Marico Sees Double-Digit Volume Growth In India Business In Q1

Marico Ltd. expects revenue from its India business to grow more than 30% in the quarter ended June, aided by double-digit volume growth.

Healthy momentum in demand witnessed in March sustained till the first three weeks of April, until the second Covid-19 wave led to resumption of lockdowns in various states, according to the maker of blue-bottled Parachute hair oil's quarterly business update released on the bourses.

“The impact on public health was more severe as the pandemic reached rural pockets of the country,” it said. “But the impact on business was lesser than the first wave witnessed last year, as supply chains were evolved enough to cope with localised and staggered lockdowns and retail stores were also allowed to operate for limited number of hours during the day.”

Demand in south and west India — the relatively higher salience regions for the company — was slower due to higher caseloads and extended lockdown restrictions, the filing said. As the infection rates have dropped to pre-second wave levels, overall demand has been trending better since early June, it said.

• In Marico's India business, Parachute coconut oil delivered ahead of its medium-term expectations. The company had set its medium-term volume expectations in the range of 5-7%.

• Its Saffola Edible Oils posted low double-digit volume growth despite a high base.

• Value-added hair oils witnessed a recovery across the entire franchise. The recovery, however, is on a low base due to billing constraints in April last year.

• Marico's foods portfolio revenue more than doubled year-on-year with the oats franchise continuing its strong run, and recent launches scaling up in line with medium-term expectations.

• Premium personal care, constituting less than 5% of domestic revenues, also recovered sharply over last year, but ended below pre-Covid levels.

• Marico's international business posted a constant currency growth in low 20's on the back of sustained momentum in Bangladesh and broad-based recovery across other markets.

“As key input costs started easing after peaking at the start of this quarter, gross and operating margins should see significant sequential improvement in Q1 and thereafter trend towards medium-term expectations,” Marico said. “However, operating margin in the quarter will drop sharply on a year-on-year basis, given the exceptionally high base (due to rationalisation of advertising and promotional spends and other overheads in the base quarter) and the arithmetic (high denominator) effect of significant pricing-led growth.”

The company had earlier said it would be comfortable maintaining its threshold operating margin of more than 19% over the medium term.

Marico also expects its bottom line growth to be muted in the quarter ended June.

Demand Outlook

The company is seeing improving demand trends as the second wave appears to be receding and vaccination is progressing steadily, according to the filing.

Marico said it's prepared to tackle any disruptions in the business environment if there is a third wave as a majority of its own members and all extended third-party resources have received the first dose of vaccination.

The company maintains its outlook on delivering sustainable and profitable volume-led growth over the medium term.