care we are now expanding, and we also saw that we can grow

up to three to five times in the first coverage. If you can help us how does this work and what is

the universe of beauty parlours across for the segment which we are looking to tie up?

Sunil Duggal: The total universe should be in the region of around 40,000, we would be looking at covering the

top 10,000-12,000, there is no point going below that in the next one or two years, at the moment

we have something like 4,000 top parlours in our coverage, so we would be looking at tripling

the coverage, which obviously means a lot more foot prints on the ground, also lot of training

resources etc., so that is something, we have got a dedicated team which now only looks after the

cosmetics business, we are also moving Uveda and some of the Rose Water because that is a

mass distribution product, but some of the smaller products like the face fresheners, etc., into this

cosmetic vertical, also small SKUs like Vatika Hair Conditioners etc., so that really gave the way

forward for Fem in terms of the parlour coverage.

Shirish Pardesi: Very lastly, in terms of cost pressure, what are the key three four, key costs or key raw materials

which is burning, may be which is forcing us to take the price increase?

Sunil Duggal: There is Agri products, which is in our case mostly herbs, which are areas of concern. Honey

continues to be an area of concern and it has been like this for the last couple of years and then

the third piece would be the hydrocarbon derivatives, which is LLP or plastics, which should be

contingent upon the oil prices and they already at a level which is higher than what we believed it

ought to be. But I think to some extent the strength of the Rupee will offset it, now while the

strength of the Rupee does go against us in terms of translation losses, but that is more like I said

the topline issue it also helps us immensely in terms of management of cost, because a lot of our

raw materials are imported particularly in beverages and every Rupee in terms of the Rupee-

Dollar parity makes 4-5 Crores difference to our bottomline.

Shirish Pardesi: Okay. All the best. Thanks.

Arnab Mitra from IIF

Arnab Mitra: Good evening everyone. My first question is on the shampoo category. I just wanted to know

how Total Protect Shampoo is ramping up and also what is the strategy and the Anti-Dandruff bit

which has sort of not worked out last year?

Sunil Duggal: The Anti-dandruff which is an important initiative I think we have gone back to the Re.1 price

point, which we had vacated gone up to Rs.1.50. It did not really get much traction at Rs.1.50, so

we believe that at Re.1, while there would be a temporary stress on the topline with regard to the

revenues, but in terms of volumes we should be able to significantly accelerate the growth of this

offering, because we would be only quality Re.1 player in the country. So we have got a lot of

hopes from the shampoo performance this year, even though it may not show up too much in

terms of the topline, but I think the volume growth would be extraordinarily high.,So no issues


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there, and in terms of the Total Protect shampoo we are really going to make it more regional

rather than national because I do not think we have the resources to support two completely

different shampoo brands, so it would be largely localized in the east where it has got a high level

of recall and equity and we may not extend it to the rest of the country at least near-term.

Arnab Mitra: Just on the hair oils segment, I just wanted to know this price cut that was done by one of our

competitors, has it affected market shares for Dabur Amla this quarter and do you see any

possibility of you responding in terms of promotional offers?

Sunil Duggal: No, not at all, infact we are planning to take up prices (01:11:39) of Amla Hair Oil. There has

been no impact on account of low price competition. Amla equity remains extremely strong and I

think really the Amla growth is contingent upon rural economy being robust rather than any

competitive pressures. If the rural economy remains good, the way it was last year then I think

we will have a very good year for Amla Hair Oil plus the franchise is now very significantly

rural.

Arnab Mitra: Okay, just lastly on skin care just wanted to understand why the growth is flat after three quarters

of very good growth despite the winters being so good this time. Any specific reason for that?

Sunil Duggal: Winter growth is actually a third quarter growth not the fourth quarter. Fourth quarter is

secondary growth which were very good but the primary numbers, which you see are actually

done in the third quarter.

Arnab Mitra: Okay fine. Thanks.

Sagar Parekh from Enam Holdings

Sagar Parekh: Thank you for taking my question. Just one question, in terms of the CCD segment as a whole

what do you see the growth in FY'11?

Sunil Duggal: I think CCD we will be looking at growth which obviously would be comparable with the

domestic growth. We will be looking at around 15-odd percent.

Sagar Parekh: And how much would be volume and price?

Sunil Duggal: I suspect it would be between 10% and 12% volume and balance is price.

Sagar Parekh: Thank you, Sir.

Ahijeet Kundu from Antique Stock Broking

Abhijeet Kundu: Good evening everyone. Sir one question I have is primarily on your outlook on the urban

demand growth for FMCG, what we have seen last year or last two years has been that the rural


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demand has outperformed urban demand overall. And currently also we are seeing a good

amount of pressure on premium products, primarily in the urban markets that is why the retail

demand has picked up, so what is your outlook on it going forward?

Sunil Duggal: I think rural will continue to be the most important end(01:13:54) of the domestic market, the

rural demand would outpace the urban demand, the only hope that urban demand would revive so

that the entire dependence for growth is not rural as it was in the last year or so. But this year at

least we expect demand to be ahead in rural areas as compared to urban, because you know the

economic stimuli which is there in the rural areas is not going to go away. So only a bad

monsoon which would impact agri output tremendously would be the sort of party pooper

otherwise I do not see any reason why rural demand should not be good, it may be

extraordinarily good if it is a good monsoon and you know a great kharif crop, so then we could

actually have a real bumper here.

Abhijeet Kundu: Sir, when do you expect the urban demand to pick up actually one quarter around the line?

Sunil Duggal: I think the urban demand has been compressed by inflation. There seems to be no other

macroeconomic indicator to meet with that element, because we are having revival in terms of

the urban economy, etc., but the people at the lower end of the consumption basket are very hard

hit by inflation in the urban areas, and as and when the inflation tapers down you will see the

revival of urban demand otherwise it will continue to lag the rural demand substantially.

Abhijeet Kundu: Sir, your effective tax rate for FY'11 could be in the region of about 19%?

Sunil Duggal: That is right.

Abhijeet Kundu: Okay, Sir. That is all from my side. Thanks.

Amrita Basu from Kotak Securities

Amrita Basu: Hello Sir, just one question, I think it was asked earlier, but I did not quite understand it. Why

were skin care sales flat in 4Q?

Gagan Ahluwalia: Some partly due to base effect, Amrita.

Sunil Duggal: The Fem sales has continued to grow well, but I think the other one, Gulabari is more of a winter

product, so fourth quarter sales in any case are not very high, so even a small distortion there

could accelerate or dip towards very substantially, but again I would caution all of you from

focusing too much on one quarter numbers, see how the trend is, there is nothing really wrong

with the skin care portfolio. It is doing extremely well. We should continue to grow at a 25% plus

next year and if it is one quarter it is mainly on account of base effect, our own requirements in

terms of compressing sales for the quarter, for one reason or the other.


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Amrita Basu: Then what was the sales put in skin care in 4Q FY'09 if you could just help me with that?

Gagan Ahluwalia: The Gulabari range last year was 40%.

Sunil Duggal: So both hair oils and skin care you are seeing a little bit of base effect compressing growth here.

Amrita Basu: Okay, thanks a lot, Sir.

Yasmin Shah from Avendus Capital

Yasmin Shah: Thank you, Sir I have three questions, first is on the international business, what is the outlook in

terms of growth after taking into consideration the currency impacts? Secondly on detail how

many stores you plan to open over the next two to three years and when you expect to

breakeven? And thirdly your gross block, how much does that have intangibles it has moved up

by close to 400-500 Crores?

Sunil Duggal: On the first question which is on the international business, I am still not clear (01:17:38) about

the currency piece because I can not forecast how currencies will move, but in constant currency,

which is largely dollar denominated we should see growth in the region of 20% to 25% for the

international business, organic terms. Now this might show some shrinkage when translated into

rupees because the rupee is likely to strengthen more than likely to weaken so that would perhaps

go against our topline growth, but again like I said, it will have more impact on margins because

all our costs overseas are in local currency.

Yasmin Shah: On the retail portion?

Sunil Duggal: I think what we are doing now is that we are rapidly opening up the next tier of stores, which is

you know 10-12 number, going up to aggregating a total of 40 to 50 by the year end, now we

have a milestone in mind that by around October we will do a check in terms of how the business

is going, how the stores are going before getting into the longer term plan in terms of store

growths, so we believe that we have got a business model which is working on the ground. It still

requires a level of validation, which the new stores which we are in the process of opening will

provide us, we should have answers by October, but this year the plan is that we will open

between 40 and 50 stores.

Yasmin Shah: And what will be your Capex for that?

Sunil Duggal: The Capex would be small. The stores are rented, so you typically have around let us say 20

lakhs Capex or 15-20 lakhs Capex per store, so if you open up aggregate of 30 stores around 5 to

6 Crores Capex.

Yasmin Shah: Sir, on the last question the gross block number for this year, does it have any impact?


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Gagan Ahluwalia: It is 900 Crores which includes the Fem Care consideration, which has been partly recorded as

fixed asset and partly recorded as goodwill.

Yasmin Shah: So how much is the goodwill you said?

Gagan Ahluwalia: About 228 Crores.

Yasmin Shah: Okay fine. Thank you.

Gagan Ahluwalia: Thanks every one for joining this call. We will post an archive copy of the webcast and transcript

on our website. If you require any assistance please contact us, thank you and have a great

evening.

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