Thank you very much. We will now begin the question and answer session. Our first question is from the line of Vismaya Agarwal from Citi. Please go ahead.

Hi Varun and team. First of all, thank you for the new segment on the presentation, the insights on the BPC category. I had a couple of questions. So first, can you share some detai ls on the growth rate for Mamaearth, some colour on the primary sales for the brand and maybe an update on the performance for the brand across different channels? I'm asking this in context of the distribution project that's ongoing. So just some colour, please.

Hey Vismaya, hope you are well. Obviously, we've not been sharing brand-wise growth in the past as well. We, from comparative purposes, but I think like we shared in the Mamaearth slide, if you look at the Nielsen data amongst the top 15 beauty and personal care brands, Mamaearth continues to be the fastest growing brand in face wash and in shampoo. And even in modern trade, we have continued to gain share. So clearly, competitive growth is strong and it's going well from a competitive growth perspective.

Got it, Varun. So what I meant was not exact numbers, but maybe from some qualitative comments around, say, is it on track to that double -digit aspiration that you've had for the full- year base? So not just the quarter performance, but more on the whole trend, the way this brand is trending. But I hear you on the market share bit. Yes, and just one more bit here. I do see the inventory levels that you've shared for specific categories for Mama earth, but on an overall basis, I just want to get a sense that slide that you have on Project Neev where you mentioned the 30 to 45 days inventory across the channel partners. Is that the current number or is that what you want to target eventually once this sort of initiative is complete?

Sorry. So one, I think the inventory numbers that we shared in Mamaearth for face wash and shampoo, they're retailer-level inventory numbers captured by AC Nielsen in a number of days. And Project Neev, what we are talking about, is distributor inventory, and those are desired inventory levels that we want to get to post we do the correction.

Got it. Thank you. The last one from my side is on the gross margins. Now I see it's expanded quite a bit even on a Y -o-Y and on the sequential basis. So can you give some insights on the drivers here other than channel mix? Is there some seasonality at play here as well given what I see on the historical data? 1Q has generally been a higher gross margin. So any comments there? And also an outlook if you can share further as to where this gross margin should settle for FY25.

Yeah, Vismaya. Hi, Raman this side. So I think the gross margin expansion is the two key levers. Of course, as we scale, we continue to get some procurement efficiency. So part of that is because of that. And secondly, in terms of brand mix, given our younger brands are a higher gross margin profile, that's also helping bump up our gross margin profile. So I think that these are the two key levers. And I think from a, let's say, go forward, you know, expectation, we expect around same levels between 70% to 71% kind of a gross margin level is how we expect in terms of achieving the gross margin profile for the year.

Good. Raman and Raman, anything on the seasonality here? Is 1Q generally a higher gross margin quarter?

Well, I think that if you look at Y-o-Y, I guess 1Q has a higher proportion of sun and face wash, so there is slightly higher gross margin like that. But from a perspective of Y -o-Y, and I think we will continue to be at the gain that we have demonstrated in first quarter, I think that gain will sustain throughout the year.

Got it. Perfect. Thank you and all the best.

Thank you.

Thank you. The next question is from the line of Chintan S heth from Girik Capital. Please go ahead.

Yeah. Thanks. Thanks for taking this question. And I think great set of numbers. The numbers are progressing well. A couple of questions on the distribution side. I understand you are not comfortable sharing brand-wise, but if you can share some data on how the offline -online mix has changed this quarter versus last year, that would be helpful just to check how we are progressing on the offline side. Secondly, with this project, what are the outputs we have internally benchmarked for this project? Right now, it's close to 65-35. Where are we looking at as an offline mix, to see as post the project name gets concluded ? Thirdly, on the Ayuga si de, any write-offs we should expect or its already in the numbers that is on the Ayuga side? Thanks.

Thanks, Chintan. So, on the first question, the contribution of online-offline remains largely in the same zone as last year, right? Because there is, while there is offline growth, but our younger brands which are growing are only present in online, right? So, because of which, online is actually also growing faster. And hence, that contribution is largely, you know, held, compared to the last few quarters.

So, the mix remains the same, or it's a quarterly comparison, offline-online?

Yeah. I mean, from a quarterly comparison, if you will see, then online might be a few on the base points increased because, like I said, the younger brands which are only online, their growth, you know, leads to the online channel expansion, while the off line growth is largely only driven by ME. So, that's what that is. I think the second question was in reg ards to the outcome of project. I think the outcome of project means is more long-term in that sense, that the right offline GTM ecosystem will be needed for us to drive, not just Mamm aearth, but also, for example, Derma Co, Aqualogica, Dr Sheth, because all of these brands in the long term will be executed in the physical, retail, right? And we need to have a very healthy distribution system where the partners are earning healthy ROIs and their ability to invest in the growth of these brands is high. So, I think it's an investment in the decade-long growth that we want to see across the channels. And hence, there is no short-term sort of, contribution change that we would see because of that. And what we would want to measure, like we're saying, I mean, reducing inventory levels will allow us to get our partners to invest more in in-market or in manpower interventions to increase direct distribution. I think that, and like we mentioned, we are running a Nielsen IQ-led survey amongst distributors. I think for the next few four quarters, as this project continues, we will continue to run that to understand how the perception of the company amongst distributors is improving.

And because recently, we came across, media articles related to certain inventory not getting replaced by the company that was the comp laint for a few associations, so distributor associations. So, that it will be taken care of through project Neev. That's what our target is.

Yeah. Some of those complaints we have talked about and we've given our answers, some of those are not, you know, don't have merit. And, you know, we've been, we've had policies, we've been sort of, you know, actively taking care of any damage expiries, etc. But yes, we have talked about just in the past that our overall inventory level in the distribution system are higher relative to other FMCGs. But finally, the partners that we are now seeking are the FMCG kind of distributors. So, Project Neev aims to help us, get a better business partnership with these distributors and also, of course, take care of all of these concerns which might be out there.

Right. And on Ayuga, the last bit, and I'll jump back into it.

Say, Ayuga,, as you mentioned, yes, so we don't, we don't see any write-off risks. We have some inventory which we need to manage, which we have already provided.

Okay. Thank you.

Thank you. The next question is from the line of Manish Poddar from Invesco Asset Management. Please go ahead.

Hi, Varun. Two questions. So, Varun, if you can highlight, let's say, because of this, you know, distribution transition, what is the sort of impact on sales?

Yeah, hi. So, I think, like you mentioned, the phase where we are, where to take the inventory correction, we haven't reached there. We were first, you know, strengthening our supply chain so that even with the relatively lower inventory levels, we are able to run the system without fill rate issues. I think that was our past focus. But over the, this quarter or next, we will be taking that decision where in that quarter we will have short -term impact in sales. But otherwise, in the long term, this won't have any impact. Actually, it will be very positive impact on the market.

Okay. And how much -- we were initially implementing in the top locations. Where are we now in the journey? So, just -- the slide has a lot of moving points. I'm just trying to understand, let's say, if I have to monitor one or two variables, I'm just trying to understand how much of the network are we there? And you're saying it will take another two quarters…

So, like I mentioned, the first two phases, we are almost 80% there. So, for example, phase one, which is about transitioning in top 50 cities to direct distribution model, we are done with almost 35, 36 cities . 15 more cities are left, right, in terms of removing SS and moving to a direct distribution partner. The second phase, again, from a DMS perspective, our rollout has been fairly healthy, 90% of the sales are getting captured there. And the supply chain phase, I think we are about 60%-70% there. So last quarter is when a lot of the work has happened. And as we speak, it's happening at a strong pace. The rest three phases, which is inventory correction and norms, etcetera, is yet to be started.

Sir, if you've implemented this in so many locations, without a sales loss?

Yeah, because we've not taken the inventory correction till now. And then we will do the -- because if we would have done that without having the right supply chain levers, for example, without opening the East regional center, if we would have done the inventory correction in the Calcutta segment, then our fill rates to retail would have dropped significantly. Because our supply chain wasn't ready to supply the distributor on regular purposes, right? Now that we have opened the East regional center delivery, we are in a ready state to actually make that transition, right, which is why it's not visible till now. We will take that over this quarter or next.

Got it. One last one. So in terms of…

Sorry to interrupt. We are losing your audio in between. So if you can repeat your question.

Yeah. So, Varun, just in terms of new product contribution to sales, that's at 9%. And so just wanting to understand, let's say, I think this number at quarter 4 was about 18%. So just trying to understand why the reduction, let's say? And there is, I guess there's no mention on Staze. So if you can highlight how is the progress there? That's it.

Yeah. I think firstly, that number was from like innovations which had lasted for the whole year. And even that number, if you look at from a perspective of contribution to growth, 50% of the growth contribution was coming from innovations. And I think even now, 50% of the growth contribution continues to be from innovations. And on Staze, I think the progress has been healthy. It's a very young brand. It was only launched in February, which is why we're not sort of sharing any major update. The progress is healthy. But only once it hits a certain milestone, which we want to talk about, is when we will share it with you. But the early results in the progress, we are very happy.

So if I can get just one clarity. So when you say 9% and there's a hashtag which is Jan to June. So during these two quarters, new products contributed 9% to the sales?

Only the products which were launched after January of '24, they contributed 9% in the AMJ quarter. That's what we mean.

Okay. And the same number was 18% last full year, because there's no there's no asterisk there...

Which was for the products which were launched in Jan '23 to December '23 contributed 18% to the Q4 contribution. So 12 months of launch products in the next few months.

The next question is from the line of Mehul Desai from JM Financials.

I have two questions. One is, obviously, if you can give some flavour on profitability trends in TDC, how is it shaping up? I think we had once spoken about that trend breaking even with now gaining scale, is it set more into positive trajectory? And second on the A &P spend, I think for the full year, the A&P spend were close to 34-odd percent. First quarter, we have started at 36- odd percent. So is there a seasonality that first quarter is high on A &P spend? And how do you see A&P spend as a percentage to sales for the full year?

On the first question, yes, TDC continues to scale in a healthy manner, both on top line front and even from a bottom line perspective has become better than what it was last year. So it's in the positive even in this quarter. On your second question, yes, we do have seasonality in terms of how we do our brand marketing spend. So we have higher brand marketing and A &P spend that we do in H1 compared to H2 because of sunscreen, face wash being our two core categories. And this is the recruitment period for these two categories and hence across brands. There is stronger brand investments that we do.

And do you see some efficiencies coming on A&P spend in FY'25 or you think the competitive intensity is high enough that you might not see efficiencies in A &P, but you will extract more efficiencies on staff costs and other expenditures?

So, actually, the observation is correct. Competitive intensity has been fairly high and our focus has been to gain shares. And we would try and ensure that we continue to invest in the brand to gain competitive growth. Of course, our H2 A&Ps will be, like I said, better than H1 A&Ps. But overall, the focus has been to find efficiencies elsewhere and remain strongly competitive on the brand.

The next question is from the line of Nitin from Emkay. Please go ahead.

Just wanted to get a sense on research and development strategy ahead. So, last quarter, we had acquired Cosmogenesis Labs where Rohini Manoj also joined us. So, anything you want to highlight how we are planning to go ahead with the R&D strategy ahead?

Thank you for asking that question. In fact, like we talked about GTM as a foundational lever, we are very, very clear that R&D is a strong foundational lever for long -term growth of our business and winning in the beauty and personal care in India. And he nce, there is continued focus and investment that we will keep doing on R&D side. Cosmogenesis was one of those initiatives that we took last quarter that, in fact, the completion of that integration is really happening in this quarter and post which we will start focusing on how do we leverage on all the intellectual learnings that they have. But aside of that also, there is more activity that we continue to do on R&D in terms of even learning and partnering with global active vendors, figuring out what new innovations are happening across the globe, right? And how we can also study the dermat science of skin to understand what can be done further from a crafting for India perspective. So, I think a lot of focus on that front and you will see that as a continued conversation pillar from our side over many quarters to come because we genuinely believe that’s one fundamental lever that we will continue to strengthen.

Thank you. So, like this question was more also from the perspective of recently HUL is also talking about the strategizing and launching some of the patented international offerings in India. So, just wanted to get more sense on this, like, do you see this will have any implication to us or you see this as a positive for the overall market development perspective?

So, I think I can speak on our behalf and I can tell you that, you know, Honasa will continue to be the edgiest and the most innovative company in beauty and personal care in the next five years to come. And I don't think anybody will be able to beat us when it comes to consumer innovation, it's our core and we will continue to get stronger in that.

Sure. And do you think there is any merit in terms of patenting products, like some of your competition in active ingredients have sort of started patenting the products, while we have not yet patented anything. So, do you think patenting has any role to play in the beauty and skincare segment?

You said that this is an area of which we have been deliberating on in terms of technology or ingredient, patenting. As of now, we have not actively been pursuing this, but with the enhanced R&D strength that we are accumulating now, this is also an area that we will further deliberate.

Sure, sure. Thank you. Thanks for giving the opportunity.

Thank you.

Thank you. The next question is from the line of Jitendra Arora from ICICI Prudential Life Insurance Company. Please go ahead. Mr. Arora, your line is unmuted. Please proceed with your question. As there is no response from the line of current participants, we will move on to the next question. The next question is from the line of Percy from IIFL. Please go ahead.

Hi, Varun and team. My question is on the guidance that you had given last quarter in terms of 20% plus growth and 150 basis points margin expansion for the full year. Are we still maintaining that guidance?

So, Percy, I think, from there can be one quarter where we execute the project in phase four and where we might be off that guidance. But outside of that, all three quarters, we are maintaining the same guidance.

Okay. And could you quantify this quarter, what is the impact of the pipeline correction on the total company level sales?

So, like I mentioned, Percy, so we have not executed the pipeline correction in the last quarter. So, our supply chain readiness was not in to the level where we could take that chance. Now that we are building our supply chain readiness, we will be taking that correction going forward. We haven't taken that in the past.

Understood. And lastly, I know you don't give separate numbers for this, but any kind of rough range you can give on Mamaearth brand growth, I mean, our target wa s to bring the growth to double-digit. So, are we at that level this qu arter or, I mean, are we at mid -single, high-single? Where are we roughly?

Percy, we talked about this in the Mamaearth side as well, from a perspective of optics, the brand is amongst the fastest growing in top 15 BPC brands in both face wash and shampoo, which are the top two categories for the brand basis the Nielsen offtake data as well as in modern trade, we are gaining share in that. So, overall, from a consumer love and health perspective, the brand is comparatively growing and that's the objective…

I'm sorry if this is a repetition because I joined late, but if basically at the level there is good growth and this quarter we have not taken any pipeline correction, then at a company net sales or primary sales level also, we should be seeing the same amount of growth. Is that understanding right? Or am I missing something?

Percy, from a company perspective, again, I think growth in product business is something which is significantly better than what industry at large is delivering. So, I think that is reflective of our brand's ability to capture.

Sure. Got you. Thank you very much. All the best.

Thank you.

Thank you. The next question is from the line of Jitendra Arora from ICICI Prudential Life Insurance Company. Please go ahead. Mr. Arora, your line is unmuted. Please proceed with your question. And if your line is unmuted from your side, you can unmute it from your side and ask your question. As there is no response from the line of current participant, we'll move on to our next question. Next question is from the line of Dhiraj Mistry from Antique. Please go ahead.

Yeah. Hi, sir. Congratulations on a good set of numbers. Sorry for dwelling on this, but on an annualized basis for FY24, if this project Neev, what could be the impact of this on an annualized basis, not from the quarter perspective, but from the annualized basis?

Around 150 basis points from a topline perspective.

So, when you talk about 20 % revenue growth for the full year basis, does that incorporate this 150 basis point of impact, or this is excluding that?

This is excluding. So, our secondary growth will continue to be at the 20%.

Yeah. Okay. And, sir, last quarter, you mentioned that you would be launching INR99 and INR49 pack, not in the sachet. You were not interested in sachet format. Where are we in that strategy? Because if we want to scale up in our general trade channel, we need some lower price point products. Where are we in that part of journey?

So, on face washes, we now have a INR99 face wash in vitamin C, face wash, and we have also launched Ubtan 50-ml pack at INR125 put-down price. Similarly, in onion shampoo, we have launched a 100-ml pack, and these are all those launches which had happened last quarter, and now we are looking to scale them through our direct distribution. We’ll continue to look at more opportunities across categories where some of our heroes SKUs -- can come in lower prices, and over the years, we will figure out how further lower put -down prices can also be provided to customers.

Okay. Sir, can you give some qualitative statement that what would be the percentage contribution in this quarter? Although it's like very new, but can you help us understand with that?

No, not material enough as we speak, because it ’s too early, and such packs require deep GT distribution build-up, and only when that distribution build-up becomes strong can then you have a material contribution coming from these packs. So, I think it will take us three to four quarters to scale up the GT distribution for these packs, but yes, I think next year same quarter, we should see delta GT share gain coming from these packs

Got it. And just to clarify on this, like this price point products are not available in online channels. It's purely for GT channels.

Yes, this is purely from our GT perspective.

Okay, and just last question from my end. Can you share online and offline contribution for Mamaearth brand particularly that whether the offline channel contribution has increased for Mamaearth brand not from the company level but only for the Mamaearth brand? That's it from my side. Thank you.

It continues to be 50-50 for both channels.

Got it. Thank you very much, sir. Thank you.

Thank you. The next question is from the line of Jaykumar Doshi from Kotak Securities Limited. Please go ahead.

Hi. Thanks for the opportunity and congratulations on good set of numbers. The first question is just clarification. I know you called out that the impact of right sizing of channel inventory could be 150 basis point or the full year level, which would probably mean about INR30 crores or so on net sales. Will it have a disproportionate impact at profitability or you seem to be broadly comfortable on delivering your 150 basis point margin expansions guidance at a full year level?

Jay, like we said the quarter that we take that adjustment it will have impact on profitability in that quarter. And for the rest of the three quarters, we are confident of delivering that 150 basis points plus margin improvement. So the full year will be a combination of that. But what it allows us to do is then from a next year perspective, a healthy distribution system will allow us to further extract efficiencies making the longer term and medium term picture more healthy.

Understood. And when you mentioned channel inventory correction does it essentially mean that the level of channel inventory will go down so basically that quarter will see a gap between primary sales and secondary sales? Or will there be some stock returns, which would lead to provisions or write offs as well?

So Jay, it is a combination of the two. In certain cases where there is a closure of a party that has happened or if there was a tail assortment lying with the distributor, we would do RTVs. In which case, like you rightly said there is provision etc. that will also come into play. And in other cases there will be a primary secondary gap in which the secondary spend would still happen as per the plan. But because the primary won't be there that will lead to the margin impact. So I think that's how we're seeing it.

Understand. And this is something you'll do in one quarter. It won't drag in the subsequent quarters, right? It will be sorted out in. Okay.

That's the plan. Because that is why we wanted to be ready with the supply chain and execute it in one quarter and not sort of extend it beyond. And we are very confident that post execution in other quarters, we will actually be in line or better maybe in terms of our performance.

Sure. One more question. A couple of quarters back, you'd called out that on the marketplaces front, you're doing quite well on platforms such as Purplle. Does that sort of growth trajectory or strength that you are witnessing in tier two, tier three markets continue or there's some moderation or competitive intensity there as well?

No, it continues. I think Flipkart, Meesho, Purplle and all of these three marketplaces, which are tier two and beyond focused and are actually growing quite well and faster than our overall e - commerce.

Sure. Thank you. Thank you and best wishes.

Thank you. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead.

Hi. Thank you for the opportunity. Apologies if this is a repetitive question but I wanted to check, what is the salience of broadly Suncare for you in overall revenue pool? And I believe Q1 seasonally could have been higher, right? We dealt with a very hot summer.

So, hi Latika. So, salience to the portfolio would be 20 odd percent in that range. And yes, summer is a healthier quarter for Suncare but at least our last year's trendline tells us that the seasonality is not massive. In fact, the usage of Suncare continues into the further quarters as well. India apart from North actually doesn't even see major winter. So, even in the other quarters, the salience is strong. It is not like it drops significantly. And in any which ways, both Q2 and Q3 see second summer phenomena towards September, October. So, that of course helps and then in general, the adoption of the category is happening in a manner where consumers are not just linking it to heat but just pure sun exposure, which is why markets which are very cold be it European markets or American markets have deep penetration of this category. So, as education is expanding the salience of the category is also fairly well spread.

Thank you. The second bit was on channel salience. I remember in FY '24 the offline revenue salience was roughly 35% and 65% was online. I just wanted to understand how is Quick Commerce as a channel evolving for you? Any colour or any flavour on what would be the salience of this channel in your overall revenue mix today? Thank you.

So, Latika, I think Quick Commerce as a channel continues to do well for us. In the e-commerce mix it is actually the fastest growing sub -segment for us. Even in last quarter, I would say the channel would have grown more than three times than any other e -commerce vertical that we have. So, very strong growth and we're still scratching the surface because most of these sales are coming from top 10 cities right now. So, as the channel expands to the next 50, next 100, we have very strong shares in most categories in this channel. So, we're very positive on this channel.

Alright, but is it possible to share any flavour of what percentage of online revenues will now be coming from Quick Commerce?

It's more than 10% already. And since it's growing much faster, we'll continue to grow strong.

Okay. So, that's 10% of online revenues, right? Our overall revenue?

Yes, of online.

Okay. Great. Thank you so much.

Thank you. The next question is from the line of Ankush Agrawal from Surge Capital. Please go ahead.

Yes. Thank you for taking my question. So, the final question is on the expense. So, in Q4, the guidance that we gave, we stated that we see at least 150 bits of margin expansion, of which two-thirds will come from expense levels. But I think in one of your replies to early participants, you kind of stated that you want to keep expense at a similar level and want to see margin expansion coming from the other operating costs. So, I wanted to understand, has there been a change in the strategy for this year?

No, I think, as mentioned earlier, this year, we've seen significant competitiveness from other folks, which have two impacts. Of course, it leads to higher CPMs and inflation media costs, as well as to protect your share gain plans when it's to invest more aggressively. So, currently, given brand building is something that's our number one priority, we've been investing strongly. It's also, the quarter had summer sunscreen and face wash, which are our core categories, where we spend from a year-long perspective as well. So, that is also a part of it. If we can manage to deliver what we need to deliver without actually reducing our intensity on brand, that will actually be a great place to be. There is a lot of work that we have been doing on media mix analysis, and coming up with a stronger understanding of the parts of media which work harder for us, which will allow us to be more efficient on this as we move forward.

Thank you.

The next question is from the line of Mehul Desai from JM Financial. Please go ahead.

Yes. So, just on this inventory correction, which is yet to begin, I just wanted to say, we have not given any timeline. Do you expect this to be this year, or you will still, before giving any timeline, you will still want to see the progress in the first three steps of your project, and then you might give a guidance on that when you want to start this right sizing?

No, Mehul, we are very clear we want to do it this year itself. So, it will happen in this year.

Yes. Okay. Thank you.

Thank you. The next question is from the line of Jaykumar Doshi from Kotak Securities. Please go ahead, sir.

Yes. Thanks for the opportunity again. As per my understanding, your summer portfolio is much stronger than the winter portfolio. So, could you talk about your plans, if any, to strengthen your winter portfolio ahead of the season this year?

So, Jay, this has been an active area of work for us. Our R&D teams, our brand teams for the last three-odd quarters have been working on moisturization as a category, and how we can use the same house of brands power that we have to take share in moisturization. This year in H2, you will see a lot of positive innovation happening from our brands in that space, which will help us strengthen our position so that as we move forward into the later years, we have a healthy mix of moisturization cat egories that we can execute strongly in H2 to drive strong share gain and growth. So, yes, we have a strong focus there, and you will see action from us.

Sure. Thank you so much.

Thank you. As there are no further questions, I now hand the conference over to the management for closing comments.

Thank you so much for attending the call. And like I said, we're super excited to execute our agenda in capturing the BPC landscape of India. There are certain foundational capabilities like R&D, media mix Modelling, GTM that we continue to strengthen and work on because we know that these capabilities will decide our long-term success. And we'll continue to take the right initiatives on these fronts and continue sharing how we're doing on those initiatives in the quarters to come. Thank you so much for your patience and support. Thank you.

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