Emami bets 17% growth in rural consumption, overseas plans

NH Bhansali, CEO, Emami Group explains to CNBC-TV18 that the company plans to sustain growth at 17 percent on high rural consumption and increased capacities from manufacturing facilities in Bangladesh and Egypt.

Below is an edited transcript of the interview on CNBC-TV18

Q: What is the level of rural and overall consumption?

A: Rural consumpstion is excellent after the worries of poor rainfall being put to rest. In fact, consumption has been exceedingly good for all consumer companies and our growth has been phenomenal in the rural and urban markets. In the domestic market we are growing at around 20 percent which is in line with expectations. We feel that there is no impact on the rural growth as yet, despite the GDP growth which has been revised downwards.

Q: What will you peg your full year or even your FY14 growth at? Will you do a full year sales of about 18-20 percent with margins at around 25 percent?

A: We maintain our guidance of around 17-18 percent topline and bottomline growth. In fact, our domestic growth is at around 20 percent presently, but there are some corrections on supply chain from international business and the Canteen Stores Department (CSD) due to an embargo on procurement.

So these businesses have remained flat. But overall growth is expected at around 17-18 percent and we continue with our guidance for 17-18 percent growth in the topline and bottomline for FY12-FY13.

We think that the pace of growth can be sustained because the penetration levels of the categories where we are currently active, are still very low.

Q: You hiked prices by 7 percent in Q4 FY12.  Do you plan to hike prices this quarter and would that crunch your margins despite volume-growth being maintained?

A: We do not increase prices quarter-to-quarter. Hikes in prices are based on brands and as a reaction or on a proactive basis. But over the last two years, we have increased prices by around 7 percent. The proportion of hike in prices would be maintained in the current fiscal.

Q: What are the new launches planned in the winter-product segment? How has sales performed this season and what would your advertising spends be?

A: With Boroplus, we are the leader in the antiseptic cream category with a 75-percent marketshare. From our winter-product range that includes Boroplus, Chyawanprash, and other winter-care lotions, Vasocare is the new product that was launched last year. All these brands are doing well with some of the brands registering growth as high as 30-40 percent. The overall advertisement-to-sales ratio is around 16 percent.

Q: What is your total ad spends? Is it similar to what it was last year or will it be more than last year?

A: Yes, it will definitely be more than last year. In fact, we will be spending more than Rs 250 crore on advertisement and promotions and that would be at around 17 percent to increased sales compared to last year.

Q: What is the status of your plant in Bangladesh? With trial production already having commenced, do you plan to increase capacity for FY14 and will that mean a commensurate increase in volume? Do you plan to grow over 17 percent?

A: This is in line with our strategy. We are setting up a plant in Bangladesh and Egypt as well. We plan to increase capacities and growth in a phased manner. We aim to establish ourselves better in Bangladesh and Egypt.

Q: Are your exports better than domestic sales?

A: We have a very strong presence in the CIS, the Middle-East, Bangladesh, Nepal, the SAARC region and the growth in these countries has been good at the secondary level. But there have been some corrections due to supply chain problems. So, we are reducing secondary stocks in these markets. In the current fiscal, we do not expect any growth in sales except at the secondary level.

Q: There were a couple of problems in the CIS market in the previous quarter. When exactly do you expect the problems to smoothen out or improve?

A: There had been some problem due to spurious products and very high levels of secondary stocks. Efforts are on to resolve both problems. So this year, we have set a very low target on sales and growth in the CIS.