12-quarter-high USG (7%) delivered.

You articulated your four-pillar strategy from a company standpoint. When you look at it from a product segment perspective, can you just talk about areas that you think need attention based on your assessment?

Priya went category-by-category. Home Care delivered mid-single digit UVG with flat revenue due to deflationary commodity, with Household Care delivering double-digit UVG led by dishwash. Personal Care saw quarter-on-quarter improvement in performance and competitiveness, with double-digit growth of premium soaps; liquids and body wash sit under 2% penetration in India. Beauty & Wellbeing grew 5% with single-digit growth on Skin Care, OZiva delivering triple-digit growth and Minimalist continuing to deliver; in Foods, Beverages grew double-digit and Horlicks shows early green shoots with more work to do.

From a longer-term perspective, the external view is that Beauty and Foods will require more attention. Do you concur? And from a premiumization perspective, how do you think about the digital-first competition, as well as is there a case to focus much more at the mid of the pyramid and below?

Priya emphasized the radical segmentation of consumers as her first pillar - Power Spenders at the top (60-80 million consumers), Premiumizers in the middle, and Democratizers at the bottom of the pyramid. With HUL's price-brand pyramid, there is opportunity to grow in each of these segments and tailor channel, brand, price and media strategies. She agreed it is not just urban India but also rural markets where HUL has the opportunity, with huge transformation taking place in rural areas.

On GST, you mentioned October will continue to see the impact, but the destocking end second quarter and October should also unwind in the next quarter itself. Is that a fair assumption?

Ritesh confirmed that September and October were impacted by trade destocking, choiceful consumers waiting for lower prices on the shelf, and pricing disturbance from multiple prices in the market. He stated that disturbance will end up being in the trade and in the business till early November, after which prices will stabilize and normal trading conditions return. He noted that when trade destocks, it does not automatically come back within a week and requires effort to reinstall normative stocking levels.

Can you quantify what was the impact on margins due to trade support in this quarter? And do you expect the same to continue in the third quarter as well?

Ritesh stated they leaned in with trade support and improved gross margin by 130 bps sequentially as one of the arsenal deployed to support trade pipeline liquidation. Going forward, they don't expect further margin impact coming in from GST transition since the entire GST rate reduction is cost neutral. The 90 bps EBITDA decline was ultimately driven by the 80 bps increase year-on-year on A&P that flew through to bottom line.

Once everything normalizes, do you see customers actually buying more FMCG in volumes? And do populist programs in states (e.g., Bihar Rs. 10,000 to women) help FMCG consumption? Will the Rs. 45,000 crores GST stimulus eventually lead to uptick in FMCG consumption?

Ritesh stated FMCG consumption has always benefited from net disposable income and improved consumer sentiment, and both will be supported by GST transformation. This will absolutely augur well for consumption, incentivize the journey towards making the portfolio more premium, and is in positive territory. On elections, his reflection is these are transitory in nature, and any structural reform done is what typically helps consumption rather than any short-term measure during elections.

When normalcy comes back in early November, do you expect a reasonable restocking benefit? Or because of perishable demand stockout, the restocking benefit will be much lesser than the destocking loss?

Ritesh explained that in FMCG, there is typically 4 to 6 weeks of trade pipeline depending on category. When trade pipeline comes down it does not automatically within a week or so come back; it takes effort to ensure inventory levels and stock levels return to normal range. The next couple of months will be the focus, with shelf-filling easier in Modern Trade and e-commerce while the length and breadth of 9 million outlets requires a couple of months to reinstall the 4 to 6 weeks of trade pipeline.

On margins, you've given guidance of 22-23%. In the first half you have met the higher end. Is there an upside risk in H2? Media channels were carrying that the margin guidance has been upgraded - you clarified that was about Ice Cream impact. When does that Ice Cream benefit happen, in FY27 essentially?

Ritesh clarified that demerger is expected in December quarter, with results for December quarter excluding Ice Cream as a discontinued business; listing follows in March quarter. Ice Cream is roughly 3% of business at low single-digit margin. Once results are reported excluding Ice Cream, on average annually they should see 50 to 60 bps improvement in reported EBITDA margin, but the underlying guidance remains 22 to 23%. He confirmed they operated at the higher end this quarter but other quarters may see a different part of the range.

Is there a trade-off between growth and margins as HUL looks into the next few years? To get to strong volume growth, do you feel there is a need to invest more in the business which would take operating margins down? Or is there no trade-off?

Priya stated that the focus and obsession is going to be on volume-led revenue growth - they will look at the business unblinkingly looking at growth first. When they do that, they have the right financial leverage to deliver the operating margin of the business. That is simply how they will run the business, supported by the four pillars she outlined.

HUL has had a 22-23% margin range historically. Do you feel that is a defendable range or does that depend on the growth environment, and therefore as you focus only on growth, could margins be lower or below that range?

Ritesh confirmed the outlook for margin guidance is 22-23%, with 50-60 bps added once Ice Cream demerger reporting begins. They operate at almost 200 bps lower than peak margin - a conscious call to drive growth in a tepid consumption atmosphere. At the current 22-23% range excluding Ice Cream impact, they will be able to support investments required, but if commodities or operating environment change materially, they will come back with revised outlook covering the next 2 to 3 quarters.

Three specific areas where you've highlighted initiatives - Nutrition, Lifebuoy and Glow & Lovely. How has been the feedback of your initiatives? Where are areas looking encouraging? Where do you think more time or work is required?

Priya provided updates on each: Nutrition shows early green shoots with low single-digit UVG, with new launches like RTDs and Pro Fitness range; more work to do, early days. Glow & Lovely Glass Bright performed well ahead of expectations, with the brand extending beyond the Core; HUL competes in skin care with Vaseline Cloud Soft and Simple in face washes. Lifebuoy competitiveness has improved with work to do, and was impacted this quarter with GST. A more radical and bold transformation can be expected on all three brands to make them more modern, youthful and contemporary.

On consumption trends at macro level - we have multiple positive catalysts but things have been gradual. The chart shows tapering for rural volume growth and pickup in urban. What are you picking up on the ground? Any specific changes? Any risks at category growth level? Can you give a rough guess on what could have been the underlying volume growth without the GST transition impact?

Ritesh stated demand trends are stable with both urban and rural contributing - moving annual total for last 12 months shows no big ups and downs. Multiple positive drivers are in play: monetary easing, direct tax benefit, GST benefit, lower food inflation, and good water tables from monsoons. Risk factors include kharif harvesting and winter severity. He estimated GST impact on aggregate HUL was up to 2%, largely volume of GST transition - that was the rough approximation of GST impact on total HUL business.

Can you talk more on reimagining or modernizing the core portfolio? Should one expect a near complete overhaul of the core with new packaging, new communication? And on fewer big bets - what does that allude to and some examples?

Priya explained that brands need to be truly desired and desirable, especially given 400 million Gen Z consumers driving change in India. Reimagining means looking across packaging, proposition, product - it will be renovation on the core plus premium innovation, with bolder marketing transformation including more Social-first Demand Generation. On fewer bigger bets, the key is to scale bets - identifying few segments to develop markets based on market readiness; she gave the example of body cleansing liquids where India is only 2% liquid (mostly bars), representing a huge opportunity to scale.

On other operating income and the employee cost - any one-offs sitting out there? How should one think about that going forward?

Ritesh explained employee cost plus other expenses operate at 18-18.5% range combined. The quarter saw lower employee cost and higher other expense due to ESOP expense base differences from the same period last year - phasing-related, nothing substantial. On other operating income, PLI benefits accruals were lower, partly due to the upcoming Ice Cream demerger; they chose not to accrue those benefits this quarter on a measured accounting basis and will revisit at end of financial year.

In 2017 when GST was introduced and rates were cut, we saw fairly good demand response for 6 to 7 quarters with marked acceleration in topline growth. Should we extrapolate that experience this time?

Ritesh framed this as one additional input adding to monetary easing, direct tax benefit, food inflation correction, and now GST benefit. All this together will augur well for improving net disposable income and consumer sentiment, the two elements that drive consumption. He did not think GST reform on its own will be a silver bullet but is an important initiative adding to overall demand atmosphere which has been tepid for the last couple of years; both rural and urban are now contributing to overall market improvement.

On the grammage part - in the latter part of September you made price adjustments for GST. Now you can make grammage adjustment for price point packs. When you mention early November normalization, does the entire grammage increase for price point packs also get adjusted in the same timeline by November?

Ritesh confirmed for non-price point packs, price changes are reaching the market with new MRP. For price point packs (Rs. 1, Rs. 2, Rs. 5), grammage or ml has been improved/increased - effectively lower price per gram. These changes have started landing in the market and they expect that in early November it will be present across length and breadth of the country. Some SKUs may be a little up and down, but bulk of the business will have new price points by then.

On the Tea segment, given correction in tea prices and that we're looking at marginal pricing in the commodity, in Q3 could prices adjust before the cheaper raw materials are consumed, impacting margins specifically for this segment?

Ritesh stated tea now is in season - production starts coming in May, June. The prices in market reflect the lower commodity purchase price and lower spot price they see. Tea is one of the categories that always benefits when overall price table comes down. They have shown high-single digit USG for the business this quarter, supported by both volume growth and price growth. Their strategy of pricing to replacement has been in place for this quarter, and they are seeing the impact of that coming in.

On Beauty & Wellbeing - current portfolio is mainly Vaseline, Ponds where you've extended to subcategories. As you scale this segment, are these current portfolio brands sufficient and where will innovations happen, or will you look at more bolt-on acquisitions like Minimalist?

Priya outlined three key trends in beauty: brands need to be desirable not just functional with strong aesthetics and sensories; a lot of beauty discovery happens online and brands need to be social-first; and a robust innovation program is critical as consumers seek more affluent regimes. HUL is leaders in beauty across skin, hair and color cosmetics. The team has done excellent organic work adding innovations across brands in Hair Care and Skin Care, and they will continue to look at appropriate bolt-on acquisitions as relevant to keep adding to the portfolio.

E-com is broadly 8% of sales (12% of urban). As that grows, how do terms of trade change and how does that impact margins? And on the larger portfolio - 90-100% penetrated categories where UVG is population growth and premiumization (soaps to liquids etc.) has been slow - how do you see that changing?

Ritesh said e-commerce will follow a similar trajectory to modern trade - HUL has advantage with premium portfolio, and they sell design-for-channel packs (e-commerce designed for e-commerce, quick commerce designed for quick commerce) ensuring profitability and lower channel conflict. They are in investment phase for e-commerce. On highly-penetrated categories, he highlighted long runway: $54 per capita FMCG consumption vs Indonesia's 4x, headroom in skin care subcategories at single-digit penetration, and within Home Care many premiumization waves (mass powders to premium powders to liquids to shots, fabric wash to fabric conditioners). Bodywash liquid is only 2% of category vs 7-8% for Home Care liquids.