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

I just wanted to understand this EBITDA margin guidance a little better. We've moderated it by almost about 100 basis points despite moderation in key commodities like crude, palm oil, which suggests there is a sharp adjustment in the price value equation versus what you were discussing last quarter. Could you explain if that understanding is correct? And which are the segments where this adjustment is done?

The entire EBITDA change from 23%-24% range to 22%-23% is essentially not price versus cost adjustment. The intention is to dial up investments across all the lines of the P&L given improving macroeconomic conditions and the portfolio transformation ready for investment. In terms of product segment, this is broad-based, but between all the segments more dialed up to Beauty & Wellbeing.

More in Beauty & Wellbeing, but the gross margin and the product quality is going to be primarily over there as well? Is there any increase in price-based competition in laundry, something that we saw a few decades back, which we should be worried about?

This EBITDA margin guidance change has nothing to do with Home Care pricing and price value equation. Whenever we see inflation of Tea, Coffee and CPO impacting Skin Cleansing and Beauty & Wellbeing, we always take price increase in smaller chunks. So you always end up having a deficit of price versus cost in inflationary categories. On Home Care, our pricing always has been we react to commodity and we do our price changes to maintain competitive price value equation responding to change in commodity.

Follow-up on broader perspective on EBITDA and growth strategy.

On macro, the triggers are tending towards positive now - monetary changes on interest rates, the tax relief, crude oil impacting cost of living coming down, robust monsoon, agriculture output, resilient growth in rural. We feel very confident internally on what we've done around our core business and have revamped most of our core brands. We want to play to win and lean in with investments in the Channels of the Future. EBITDA at 22% to 23% levels is still very much top quartile of CPG industry in India.

My first question was on your comment that you expect the macro environment to lead to a gradual improvement in demand. In terms of timing, do you think we are there where we are already seeing some improvement in demand? Is there anything in the data that is indicating or suggesting to you that there is some pickup which is already starting to happen in the overall FMCG market and also in your own business?

Our comment on macro is more linked to near to midterm outlook, which you can read as next couple of quarters. We are talking basically June quarter and September quarter where we would see improvement in the growth trajectory. There are no new headwinds, good agriculture outcome supporting rural growth, monetary and tax relief supporting urban growth, and lower food inflation. These signals are here and now signals.

On the EBITDA margin - in the past we have had this aspiration of a modest margin expansion over the medium term. So when we say we are 22%-23%, does it mean it could be a couple of years where you remain in this low margin range? Or is this more of a short-term 2-3 quarter phenomenon and then we could get back to a modest expansion?

The guidance that we've given of 22%-23% is more near to midterm. So please read 2-3 quarters. Our long-term intention of driving modest margin improvement, that does not change. If commodity price trends in the market are not vaguely off compared to what we see today, there is no reason why in the later part of the financial year we'll start seeing margins improving. Our guidance of investment is more here and now for the next 2 to 3 quarters.

I just wanted to understand the segments where the price value equation needs to be corrected.

Home Care - no further corrections to be done; for the immediate next quarter or two, there will be a negative UPG in Home Care segment. Beauty & Wellbeing - not much of an impact. Foods business - Tea has inflated by 20% in last financial year; we did not price the peak of inflation, neither for Tea, neither for Coffee. Personal Care - we have not priced to the peak of inflation; if commodity of Crude palm oil remains firm, we will appropriately do pricing actions for the next couple of quarters.

My second question for Ritesh is that basically, margin guidance of 22%-23%, as you said, that is for 2-3 quarters. But I assume that in this, you have not assumed any operating leverage kind of play out. If I were to assume volume growth builds up in the second half, do you see operating leverage then helping out in the second half?

Every 1% delta growth will end up giving 40 to 50 bps operating leverage. The assumption that we have made for the next couple of quarters, we will invest back the operating leverage. So the number which you see there is net. After a few quarters once we start seeing a continued trajectory of improvement, then time will come for us to start dropping the operating leverage into the P&L in terms of profitability. We should start seeing margins to improve from this band in the later half of the fiscal.

Your outlook of moderation in gross margin, are you factoring in the current RM prices of crude and palm? Or is this based on the prices that were last quarter or a month ago?

We are factoring the current landscape of the pricing. If I look at the current spot price in the future covers of these commodity trends, they have been factored into the moderation expectation. If that changes, then of course we'll come to new reality. But today, we're taking the spot and the future covers.

In that case, you have tailwinds from lower Crude price and lower Palm price. Are you planning to retain any of that benefit? On one side you are indicating possible increases in personal wash prices, but with the way palm oil prices have corrected, do you still think there is a reason to increase price? Or would you consider reducing prices there?

Whenever the prices go up of commodity, we don't price to the peak of inflation. Palm oil went to as high as $1,150. We never priced to $1,150. So now today, when we sit at $980 or $950, there's no need for us to adjust for that $200 because we started with $750 up. There's no need for correction of the prices. Whenever prices go down in terms of deflation, we pass on in large chunks prices back to consumers.

Just one question, good to hear about the pursuit for growth over margins. The question is that what are the signposts which we will be seeking to understand that this strategy is working? Will it be on the volume growth side or will it be on the market share side?

Our focus is on volume-led competitive growth. If you look back over the last four quarters, we have stepped up our absolute unit volume growth. We are selling more units to more consumers in the last four quarters. We have now been in the fourth year of competitive turnover weighted market share growth. The short answer to your question, it's volume-led, that's really going to be the rubric or the algo.

Now given there is a higher possibility of macro coming back, and if we look at the growth patterns for each segment last year, Home Care did very well, whereas Personal Care was on the weaker side. Do we expect this to turn in terms of Personal Care coming back much faster for us because the macro turns?

Home Care, solid as ever. Steady Eddie continues to grow, a big business for us under 40%. Personal Care, also, we see signs of improvement. All the work we have done around Dove, Pears, Lux and Lifebuoy. Beauty & Wellbeing - Hair is growing strength to strength; Skin care, we're putting in a lot of structural efforts. On Foods, Tea price quality margin equation is optimized. The one challenge we have is mainly Nutrition Drinks, Horlicks.

First one is the new Unilever CEO in a recent interaction mentioned that quick commerce in India is about 2% and could become 10% to 15% in 3-4 years. He also hinted that quick commerce margins might be slightly lower. So does it have anything to do with your margin guidance? And can you share your thoughts on how you see quick commerce potential in the margins?

Quick commerce growth is not the reason for EBITDA margin guidance. Quick commerce is roughly 2% of the business, so it doesn't have that much impact in terms of overall contribution. Overall organized trade margins for us are better than general trade because the portfolio that we sell in organized trade are premium parts of the portfolio. This is a margin-accretive organized trade channel. It only augurs well for us in terms of overall tailwind.

Lastly, if you can provide a quick comment on receivable days, which are at an all-time high. How should we look at them going forward?

Investment for growth is not only about increasing A&P investment. We did see over the last couple of quarters need for us to drive more amount of capital availability in the trade channel to drive higher distribution. We have leaned in with our balance sheet resources to support our distributors to increase assortment and overall availability. We are negative working capital and will remain negative working capital. Our cash conversion ratio last year was near 100%, and there is no reason why that number should be materially away from that for next financial year.

Last quarter, you did mention the phenomenon about small packs growing faster than large packs and that affected the mix a little bit as well. Given that you have a stronger outlook in terms of growth, is that a phenomenon that you're seeing not playing out anymore?

That was the theme in December quarter, but we do see an improvement back to the near-term norm, and premium brands are also growing faster. Although small packs are growing faster, but large packs are also growing. We do see now premium brands, e.g. Dove and Pears growing faster than Lux and Lifebuoy. B&W our business also growing fast when compared to Home Care. So we do have positive mix effects as compared to last quarter.

The second question was on Lifebuoy, and slight move away from hygiene as a platform. Just wanted to get your sense about why you believe that's a space or a proposition that's not picked up as much? What prompted this move?

Lifebuoy stands for germ prevention or disease prevention, that is the heritage of the brand. That remains at the core of the brand's promise. What we're now saying is that it's wider than just germ protection alone. It also helps the skin health. We have modernized and made the proposition wider. It is not to take away what it does already well, so this is an enhancement journey. It's early days because it's just gone in market in March. We do see sequential improvement.

My second and last question is on your comments on the global CEO. He seems very positive on India, more aggressive than his predecessor. So this 100 bps lower EBITDA margin outlook for next 2-3 quarters, is this something Unilever is doing in other emerging markets? And on Oliva, how is the growth from the time of acquisition till now?

We gave the rationale for taking that 1-2 quarters to create the investment space, to build momentum further in our business. It is a call that we have taken along with our Board. I don't think this is correlated with any broad emerging market strategy, and we are playing India for India. Fernando sees India as a very important part of his overall strategy. He would like India and U.S. to be his anchor markets.

Follow-up on Oliva growth from acquisition till now.

On Oliva, when we acquired the business a little over 2 years ago, it was a Rs. 100 crores ARR business. Now it's a Rs. 400 crores ARR business. The business has also improved profitability. When we acquired the business, it was a 40%-50% EBITDA loss business. Compared to that now, we have broken even in terms of profitability. We have acquired 51%, and we have already agreed a formula using which we'll end up acquiring the balance by January '26.

Possible to share more details on competitive landscape in the detergent category. Is this largely escalated in liquid detergents portfolio? How large is the segment now? How do margins stack here versus powders? Do you see a need to further reduce price posing further downside risk to margin?

We operate in three segments: bars, powders and liquids. Bars are very price sensitive, commodity price led. Powders are a large part of the category, very profitable for us, with Surf Excel one of the big brands. Liquids are growing quite strongly with very high double-digit growth over last 2-3 years. Home care liquids on the whole, our business is already well above Rs. 3,000 crores in scale. We have three very strong equities at play with Surf Excel, Rin and Sunlight. We do see conversion from powders to liquid also accelerating.