Godrej Consumer Products Limited (GODREJCP) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Godrej Consumer Products Ltd. Q1 FY27 Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Kedia from Godrej Consumer Products. Thank you, and over to you, sir. Good afternoon, and welcome to the conference call for Godrej Consumer.

We have with us Sudhir Sitapati and Asif Malbari. We will start with opening remarks from Sudhir, and post that we will open the floor for questions from everyone. Now, I will hand over to Sudhir for his opening remarks.

Q1 FY27 has been a strong start to the year for Godrich Consumer Products Limited. We delivered broad-based growth across India, Indonesia, and GOM, building on the confidence and strategic direction we shared at our investor meet in May 2026. The operating environment remained challenging through much of the quarter. Input costs were elevated, particularly during the early part of the quarter, and geopolitical developments contributed to significant volatility in crude and other commodities. Despite this backdrop, our underlying volume-led momentum strengthened sequentially, reflecting the resilience of our categories, the strength of our brands, and most importantly, the quality of our execution. At a consolidated level, revenues grew 19% year-on-year, with underlying volume growth of 9%. EBITDA grew 14%, with margins at 19%. Net profit grew 11%, reflecting healthy underlying earnings quality, even as margins absorbed some near-term commodity pressure. This was on the back of a strong, broad-based performance in India and Indonesia. In India, Indonesia coming back to stable growth and an exceptional performance in Africa driven by FMCG expansion. While we are pleased with the financial performance this quarter, we are even more encouraged by the structural changes that are continuing to take place across our company. Over the last few years, we have been working toward three important objectives. The first is to build the capability to deliver consistent double-digit volume growth, backed by next generation of growth engines, while restoring competitiveness in some of our most important core categories. The second is to turn around our Africa business and reposition it as a meaningful driver of profitable growth. The third is to decisively turn around HI in India. Q1 provides further evidence that we are making meaningful progress against each of these objectives. Our first objective is to move towards consistent double-digit volume growth. This quarter, consolidated underlying volume growth reached 9%, supported by increasingly broad-based momentum across geographies and categories. Our speedboats, Godrej Fab, GK Incense Stick, and Godrej Air globally, continue to grow strongly and are becoming increasingly meaningful contributors to the overall company. Our new entries in toilet cleaners, body wash, face wash, and pet care are also showing strong progress. These businesses are meeting their stated milestones, and we are encouraged by the quality of consumer traction and execution that we are seeing. These businesses are still at an early stage relative to their long-term potential. However, their progress gives us increasing confidence that we are building the next set of scalable growth opportunities for GCPL. Continuing our progress and expanding into fast-growing categories, we are pleased to announce the launch of Godrej Riz, our entry into liquid dishwash. Liquid dishwash is a 2,500 to 3,000 crore category, which is growing in strong double digits as consumers are upgrading from bars to liquids. We are launching Godra Jiriz in select states and are confident of our ability to delight consumers with Godra Jiriz as we have done successfully with our other innovations. Based on the progress we are seeing across these businesses, we believe we are now a few quarters away from consistently delivering double-digit underlying volume growth. Our second strategic objective has been the turnaround of GOM. Our GOM business has delivered an outstanding quarter. This performance was led by our FMCG portfolio, where we doubled media investment alongside continued strength in hair fashion across markets. We successfully scaled air fresheners across the GOM region, and the initial pilot of incense sticks in Nigeria has received strong consumer feedback. There has also been a structural improvement in EBITDA from high single digit to a consistent mid-teens level, and we are confident of holding this going forward. More importantly, the Africa performance is no longer limited to a single quarter. We have now delivered several successive quarters of improvement in both top-line growth and profitability. The business is benefiting from portfolio simplification, stronger execution, improved cost discipline, and increased investment behind our priority brands and categories. Our third strategic objective has been the turnaround of India HI. Household insecticides recorded an important milestone during the quarter. After almost a decade, we gained overall market share in the household insecticide category in Q1 FY27. This improvement is consistent with the actions we have been taking to win in this category. While one quarter does not constitute a trend, the overall share gain is an encouraging indication that our strategy in household insecticide is beginning to deliver the intended results. We remain focused on sustaining this momentum through superior products, sharper consumer propositions, disciplined execution, and continued category development. This year has been a year of volatility. In Q1, we experienced significant input cost inflation and instability, with LPG prices going up 3x and similar increases in other costs. This especially impacted India, where the cost impact was close to 6% on the business. Despite this, we delivered a double-digit EBITDA growth. While prices have cooled off from the highs, going ahead, we anticipate volatility to remain, with both crude and palm being unstable and El Nino impacting demand across a few categories. Our response will remain consistent with our established approach to navigating commodity cycles, calibrated pricing actions, strong delivery and cost-saving programs, and prudent media optimization. We remain mindful that El Nino conditions can heighten weather volatility across our key markets with the potential to disrupt agricultural output and rural demand. Though our geographically diversified sourcing and portfolio provide meaningful resilience against such volatility, and as such, we don't foresee any major impact. With revenue growth tracking ahead of our original expectations, An input cost beginning to ease, we enter the remainder of FY27 with increased confidence. We remain firmly on track to deliver our guidance for the full year, with the confidence to exceed the same in select areas. We remain confident in the resilience of our portfolio, the strength of our brands, and our ability to deliver sustained, profitable growth going forward. We will now open the floor for questions.

Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Abneesh Roy with Novama Wealth Management. Please go ahead. Yeah, thanks.

My first question is on dishwash. So attractive category, so if you could tell us, generally you come with disruptive pricing, and if you could tell us, here also have you managed to do that, and in terms of quality, is it comparable to the current player? Second, which markets, we checked online, putting every pin code, we did not get availability. Since you could tell us which market you have started this, I suspect it is again Tamil Nadu or South India. Second is, you have dried dishwash earlier through Portage Protect, so any learning from there, and do you see this as a golden opportunity given one large multinational player seems to have temporarily racketed, and once they come back, will it be enough opportunity for you to seize that opportunity?

That is my first question. I think Abnish on Dishwash, we haven't yet physically launched Riz yet. We are just in the process of launching it. So we don't want to comment on anything because it will be competitive sensitive. But we thought since this is an opportunity for us to let you know, we thought we'll announce it. But in a few days time, you'll see it everywhere and the mix will be clear. In general, you know, we end up launching. The strategy is if we have a differentiated product and a good pricing. This seems to be our home care strategy. It seems to work very well in FAB. It seems to be working quite well in SPIC. And I'm sure it'll work in RIS. But more about it, Abneesh, when we actually launch in the market. You didn't find it in PIN code because it's not in the market yet.

Understood.

And it's a good comment on the multinationals that are currently hardly available, almost near zero, which has kind of withdrawn. Is that a big opportunity? Because you have tried through Protect brand earlier, right?

See, I mean, on the question of a competitor exiting, I mean, we look at the market in terms of structure of long-term growth, and Dishwash Liquid does have long-term growth potential in it, and we look at differentiated products. So, we don't really look at it in terms of, I mean, in other words, I don't think that has been the major factor in entering it here. I think one difference between some of our earlier home care launches and our current home care launches is we do spend a lot more media now on these than we did in the past, and we also typically launch relatively differentiated, fundamentally differentiated products. So, I think that's why this is going to be different from Protect.

Understood. Second and last question, on the SPIC brand, you sound quite confident and you have taken with Pan India. Any initial numbers you can share in terms of, say, market share on e-commerce, quick commerce, or whatever numbers which make you confident? And generally, when you do well, other players respond. So, we have seen that in liquid detergent, you came out with disruptive pricing. Now, some of the players are even more disruptive in terms of pricing than you. So can that happen in speak also?

I mean, look, we can't share numbers, obviously, but, you know, our general model is to do a test market. If we're happy, expand. If we're not happy, we don't usually expand. So the very fact that we've expanded SPIC means that we're quite happy with it. Then coming to the point on, what was your second question? Sorry.

Disrupting is there in SPIC.

You know, some of the categories penetration in India is so low that we continue to look forward to category creation here. And SPIC also is relatively high urban penetration, but relatively low rural penetration, growing reasonably fast. Dishwash still, liquid dishwash is pretty low, you know, outside SCCA penetrations. So the actions that all players in the market take in general help us.

Understood.

In the case of FAB, FAB has also succeeded in growing the market.

Follow-up on that, Fab, growth is good on the top line. Currently, inflation is high. Have you managed to cut promotions or do some pricing things also here? And has the industry also behaved in a manner in liquid detergent?

Yeah, Amish, we have taken price increase in FAB, but you know, one of the reasons why our India gross margin fall is pretty sharp this quarter is... Three commodities more than trebled costs, which were LPG, kerosene, and Lapsa, which we use in detergents. So I think among all companies in India, we were the one who had the highest impact of raw material cost. LPG in particular has been both a cost and availability issue in the quarter. So... No amount of price increase, especially when you know these, you know, it's short term. So, for example, all these three commodity prices have again fallen. Of course, we still have some impact on consumption in Q2. But replacements have not, I mean, have fallen quite significantly. So, one can't fully price for a crisis like West Asia immediately. So, one has to take that short term margin hit. But that's what we have done.

Sure. Thank you. That's all from my side. Thank you.

The next question comes from the line of Kunal Vora with BNP Paribas. Please go ahead. Yeah.

Thanks for the opportunity. My first question is on your speedboat, your target is to go from 15% to 20% contribution this year. However, in 1Q F.27, it's increased by 3%, which is slightly lower. Based on my calculation, you will need to accelerate growth if you want to get to 20% contribution for F.27. So, is it going as per plan, or are you seeing any softness? Yeah, that's the question.

No, it's going as per plan, broadly speaking. There was a little bit of softness in air in India because of fill rates. So, in India, the other big story, apart from gross margin hit, is that our fill rates on LPG-related products fell, and air has a large component of aerosols. So, you know, we think that the salience will go, and you have to remember that the salience goes up every quarter, because as the business becomes bigger and bigger every quarter, the growth on that business also contributes to salience. 15 doesn't go to 20 in one quarter. You know, each quarter go up 150 bps. So, that's what I expect in terms of salience of this business to go up. So, I think we're well on track for our speedboats, which is why we feel we're well on track for the numbers, in fact, probably exceed the numbers that we've set for this year.

Understood. So on that line, you made a comment that you expect to exceed full year guidance on select metrics. So what are the metrics on which you are now feeling more confident, and what are the ones which you believe you'll just about meet?

We'll certainly exceed it on revenue growth pretty significantly. On EBITDA, we may exceed by a little bit the original number that we had set of... You know, double-digit EBITDA growth may go up a little bit. It depends a lot, I mean, you know, on what happens to commodity, but it may exceed a little bit there. Volume growth also may be in and around or exceed a little bit. Volume growth does come under pressure when you have this kind of pricing. So I would say in most metrics we expect maybe one metric where we may not exceed, you know, this kind of volatility, a little bit on cash to get a little squeezed. But I think on most of the metrics, you will exceed.

Understood. And lastly, you mentioned that LLLO could impact certain categories. Which categories do you see some risk from LLLO from, and what are the factors to watch out for?

I mean, look, there are positives and negatives to El Nino. Firstly, in Indonesia, we expect a strong positive on household insecticide. In India, probably quarter two, quarter one was already, June was terrible for household insecticide. So the results, you know, we've delivered in India is with a terrible June with poor fill rates and extremely high costs. So, July also, the first half was quite poor for household insecticide. So, household insecticide, if you have a drier, monsoon will get affected, but it's likely also to be a warmer winter, which will positively affect HI. So, HI, first half will be...

The next question comes from the line of Latika Chopra with J.P. Morgan Chase. Please go ahead.

Hi, thanks for the opportunity. I think you already alluded to HI, weakness in June, and some bit of challenge on air. I just wanted to better understand the shape of, you know, India revenue growth in coming quarters. You know, you had a volume growth of 7%. Given, you know, what you mentioned on speed boards, it looks like that this number should idly be ticking up in subsequent quarters. And given the weakness of HR that we saw, probably may not be there in the second half. The second bit was on pricing, you know, 5% of weighted average pricing in the current quarter. Given the gross margin drop that we saw in Q1 was quite steep, how should one think about pricing at your end, and what would it imply for the gross margin trajectory, you know, for the India business, if you could talk a little about that?

See, on volume growth, I think you're right about the fact that while 7% is reasonable, you know, it is on the back of June, you know, literally having kind of doing, June this year didn't rain, right? Last year it was raining quite heavily in June. So we had like a high double-digit decline in HI. So that has been a significant hit on HI volumes. So you're right about the fact that as HI volumes pick, and this happens, I think every year in a quarter, you're going to have kind of poor HI volumes. That poor number, which used to be negative, is still now turning positive, even in a terrible quarter. And then you'll also have a very good quarter. That's the way this thing moves. So I would say that 7% volume in India is at the lower, probably at the lower end of the range that we may get. So I mean, I think we'll probably be in and around maybe 100 bps more than this is around about where we should be in India this year. Every year, we're kind of going up by 100 bps. That's really how we're kind of looking at Indian business. I think in terms of gross margins, we've taken up. Prices by about 5%. We probably will still take up a little bit more, but you see, we have to be prudent because now costs have come down again, and the last thing you want to do is to take down prices. So it remains a volatile situation till crude prices stabilize. Because as of now, what do we do, right? What do we assume crude at? What do we price for? Because right now, our consumption may be Brent at $90. Replacement seems to be $84 today. So where we price at is still not super clear. So I know it's not a super clear answer, but frankly, the macros are not super clear right now on commodity costs.

Sure.

But I think whatever happens, we'll manage in this range of volume growth in EBITDA. I think in India, we may be standalone, double digit, or if things go really bad, in EBITDA, high single digit. I think consolidated, we're having a lot of tailwinds. It'll probably be, you know, take the overall number to higher than what we had anticipated. But let's see how crude and palm behave.

I'll be sure. The second bit was on Africa. You know, you did talk about the stronger growth in FMCG business, but the 25% constant currency growth is still quite, quite, quite high. I just wanted to understand if you could share more color on how the revenue salience of Africa is looking like today and what is the confidence in, you know, what kind of sustainable growth for the full year FI27 one should work with. And also your investments in this business, you know, is there any influence on margins in the sector? Thank you.

Yeah, I mean, look, Africa has had an exceptional performance. I think there are three reasons. One is, I do think the Africa continent goes through headwinds and tailwinds. And right now, the macros in Africa are quite good. Secondly, on our core business of hair extension, I think Asif and team have done an excellent job in improving operations there because there was a lot of governance, a lot of wasted cost and so on and so forth that has come off. And thirdly, and I think most importantly, is that we have made significant progress in FMCG, especially air care in Africa. Now, to give you a perspective, in the last, in six months after launch in South Africa, we are a double-digit market share in air care. So, you know, and we've seen success in Nigeria, Kenya, now we're seeing success in Argentina, Chile, US. So, we're seeing a lot of fundamental success in FMCG led by air care for Africa.

All right. And a mid to high key, constant currency growth looks sustainable for this region, for FI27, rest of the year?

I think for FI27, rest of the year, possibly so. I would say in the longer term, you may or may not get 17% volume growth may not be what we may sustainably get, even with FMCG growth, because I told you that there are, it is a volatile continent, but it will still, I suspect, be much better than what we've had in the past.

And margins, you've been able to hold out, they were stable, so there is no higher investment-led challenge on margin or anything? Just checking on?

No, there is no. In fact, in Africa, we have significantly increased our advertising spend and still, you know, done reasonably well on margins. And actually, when you have a... This kind of currency appreciation in the African currency, actually, it hates margins. So while it's good on top line, it's not so good on bottom line. So I would say this kind of mid-teens and margin in Africa is perfectly sustainable. As FMCG becomes bigger and bigger, it will get more and more. I mean, you'll get some kind of benefits in margin as well.

Sure. Thank you so much.

The next question comes from the line of Arnab Mitra with Goldman Sachs. Please go ahead.

Yeah, hi. Hi, Tim. My first question was on margins. So, if you look at the India margins, which are down 450 bps sequentially from what you did in the last quarter, you mentioned these specific commodities which had spiked have now somewhat cooled down. So, if you had to take a view of the current spot prices, where they are, how much of margin recovery do you think you can get over the next couple of quarters from where you were in this quarter? Assuming you don't have to take any more pricing.

In the next couple of quarters, we should get back to normative margin in India. It's still a slightly complicated period right now because costs are yo-yoing so much that one doesn't know what to do with pricing. So in these cases, it better be circumspect. So in any case of this 500 dips, a good part of it will get recovered with the current costs. We just have to wait for this current cost to see where they are, take up some pricing. But look, our target is... To be in this 22 to 26 kind of margin for India, you know, even in a weak quarter. So that kind of target remains, unless you have an exceptional quarter like West Asia or some exceptional Parma, and we have had two exceptional quarters in the last two years. So if you look at India margin, last first half of last year was bad, then we really recovered in the second half. First half this year is again not going to be good, and therefore two different reasons. But by second half, we'll get back to normative margins.

Got it. And my related question is on the advertising spends, which has come down a little bit in the last couple of quarters as the gross margin was impacted. So do you think these spends have to be significantly dialed back up? And is there any risk of keeping the spends low in terms of your growth investment that you are planning to make?

See, Qatar media spends by maybe 7-8% this quarter, but, you know, we calculate another measure, which is media reach, and our media reach is down only 3% from the last year's same quarter, and partly because of deflation in conventional media, partly because of... So, if you ask me, so it is not a massive media cut, but for the ambition that we have in new categories, we will have to increase the media when costs cool down. So, I don't think we are underfunding the core. But if, for example, costs were lower than they are today, we would have probably been a little bit more aggressive in new launches, etc. I mean, some of these launches that we're doing in this quarter, we may have done in last quarter and we've pushed them, etc.

So, in the core part of the portfolio, would your share of voice broadly have been maintained in the last couple of quarters?

Yes, our share of voice has been maintained. Comparators have also faced the same inflation in each category. So the response has been roughly similar.

Thanks. That's very helpful. My second question is actually again on Africa. So, assuming you're able to hold the constant currency growth at higher levels, given that it's a very complex basket of currencies, the currency tailwind seemed much higher than what we had anticipated. So, does this tailwind stay for the entire year based on where currencies currently are in your own assessment?

Arnab, it's likely to stay for another four to five months, and towards the lag end of the second half, it's likely to reduce.

Got it, got it, understood. And my last question was on soaps. If you could just give some sense of how the volumes in soaps have grown, and is there a positive effect on soaps this year due to the weather like there is on HI, which is a negative effect that you're seeing?

See, we grew soaps volumes in the quarter, firstly, so they were positive. We expect soaps in this quarter and the next to grow faster. I will still be early single digits, but after a few quarters, actually, we've grown positively on soap volumes.

Got it. Thanks. That's it for my side. All the best.

The next question comes from the line of Anurag Dayal with Philip Capital. Please go ahead.

Yeah, hi, thank you for the opportunity, sir. I have one clarification first. Is there a change in which we report our domestic segment revenue? Because home care sales is around 100 crores, personal care is 1,400, and India total is 2,500. So, this means the unbranded and exposed is virtually nil. So, have we clubbed that along with home care and personal care?

That's right. We've done that because we realize when we get into reconciliations every quarter, so this time you'll see that both the categories actually tie up to the total. And we've also restated the historical numbers according.

So then what would be the growth if you can assume, because exports are dealing really well in the last quarter, so if we remove the exports part, especially in home care, then what would be the growth?

I don't think it would kind of materially kind of change. I mean, yeah, it won't kind of materially change, and some of this gets netted off at a console level.

Sure. Second question is on Indonesia. So the jump in, you know, on UEG at 10% has been, you know, much better than what you were expecting. So could you just give an understanding of what has happened there, which segments have done well, and how the competitive intensity currently, and how we foresee the growth going forward?

I think there are three things. One is Indonesia is sitting on a slightly slower base, and even last year we were unduly worried about the volumes. The second thing is that our air business, we have significantly stepped up media on our air business there because, you know, we realized it was the same model across the world and we had a step up investment. So that growth rate has stepped up, which I think is sustainable. And I suspect we saw a little bit of the benefits of the El Nino already in Q1. We'll see more of it in Q1.

Okay, that's right, Michael. Thank you, sir.

The next question comes from the line of Harit Kapoor with Investec. Please go ahead.

Yeah, good evening. There's two questions from my end. One was on HI. I think you did mention about market shares expanding in this segment. If you could just kind of double click more on whether it's largely still been driven by incense or you've seen some of the other segments also which anyways had very high market shares also contribute to this. Just wanted to get a sense of competitive intensity and how you've managed that.

It's actually been driven by two reasons. It has not been driven by gaining share in premium segments where we are already very high share. It has been driven by two reasons. One is very sharp share gain in incense sticks. And the second is we are parallelly doing a de-influencing on illegal incense sticks, which has slowed down the incense stick category. So because we have higher shares in premium, And the, you know, incense sticks is growing at 30 odd percent last year. It's now down to, I think, high single digit or early double digit. So that gives us a differential mix. So that negative headwind that we had because of incense stick category growing very fast is significantly reduced. These are the two reasons.

So this ideally should be maintained, right, in terms of growth, etc. You should start to, I mean, obviously contingent on sector growth, but, you know, share gains, these are kind of structural.

I think share gain in HI is structural. See, this is a very small share gain we got in Q1. So as I have written in my note, we don't have to, but it is structural because over the last decade, I think we've lost 15 or 20% share of overall household insecticide. Now, you know, we are now 16 share of incense stick. Now as incense stick becomes bigger and bigger, our share of handlers is close to 45. So that's where we'll end up eventually. So now structurally we should start gaining back share after this quarter.

Got it. And just one question, non-result, which is on your pet care investment recently that you put in in relation to 200 crores on rights. If you just talk a little bit about the commitment to that business incrementally, that would be helpful.

I think the important thing is that when we launched the pet care business, we committed 500 crores of capital to pet care. These are long gestation businesses with an entirely new supply chain, entirely new sales force. So one has to be prepared to take losses for a few years. So, I think the good news in Petcare is we've been launching it in Tamil Nadu now for, I think, the last one and a half years, and to be honest, for the first six, seven months, we didn't have product market fit, which is why we didn't expand beyond Tamil Nadu, but we've now got product market fit in TN, and as we speak, we're expanding to the rest of South India.

Great. Wish you all the best. Thank you. Thank you. The next question comes from the line of Nitin Shakhtar with Green Capital Single Family Office. Please go ahead.

Hi. Good afternoon to the management. This is Nitin Shakhtar from the Green Capital Single Family Office. My question is more as an investor rather than an analyst. Obviously, you've acquired Mushtag. And you're obviously, your M&A team is very active in terms of looking at opportunities. My question is more strategic. What's been the experience of management acquiring or building a new category and in terms of top line? And what's your strategic experience with acquisitions and how you've been able to look at different categories just as a forward-looking vision in terms of strategic action revenue?

I think the Mustang acquisition is working quite strongly. I think since we took over the acquisition itself, I think we have grown by about 70 or 80 percent. from the run rate. So this rate of growth continues. It's also, as we told you at the time of acquisition, a highly profitable business. So it is, from day one, it was an EPS accretive acquisition. It's a digital first brand, and one of the few digital first brands that are profitable. So I think that's good. I think there are learnings in acquisitions in terms of this seems to be the right size. I think one has to be I'm quite confident of the fundamental profitability of an acquisition, especially in this smaller DTC space. So I would say a lot of learning for us from Mustac, but it's still early days. One shouldn't call these wins too soon. It's only been six or eight months, but these six or eight months have been very good. And some of the capabilities of Mustac, which is the other thing about Mustac, we're starting to use it on other brands.

Sure. My question is more from an investor who looks at very niche categories where large companies can sort of look at building value. So, you know, there are categories which are coming up in personal care, which is, let's say, hair-building fibers. There's a brand called Topics, which does a $50 million annual round rate on hair-building fibers. So, is GCPL also looking at smaller categories to acquire rather than just building the portfolio? Because it's a chicken and egg story, right?

Whether you invest to acquire or whether you build a category, there's no right or wrong answer.

I'm sure with your 20 plus years and experience in Unilever, you've seen it and done it all. So, just a quick perspective on that in terms of innovation within GCPL.

As a company, I would say GCPL... has done in the last five years quite a large portfolio transformation, which is why even in a quarter in which, you know, you have a disastrous HI season, we're still able to pull off with good results. Otherwise, it wouldn't have happened if the portfolio was as dependent on HI as it used to be. So I think, firstly, we have had a dramatic portfolio transformation. I think what is slightly different about us is most of our portfolio transformation has been Organic. We have entered or expanded categories like detergent, liquids, air care, pet, though it's small, or dishwash or toilet cleaner. So I would say our first priority, it is less risky to enter a category organically than it is to enter inorganically. But if you can't, for some reason, enter a category... Inorganically. Organically. Like, I think we would not have been able to enter Dior and fragrances organically, or we would not have been able to enter a face wash organically. It's a very competitive category. One has to, or if one doesn't have the technology, one has to enter inorganically.

Thank you. Thank you, Sridhar, for the clarity, and all the best to the team and management at GCPO. All the best.

Thank you. The next question comes from the line of Sidesh Deshmukh with IIFL capital. Please go ahead.

Hi, sir. This is Parsi Pantaki here. Just wanted to understand Indonesia performance. A few quarters ago, it was like we were sort of in really dire states, and now sort of it's really high growth. So, what really has changed here? I'm sure the macro cannot really change so much. Is it some kind of restocking, restocking of modern trades, or is there some sort of major distribution expansion, or is there some completely new star product which has turned around? What really is driving this?

Parsi, there are four reasons. Macro is one. Base is a second. El Nino is probably a third. And the fourth, which is structural, is faster growth on our Stella business, which has been a laggard for many years. I think it's too early to say, but given the fact that we seem to have a global air model, it's the fourth thing.

Can you elaborate a little bit on the El Nino part? Sorry, I joined late in case you have covered it.

I'd already said that somebody asked me the question, what's the impact of El Nino on your business? I said in India, in first half, it's likely to be poor, in HI, in second half, it's likely to be better, and in Indonesia, it's generally likely to be better. In Indonesia, it gets hotter and rains more. India, it gets hotter but rains less. The big impact on business, of course, the other impact of El Nino, which is yet to be seen, is the impact of El Nino on palm crop and what happens there.

Understood. Secondly, understanding India margins, I understand that basically the reason why the margin is low is the gross margin pressures. If I have to drill down further into this, is it mainly palm, which is the problem area? I know packaging, etc. would also have gone up, but given your COGS basket in India, is it Palm mainly which is driving it, or is it something else?

No, it is not palm or palm a little bit. It's certainly not packaging also a little bit. But the real three things are that, see, we are the only users in FMCG or the largest users. We are the largest LPG users in FMCG. We're also the largest kerosene user because kerosene goes into household insecticide products. And we are a reasonable, though not nowhere close to the largest user of Lapsa. Now, if there was a 10, 15 percent or 20 percent inflation, these are not large enough to matter in the overall basket. But each of these had a 3x inflation. So the prices trebled in quarter one. LPG Pro was not even available. And in fact, the government for a period of time had banned it from being used for commercial purposes. So, these three have hit us really badly.

And on these three, what is the current situation versus the average consumption cost that we saw in Q1? Currently, what is the sort of consumption cost? And therefore, just on these three kind of normalizing, without any other factor playing, Just this one factor sort of changing what kind of sort of margin expansion sequentially can be expected.

I mean, Q2 will still not be good because there's a consumption replacement issue. It's only in Q3. But I'll tell you, for example, LPG before the war was 60 rupees a kilo. At the peak of the war, it went to 190 rupees. I think our average consumption was about maybe, I don't know, lower than that. And it's now back to 90 rupees a kilo. So what happens in the war is that even though the crude prices went up only by 50%, there are these middle distillates which are used in jet fuel, etc., which trebled. And they trebled for a short period of two, three months. Unfortunately, some of that that we bought continues in Q2 as well. But these are now back to 90. 90 is not a big deal. That is, you know, because LPG in the largest scheme of things is not like palm oil or anything for us. It's not that kind of salience. So we'll be able to manage between pricing and, you know, other things, 50% inflation quite easily. But just to let you understand, the kind of inflation that we faced in LPG labs, all these three went up trebled.

Understood. So, basically, on pricing, you have 5% in the India business. Now, assuming that this is time-weighted, that you have not taken everything on 1st of April, we would have a higher pricing in 2, right? And secondly, one is the time-weighting, and secondly, have you taken any further price increases after the end of the quarter?

No, I mean, personally, we may get similar kind of price increase in Q2 as well, because you have to remember that last year also, Q2 to Q1, you always take up one, one and a half percent price increase. So while you've taken up sequential price increase, that will be the same thing for last year's price increase as well. I think we've kind of held on to price because you remember what's happened to crude, right? Ultimately, what happens is all these commodities are crude linked. And they may take three, four weeks after crude prices to cool. So because crude went to 100, then it came back all the way down to almost 70. Now Brent seems to be at 84. So the prices are so volatile. But I can say that if Brent remains in this 80 to 85 range, we have broadly priced for it.

I understand HI might be a problem for Q2 as well, but in the second half of the year, can we expect the India volume to move up from a 7% to maybe something like a 9%?

I mean, I don't know about that, but as I told you, India has a volume. Every quarter, we want to take up 100 bps. This is certainly a quarter that has been on the lower end of the range because of poor HI season and extremely poor fill rates as well. So, many of these LPG-driven categories, we had fill rates which fell by 20-25%. So this isn't the, I would say this is broadly on the lower end of the spectrum on India that we will get. So I do feel like India is, you know, I mean, yeah, maybe an eight kind of volume business.

And that's all for me. Thank you.

The next question comes from the line of Nihal Jan with HSBC Bank. Please go ahead.

Yes, good evening, management. I had just one clarification on the margin bit. If I heard right, we saw a blended cost inflation of 6% and we took a blended price hike of 5%. But I think the India gross margin saw like more than a 300% contraction. So just to understand, was it more timing based that this kind of a difference got created?

No, no, see, we got a 6% cost increase over what we had already planned. So we had already planned 2-3% price increase. So we took another 2-3% because every year you anyway plan for 2-3%, right? So this 6% was over and above the cost that had anyway gone up. These were the war link costs, not the total costs. You get what I'm saying? This was the delta over the natural cost increase that you anyway built in and the price increase you built in. So the overall cost increase would have been closer to 9 percent.

Over and above

our planning exercise, 9 to 10 percent, of which 6 was unforeseen. The other 3, 4 we foresee for and price for.

That is very clear, Sudhir. And Sudhir, just one clarification. I know historically, even though we've spoken of India margins, you've always mentioned about 24 to 26. I know you just mentioned about 22 to 26, but is this re-housing because of the volatility?

Yeah, because of volatility, unfortunately, we've had two first halves, the first half of this year and first half of last year. Both of which went below normative. Last year, we had massive fluctuation in palm oil prices. This year, we've had massive fluctuation in crude oil prices. But this kind of 24 to 26 on a yearly basis, quarters may vary a little bit because, you know, depending on the weight of soaps, etc. That is what we're aiming for. And even this year, we'll see how we can get close to that.

Understood. One final question. Now in Guam, what is the ballpark share of the SMCG business?

Yeah, I think it's best to kind of see that on an annual basis. But let me put it this way. I think we get broadly 75% of our growth kind of should come from FMCG. And as a starting point, Athelians was broadly half-half.

So if I heard you right, you said FY26, you were at a 50-50 split between FMCG and the dry hair portfolio.

That's right.

That's it.

Thank you so much. The next question comes from the line of Abneesh Roy with Nuwama Wealth Management. Please go ahead.

Yeah, my question is, on the last two first half, we have seen that your India margins have been below your normative. In the same time frame, we have seen the market leader also reduce their revenue guidance by 100 bits. Is there any linkage to that? Because see, every year nowadays, it's a VUCA world, right? Every year, a commodity is volatile, and in FMCB branded business, that is the beauty of the business. Is there any linkage that in source structurally, because market leader has reduced the... Their aspiration. So, it's a genuine bottleneck for you also.

If that was the case, in second half also, we would have had low margins, right? We were able to recover second half of last year's normative margins. But the incentive is better, right? Mix will be different in second half. It's not the margin versus the previous year. I'm just saying, see, if you take our EBITDA growth in second half in India, it was close to 17-18%. So, the margins adjusting for seasonality in second half were fine. It is, I mean, you're right, it looks like there are two consecutive years, but it's unlikely to have a third year now where, you know, see, this year, for example, you know, palm oil went up a little bit. That's not been the main cause of our margin dilution. It's mainly been, and it's just this LPG and kerosene, which low salience, but incredible increases in prices. So it's not like we just got hit by packaging, etc. So it is unlikely that this kind of costed hit will happen to us because a lot of the margin hits that we've had in this quarter actually are soap margin, for example, is at our normative level. That's not where we've taken a margin hit. We've taken a margin hit in PAKS, in air care, in laundry. These are the categories that in household insecticide actually have taken a big margin hit. These are the categories that have been hit. Last year we were hit in soap margins. I don't think so. Yeah, go on.

Understood. Next follow-up is on your hair color business and say shampoo. So it's a good comment on how you think outlook is on hair color. And secondly, shampoo category, even market leader is seeing very strong growth and even hair oil companies are now seemingly betting big on that. You also have a small niche presence to the Goodrich professionals. Any plans for long term on the mask end of shampoo?

No, we don't have any plans on shampoo in the long term, or at least not that we can disclose or nothing kind of imminent there. On hair color, we had a very good quarter. See, on hair color, what has happened is a few years ago, we launched a 15 rupee creme. That 15 rupee creme, right from the beginning, has had explosive volume growth, but it was also doing a little bit of downgrading from the large creme. Now, what has happened is that that curves have intersected, and the large creme is very small, the small creme is very big, and as a consequence, we're seeing overall volume and value growth as well coming into hair creme. As I shared, Amnish and the analysts meet, hair color has been one of the fastest growing categories in terms of penetration.

But small creme, isn't it largely for males?

No, no, it's not largely for males. A lot of women use it. It's become a massive rural product. It's in fact now by volume the largest, the widest distributed hair color pack, bigger than the market leader in henna, and it's over the last four or five years become a really big success.

Okay, quantity is too small for such a large amount of email, email, I thought.

Yeah, but people don't always do global coverage, you know, not everybody has got white hair fully.

Understood. Okay, that's all for my time. Thank you.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Vishal Kedia for the closing remarks. Thank you for the active participation through the call.

We hope we have been able to answer all your queries. For any further queries, please reach out to us on our Investor Relations contact details.

Thank you and good evening. Thank you, sir. Ladies and gentlemen, on behalf of Godrej Consumer Products, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.