Thank you very much. We will now begin the question-and-answer session. We'll take our first question from the line of Abneesh Roy from Nuvama. Please go ahead.

My first question is on your key raw material, wheat, and how you see pricing this year at the customer level. So currently, wheat crop collection is happening. I understand it seems better than last year, but wanted to get your sense on the full season. How do you see that? Second related question is you said top line driving it hard will be a key focus. Last 1 year, what I'm seeing is your volume growth is picking up every quarter, but the -- and the sales growth is limited because of the overall negative pricing at the effective level, if your commodity remains soft, how do you see overall pricing for the full year? Because if that doesn't pick up the volume growth remains strong, but if the pricing isn't much, then the overall top line momentum will not change meaningfully. So wanted to understand that.

Thanks, Abneesh. So Abneesh, when I say top line, I would say that our focus is going to be to make sure that we grow volumes. We have been growing volumes, and I think our outlook on this year is not deflationary. Our outlook on this year is slightly inflationary, which is a healthy inflation of 3% or thereabouts. The commodity situation, see while the crop seems to be fine as far as wheat is concerned, the government holding has been reasonably low. So there is going to be a government buying because of their programs. So I would think that the wheat outlook is slightly inflationary during the year, while until the elections, things will not move. But beyond the elections, I think it will be slightly inflationary. Similarly, sugar crop has not been a great crop. It's not bad, but it's not as good as the last year crop. So sugar is also going to be slightly inflationary. So I would say it's going to be a manageable inflation here. And we are making sure that we take whatever interventions that are required to get to our plan numbers as far as commodity is concerned. So we've started to buy. We've also made sure that we have a full program in place to get the best prices for the commodities that we buy. Does that answer your question?

Yes, quite helpful. One related question will be on your RTM 2.0. So you have mentioned that this will be a pilot project in H2 of FY '25, which means FY '26 will be the real year in terms of benefit and going ahead after that. So I wanted to understand when you are saying a hard focus on growth coming back, FY '26, could you talk about in terms of at least some benefits, what could be there? I understood the process. But in terms of KRA for this project for FY '26, what could it be?

So I had put everything on that s lide. If there's more detail required, we can chat about that separately, Abneesh. But frankly, the pilot is to make sure that, see, we are doing this with Bain, as you know. And the process has already started. We just want to make sure that we put all ducks in a row, then we test it out in a pilot market and then we roll it out. So you're right about the fact that the full impact will be towards the end of this year. Now obviously, all of those items that I had listed on that slide are going to be ticked. And with that, obviously, the benefits are going to be that the adjacency businesses will get their time in the sun. We will make sure that our quality of salesmen is right up there, and they are doing range selling and selling more SKUs and we have a better presence in all of these high - potential outlets. So I think it's all reasonably clear, but if there's anything more that you need, we're very happy to chat with you separately.

Thank you. We'll take our next question from the line of Avi Mehta from Macquarie.

Sir, I just wanted to ask the adjacencies that you highlighted, the non -biscuits portfolio. What is the current share of sales? And how -- more importantly, how does the margins contrast in this portfolio versus the biscuits business? Would you be able to give us a qualitative sense? Yes. I just wanted to check, sir, that in the non -biscuits portfolio, what is the revenue salience right now? And could you give us a sense on how do the margins stack up versus the biscuits portfolio, would this be possible?

So adjacencies -- are you talking about adjacencies?

Yes, the non-biscuits, basically, the adjacencies, yes.

It's about 25%.

And sir, would you give us some qualitative sense on how the margins would be for this segment? Is this better than biscuits, similar, slightly lower? Any sense over here, sir?

Average would be maybe slightly better, the gross margins. The net margins will not be, but the gross margins will be slightly better.

Got it, sir. And sir, just a bookkeeping question. I wanted to just understand, A, are there any one-off costs in the other expenses seen in this quarter? And what the volume growth was for the quarter? That's all from my side.

They are very small. There's nothing worth mentioning as far as this quarter is concerned. There was -- the advertising and sales expenses have been higher this month because we've not been supporting our brands as well as we should because of the inflationary environment that we went through. So I think overall situation is that we are now getting back to a normal way of doing business. It's not like what we've seen in the last 2 years.

We have our next question from the line of Latika Chopra from JPMorgan.

Varun, let me just begin from what you said, you're looking towards normalized way of running business. For FY '24, you had revenue growth of 4%. Could you split what was the volume growth and the size growth or deflation during FY '24? Extending that a bit, you talked about 3%-odd of inflation that you anticipate in FY '25. What is the normalized volume growth expectations, given all the interventions that you're doing in the business? That's the first question.

So the situation on volume and revenue for the last year has been, they are almost at par, right? So volume and revenue are the same. However, if you look at it by quarter, it's a very different story. So the last quarter, the volume growth is 2x the revenue growth, right? So I think the volume growth this year, we expect them to be quite solid. Obviously, barring the entry into the year, which is pretty similar to the year that's gone by. And post -election, post-monsoon, I would think that post -election, post -monsoon, we would be aiming towards a double -digit volume growth, for sure.

Understood. The second question was on margins. Your gross margins have continued to surprise despite price cuts. Wanted to understand what is the optimal margin expectations that we should build into next year? You ended FY '24 with almost a gross margin of 42%, EBITDA margin of 19% of the domestic business. So do you think there is further upside on these -- from these levels considering commodity prices are a bit benign? You talked about a bit of inflation coming back post-elections. And you also kind of alluded to need for more AMT and plus investments in all the initiatives we are doing. So I know -- so how should we think about margin outlook, given there's a big focus on top line momentum? Would you give away the margins or you think these are sustainable margins?

So the objective is not to give away margins, but to make sure that we spend the right amount in terms of innovation, in terms of brand building, in terms of all the projects that we are doing. So we have this RTM project, which we spoke about. We also have a replenishment project coming up to make sure that we make that more efficient. So I would say not a major change from what we've seen. Upside, I would not expect upsides on this, but not a major change from where we are today.

We'll take our next question from the line of Sheela Rathi from Morgan Stanley.

Just a follow -on the margins question. Would it be fair to say that near term, there could be some negative impact coming on margins, given the RTM 2.0, which we would be initiating, which could have some upfront cost versus the cost savings, which we could have in future years? Second part of this is, the NPD sales number, is that correct that INR275 crores is the NPD number, which is about 2% of the overall sales. This, I would believe, is much lower than where we want it to be. And third is the focus around the adjacent portfolio. So how should we think of margins on that aspect, especially over the next 12 months or so?

So our target for the entire set of NPDs is north of 3.5%. So this, we've spoken about the NPDs that we put on that slide. So we will continue with that target of 3.5% of overall revenue as far as the NPDs are concerned. As far as margins are concerned, see, the way we look at it is that this year is a year of top line growth. And if it means taking a short -term hit on margins because of all the projects, because of all that we are doing, we will be willing to do that, but it's not going to be dramatically different from where we are at. So that's the objective, really, to make sure that we are future -ready, we have a very solid business model as we move ahead from here, and this benefits us in the future. And similarly, on brands, we will make sure that we spend the requisite amounts on our existing powerhouse brands as well as some of the new products that we are launching. So that's how we planned it. It's not going to be a dramatic change, but might be a slight change from where we are at, which obviously will come back in due course.

Understood. And just a bookkeeping question. When you talked about the adjacent portfolio at 25%, where would dairy be right now? And where do you expect that to be, say, in the next 2 to 3 years?

So dairy is we have -- as you know, we've taken a big punt on dairy. We've invested fairly large sums of money in creating a back end. And we've also got a very strong partnership, which is the joint venture with Bel for cheese. So our expectations on dairy are big, right? We -- I wouldn't say that we've achieved what we had planned for ourselves. We are short of that. But I'm confident that with now our plant going onstream, we are producing really good quality products, plus Bel bringing in their expertise, their products. I don't know if you know, but these portions that we have selling in the market are currently coming from Vietnam, from the Bel factory in Vietnam. Similarly, the sachets are also made in Vietnam. So at some stage, once we get to the threshold on these products, we will start to produce them in the country that will give us a lot more competitiveness. We are looking at a lot of innovations beyond that. See, until now, what's happened is that everyone has been doing the same thing. Everyone has been doing a block cube and slices. We are the first ones to buck the trend on that and bring in products which are very different, right? So we will continue to do that. And the milkshakes have been doing well. As a company, we are not a soft drink company. So initially, we struggled to make sure that we understood how to deal with a product like this. So I think we are getting there. And despite that, despite our inadequacies as far as soft drinks are concerned or milkshakes are concerned, we've done extremely well. Now we are building that expertise within the system. We are also making sure that in this RTM 2.0, we bring that to life as well. So I think the outlook on dairy to me is fairly positive. And we will make sure that we do all that's necessary to make ourselves very different from all of the others in the marketplace.

We have our next question from the line of Arnab Mitra for Goldman Sachs.

Varun, my first question was, Varun, your focus on growth this year. Do you think it will be driven more by the biscuits portfolio or a big scale up in the adjacencies? And if adjacencies is a big scale up, do you think the existing portfolio is good enough? Or do you have plans to add more sub-segments to some of these adjacencies that you operate in?

It's a good question. See, our focus from biscuits can never go away because that's a bulk of our business, and growth on biscuits will always be a very important focus for us. However, the objective really will be that the adjacency business grows at 1.5x what our biscuit portfolio grows at. And this year, we are not going to do too much more as far as new categories are concerned. If you think about it, we entered a lot of new categories, and we would want to consolidate our position in those categories and make sure that we build heft in those categories this year. We've got a lot more on our plate as we go forward. We've got a lot more in our funnel, but we will resist from doing that to make sure that we get a very strong sense of growth and also until our RTM 2.0 is ready, we don't want to create too much confusion in the sales system. So that's our plan for this year. But if you think about it, we've got a lot more categories to build, which we launched last year.

And my last question is on pricing. Varun, you mentioned this quarter pricing is probably like minus 3%, if I assume volume is double of your revenue. So your comment on a 3% inflation next year, would it be fair to assume it's more back ended? You would expect first half to still be a deflation and significant pricing in the second half to get to that inflationary outlook for the top line?

See, it's not about first half. I think the first quarter is flattish. But as we go forward post - elections, we will start to see inflation is my forecast. And I'll be very happy if I'm proven to be wrong. But it seems that post-elections, we will start to see 4% kind of inflation.

My question is on market share. Anecdotally, the small and major player seems to be doing well. However, we see that you are also gaining share. Are you also seeing any trend about small and regional players doing better and they have like stopped -- you're doing better now? Or how should one triangulate this thesis about both small doing better and you also gaining share?

Okay. That's a very interesting question. Now let me give you my point of view on that. See, what happens is that once there is a very large margin that is seen in our category, especially with the market leader, there are a lot more players which come into the country and which start to do that business, right? So frankly, the point is that that's what happened, right? Post the inflationary environment, when we took a lot of pricing, everyone saw our profits because we declare our profits every quarter and a lot more competition started to come in. And we started to see them move up in terms of shares. However, on delving more into it, we figured out that their share situation was because of their spreading their wings from their core market because these local players usually come into one state, and they are regional players, then some of them were spreading their wings into other markets and gaining share. However, it's not easy to do that. Now you can do that in organized trade because organized trade, you can throw money and certainly get facings, but doing it in traditional trade has its own pitfalls. And then yo u start to get product back, et cetera, etcetera. So what we've seen of late is that while people spread their wings, they started to feel the pressure in new markets. And we've seen these shares stabilize of late. And I think that the trick really is that you've got to keep the profit to a certain level. If you go way over the top, then even a new player can come in and start to eat at -- bite at your ankles in some way or form. And we've learned it. We're going to make sure that we apply this, not just in biscuits business, but in some of our other businesses like cake and rusk as well. And I think we've done it quite well in bread. The other categories, we'll make sure that we understand how to contain these local players without really taking a cut on our profits, overall profit.

Sir, that clarifies. My second question, actually, I just wanted to borrow your confidence on the volumes were double. I believe you said double -digit volume growth is what you're gunning for in FY '25. And also, there will be some inflation of overall 3% to 4 -odd-percent. So how should one really again think about this dichotomy, again, when inflation will also be there, but will also lead to double-digit volume growth?

Sorry, I missed that question completely.

If there is going to be an inflation, how do you expect to grow double-digit volumes.

See, if you look at our base volume numbers, they are not great numbers. And I do think that the market is ready for getting back to the growth. See, if you think about it, the last decade or so for most businesses, volume growth have not been where they should have been, right? If you look at the previous decade, that was the decade where volumes, revenues, everything was booming. I think it's time that most consumer businesses now start to see the positives coming out of the economic growth in the country. I think it's been a little bit of push and pull. But hopefully, this year, we will start to see that come back, is my forecast.

We'll take the next question from the line of Harit Kapoor from Investec.

My first question is on the distribution side. So while you did mention about the RTM 2.0 that you're looking at, how do you kind of think of it for the next, say, 12 to 18 months? Would that project take precedence over expanding the directory and strengthening rural distribution? Or do you believe that this -- both will go hand and hand? Just wanted to get your sense on that.

No, these will both go hand in hand. See, this project, RTM 2.0, that we are talking about is more at the top end, right? And it's about the high potential outlets, getting the right amount of service, the right kind of salesmen, the right bouquet of brands and SKUs. And the distribution expansion project is more about the bottom end of the pyramid, which the project -- which is about rural distribution. And even today, our rural presence and our rural share is still lower than our urban presence and urban share. So we cannot take our eye off our rural agenda. And hence, both will go hand in hand.

So just to tie it into 3 segments for you. So the top end really is the organized trade, and we have seen pretty good growth in modern trade, e-commerce as well as the market share increase. The next one are the high -pot outlets, which Varun is talking about. And today, the entire service architecture is obsolete, which we are planning to upgrade, which means that these high-potential outlets will be able to send more diverse categories, will be able to give them more service. The third part really is the urban, where there is a massive growth, which is happening both from a consumption point of view and also outlet addition point of view. So therefore, that's the area where this entire distribution expansion has to really accelerate. And the fourth is rural. So rural were underleveraged, both from market share point of view, the managed distribution point of view. And the intent there is to keep adding more number of villages, resilient villages, so there we can extract more and more from rural as well.

Got it. And just one last question on the organized channel part. What is the share of this organized channel piece for you now? You have shown that all 3 businesses have done very well in FY '24, new, adjacent and biscuit. So what's the share of the overall mix now for you?

So overall mix, as in you're talking about the contribution of the product or are you talking about biscuit market share?

No, the contribution of modern trade and e-commerce, the overall revenue.

Contribution of modern trade and e-com to our overall business is about 15%. And it's -- the e- com part is, what, about 3.5%.

Yes.

3.5 and 12.5% or 12% approximately is the number for this, but we see this to grow but not dramatically. This will go from 15% to 16%, maybe 17% as we go forward. And just to remind you, our share in this channel is about the same as our share in overall market. And our potential in these channels is a lot more because from an innovation standpoint, from the quality of product s and the salience of brand, et cetera, we are much stronger in this channel. So the objective will be to get some traction and move our shares up in this channel.

We'll take a next question from the line of Kunal Vora from BNP Paribas.

I just needed some data points. So if you can give us a broad split of the adjacent categories in FY '24, you mentioned that contributes about 25%, which is about INR40 billion. Can you talk about how large is the individual products, cake, Rusk, dairy, bread, croissant, if you can give us a broad breakup?

So Cake, Rusk, dairy, bread - All four businesses are about the same size. And then we have the fledgling businesses, which is croissant, which is about -- what would that be as a percentage? About 0.7%. And we've got some other small businesses, which are negligible really because we've just started off the bars business, the Makhana, etcetera, all of those are very, very small. So that's not worth mentioning. But the four businesses are about the same size. So you can just take, yes. And international...

So it will all be INR9 billion, INR10 billion, like it will be around INR8 billion?

You're talking in dollar terms?

No, no. I mean, like rupee terms. Cake, Rusk, etcetera, will be what, like INR10 billion?

You are talking billions, okay? Yes, about that much, yes. You're right.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Mayank Mundra for closing comments. Over to you.

Thanks, everyone, for spending time with us on this call today. We look forward to interacting with you again.

Thank you. On behalf of Britannia Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.