“Dabur India Ltd. Earnings Conference Call”

July 29th, 2008

Dabur India Ltd.’s Participants MR. SUNIL DUGGAL, CEO

MR. RAJAN VARMA, CFO MR. ASHOK JAIN, GM-FINANCE & CO. SECRETARY MS. GAGAN AHLUWALIA , AGM-CORPORATE AFFAIRS

Gagan Ahluwalia: Good evening friends. I welcome you all to our conference call regarding the results for

the quarter ended 30th June 2008. We have here with us Mr. Sunil Duggal, CEO, Dabur

India Ltd, Mr. Rajan Verma, CFO and Mr. Ashok Jain, General Manager Finance and

Company Secretary. We will start the conference shortly with a brief presentation by Mr.

Duggal on the quarter’s performance followed by a question and answer session. I now

handover to Mr. Duggal.

Sunil Duggal: Ladies and gentlemen I welcome you all to our conference call regarding the results for

the 3 months period ended 30th of June 2008. Dabur India has delivered a growth of

15.5% in consolidated sales during the first quarter. Net profit on consolidated basis,

including retail registered a growth of 13.6%. Excluding the retail business the

company’s net profit grew by 21.2%. During this quarter the consumer care division,

which houses our core FMCG business grew by 10%. Importantly our renewed focus on

Ayurvedic OTC products led to a 25% growth in consumer health division which is now

on a strong growth path. IBD our international business division reported a robust growth

of 40% for the period.

In CCD, Hair care category has registered a strong growth of 15% lead by a robust

performance from shampoos, which grew by 26%.

Hair oils have recorded a steady growth of 12%. Dabur Amla grew by 14% and

continued to target conversion of lose mustard oil users led by rural activations in various

states. Anmol brand registered a good growth with Anmol Coconut growing at 33% and

Anmol Mustard oil growing at a steady 14%. Vatika Hair Oil declined by 8% during the

quarter, however secondary data has been showing an upward offtake after its re-launch.

The brand is being supported with a new campaign, which is expected to bring it back on

the growth path.

Oral Care category, has recorded a growth of 6% and toothpaste grew by 8.7% for the

quarter. The toothpaste growth has been subdued as Babool and Meswak brands were

being relaunched with entirely new marketing mix and old stock pipelines were

liquidated during the quarter. Dabur toothpastes however continue to outperform as per

AC Neilsen with Dabur brands reporting a growth of 20.7% as compared to category

growth of 14.4%. A key driver of growth in this category was Dabur Red toothpaste,

which grew by 17.5%.

The Health Supplement category recorded a growth of 19%. Dabur Glucose reported a

strong 29% growth. A new lemon variant of glucose has been launched during the

quarter. Dabur Honey posted a steady growth of 13.8%, continuing with its “Replace

Sugar Strategy”. Dabur Chyawanprash recorded a growth of 14.9% for the quarter.

Chyawanprash is set to be relaunched during the season focusing on specific claims

support using new communication and packaging. Packaging changes are being made to

the entire Chyawan range, which will be introduced in the third quarter. The new malted

food drink, Chawan Junior will be launched nationally in the upcoming season.

The Digestives category registered a flat growth during the quarter. Hajmola candy grew

by 5%, Hajmola tablets posted moderate growth while Pudin Hara declined due to

exceptionally short summer.

The Skin and Baby care category witnessed a de-growth of around 5% mainly on account

of reduction in sales of Vatika soap. The category grew by 12.5% after excluding Vatika

soap sales.

Gulabari sales witnessed a steady growth of 16% with the new variant Hydrating Rose

Creme and Rose Lotion performing well. Dabur Lal Tail performed impressively with a

growth of 17.3%. The Ayurvedic Baby care range has been expanded with the

introduction of Sarson Badam Tail which was launched last year.

Home Care sales remain flat in the quarter mainly due to Odomos, which was under

pressure. A number of new initiatives are being planned to provide fresh impetus to the

brand. Odomos has been granted Indian Medical Association endorsement for safety of

the product which is a strong accreditation and will be leveraged going forward. Odonil

brand, which operates in the Air Freshener category grew by 4%. It performed

particularly well growing by 25%. The new hard surface cleaner brand Dazzl has been

launched nationally and will be operating in the Rs. 1140 Crores hard surface cleaner

market.

The Food Business recorded a growth in sales of 15.2% during the quarter. Real Fruit

Juice franchise recorded a growth of 16%. Growth in the juices portfolio was impacted

by supply sideissues in some of the SKUs. The culinary range grew by 33% with

Homemade and Coconut milk performing well.

New campaign of Real Fruit Juice highlighting the claim of having 8 times more juice

content than fruit drinks has been paying good dividends. Going forward the company

intents to do aggressive branding and activation in the modern trade formats for the juices

portfolio. Also a new campaign for Activ Orange Carrot Juice is to be launched to

educate the consumer about its health benefits.

Consumer Health division (CHD) registered a strong growth of 24.5% during quarter 1.

The OTC portfolio lea the way with a growth of 33% and the ethical portfolio grew by

14%. Most of the OTC brands were on the growth path with Honitus performing

exceptionally well with a growth of 48%. The division has increased its investment in

advertising and promotion which, along with other initiatives, \is leading to a much

stronger revenue growth.

IBD the International business division continues to grow at a rapid pace with a growth

of 39.5% with strong performance coming from Egypt, the GCC and the Africa markets.

The new products such as Vatika Hair Cream, Vatika Hamam range, Amla Gold and

Dabur Herbal toothpaste are contributing to good momentum in these markets. The

international business was hit by high inflation in oil and PET related inputs, which

impacted the gross margins to some extent. However the bottom-line was robust due to

the strong top-line growth and calibrated price increases.

The retail venture H&B Stores has been progressing as per plans and has now opened 7

stores. There are plans to open 5 to 6 new stores during the year 2008/2009. We are

evaluating the future plans for the venture with utmost care keeping in view the sales

intensity, footfalls, Location parameters, average store size, consumer preferences,

margins profile, and most importantly rentals costs.

On the operating front EBITDA margins including the retail impact have contracted by

20 basis points to 16.2% for the consolidated business. However EBITDA without retail

impact continues to expand steadily by 51 basis points to 16.9% for the quarter. Material

cost have been higher by 103 basis points increasing to 49.02% from 48% last year, but

the impact of the same has been offset by operating leverage and efficient management of

other costs.

In the end I would like to assure you that the company continues to focus on driving

profitable growth through aggressive marketing strategies and new product introductions.

We will continue to build the growth drivers and invest behind our FMCG portfolio

aggressively as we have been doing in the past.

Aniruddha Joshi of Anand Rathi Securities

Aniruddha Joshi: Congratulations for a good set of numbers.

Sunil Duggal: Thank you.

Aniruddha Joshi: Sir just wanted to check with you - almost all FMCG companies are taking price hikes of

around 7% to 10% and our price hike was only 4% to 5% and not just that the other

FMCG companies have been able to get volume, growth in double digits also. So what

was, the reason that we have not taken any major price hikes during the quarter and still

Dabur’s volume growth is also only 11%.

Sunil Duggal: See so far our pricing strategy has been to largely neutralize the inflationary impact and

not to enhance/expand the margins. So we have been cautious and in doing sowe have

taken a price hike to the extent of the inflationary impact, which has been around 4%. So

that is the reason why there has been no compulsion for us to increase the prices by 8% to

10%, which may have been done by some companies which had inflation impact to that

extent. But if you track our gross margin profile you will find no erosion there, no

significant erosion there on account of material cost. Now going forward we have taken

price increases in this quarter, impact of which is not being felt in this quarter, to

neutralize the inflation which will come in the 2nd and the 3rd quarters. So overall we will

see a much higher pricing environment perhaps 7% to 8% for the full year. The 1st

Quarter has been fairly muted.

Aniruddha Joshi: Okay and secondly can you just update us about the Gulabari expansion and the new

Ayurvedic Skin Care launch we are talking about.

Sunil Duggal: The Gulabari Rose water continues to do well and that is the brand, which is not very

seasonal. The rose water has grown by 13%and the other products, which are new and

were launched last year are almost entirely winter specific as they are moisturizers and

lotions etc. Regarding the performance of these brands, we are pretty confident about

how they will work but that will really emerge in the 3rd Quarter of the current year. So

the overall Gulabari portfolio is steadily growing with the main stay Rose water doing

very well at 13% and the new product launches yet to kick in, which will happen like I

said in the 3rd Quarter.

Aniruddha Joshi: And the Ayurvedic Skincare range.

Sunil Duggal: That will be test launched in the early part of 4th Quarter. The products are more or less

ready and we have to finalize some of the branding issues, some of the packing issues

and we will have it taped up. They have to be put through a consumer test- the final stage

of the consumer tests. So the mix is coming together and we are pretty committed to

launching this product in the current fiscal. And we hope it will happen in the early part

of the 4th Quarter.

Aniruddha Joshi: Okay and that will be under Vatika brand or ….

Sunil Duggal: That will be under a new brand.

Aniruddha Joshi: Under a new brand.

Sunil Duggal: Dabur as the endorser but the brand will be new.

Aniruddha Joshi: Okay and sir what about our juices plan we are planning to launch juices at different price

points.

Sunil Duggal: Yes the plans still remains we are looking at the Rs.60 to Rs.65 a litre price points and

again in the 4th Quarter we should be definitely having some introduction in that space.

This is a Rs.60 to Rs.65 litre price point. And then we will be having another set of

products which we will launch perhaps in the 1st Quarter of next year which would be at

around the Rs.55 to Rs.60 price points, but that is going to be more oriented towards the

single serve pack at around Rs.12 for 200ml. So the strategy for Real would be- four

pronged with Real Activ at the top end ,the main stay Real brand at the mid point and

then there would be the two discount offerings and one of them will, like I said be

launched in the end of the 3rd Quarter or beginning 4th quarter.

Aniruddha Joshi: Sir, \ lastly what is our current plan no CHD business now.

Sunil Duggal: CHD 25% is the growth, which we saw in the first quarter. I think we are looking at

around 20% growth for the full year and as I had said in the previous quarter’s conference

calls we believe that the business is going to turnaround in the current year. And I think

the turnaround is fairly robust and there is a whole lot of new product introductions

which will keep growth momentum going forward at least for the next couple of years.

Aniruddha Joshi: Okay sir, thank you.

Percy Panthaki from HSBC Securities

Percy Panthaki: Hi Sunil, Percy here.

Sunil Duggal: Hi.

P. Panthaki: Congrats on a good set of numbers.

Sunil Duggal: Thank you.

P. Panthaki: Sir just first of all one question on the sales if I understand correctly the volume growth

for this quarter would be somewhere around 11%.

Sunil Duggal: Well yeah if you look at domestic portfolio it would be around 11% if you take the total

mix yeah it would be around 12% or so.

P. Panthaki: Okay my question is …

Sunil Duggal: I am sorry domestic would be more like 10% and you know international business is

going a little ahead..

P. Panthaki: My question is that traditionally if I look at the trend last year Dabur used to grow

volumes at about 14% to 15% and almost all FMCG results are out and no one has shown

any sort of market decline in the volume growth this quarter, some of them have in fact

improved also. So what is the reason that our volume growths are lower than trend.

Sunil Duggal: No I do not think for any extended period of time our volumes grew at that level, yeah

our average growth used to be in the 15% to 20% band. The volume growth was not 14%

they were more like 12% odd. So it is not that the volume has contracted very

significantly but I would urge you not to see the 1st Quarter as the indicative of the state

of things. We do hope that the domestic business would gain traction basically CCD

business would gain traction over the next couple of quarters. I am certainly looking at a

growth for CCD, which is ahead of what have seen in the 1st Quarter. So the 1st Quarter

numbers in CCD have been muted but of course it has been offset from the other two

businesses.But going forward we will need to drive CCD sale a little bit ahead of what

we have been doing and we are pretty confident of doing so.

P. Panthaki: Is there any reason why the CCD sales were lower this quarter.

Sunil Duggal: Nothing in particular I think there were a lot of relaunches planned so we shrunk

inventories particularly in oral care where we shrunk some inventories. Summer brands

Pudin Hara particularly also glucose performed below our action standard because the

summer really did not happen in the northern and eastern parts of the country. So it is not

structural or anything like that I think it is just a question of one quarters low growth. We

hope the situation will correct in the 2nd Quarter.

P. Panthaki: Okay and on gross margins there was a decline of about 70 to 80 basis points so what is

the outlook on the full year gross margins are you still guiding for a flat gross margin or

could there be some decline excluding retail.

Sunil Duggal: You know 50 to 100 bps this way or that way movement is always possible it is hard to

calibrate it exactly, but I do not think there would be any significant shift in our gross

margins from the levels, which we have seen at the end of last year. I think we will be

more or less maintaining those levels. But I will not hold a hand to my heart and say that

they are going to be rock steady but let’s say within a 1% band is what we expect them to

be. I would be surprised if they moved significantly in any other direction.

P. Panthaki: Sure and one slightly more strategic kind of a question do you feel that given the size of

each category you have, you have a number of products do you feel that it is getting

increasingly difficult to sort of have all the categories well displayed in the media in

terms of media spends being more effective because what is happening is that , I have

seen this quarter all the companies have raised their advertising expenditure and the size

for each product or category for some of the other companies are quite high so in terms of

the percentage of sale they are able to manage at lower levels. Now if we were to peg

ourselves at similar or even slightly higher percentage of sales do you think our brands

are finding it difficult to present themselves in the media.

Sunil Duggal: No I think we are bound by our architecture and if you take track record, take oral care

for example where unlike say Colgate or even Unilever we have a fairly fragmented

environment, we have Red toothpaste, then Babool and now Meswak, all having

completely separate identities and not being held together by a single umbrella name like

Colgate., but they all have sharply carved out identities and are fairly distinctive, I think

that is what is important. So wherever we are unable to make the identities very distinct

chances of failure are always very high but whether it is Meswak or Babool or Red

toothpaste or many of our other offerings they all have very-very sharply defined

identities and only then they are able to gain high share of voice in the respective sub

categories in which they operate. So while it is sometimes convenient to have everything

sitting under a single umbrella, it also diffuses the portfolio and there is no way we can

manage a diverse portfolio like what we have under one or two brand names. We have to

fragment it whether we like it or not.

P. Panthaki: You are right and what kind of a media cost inflation have you seen this year, has the

media cost inflation with the macro economics slowdown has also receded or you are

seeing cost inflation which was there last year also the same sort of spot rates per second,

sorry, rates per spot are they increasing in the same way.

Sunil Duggal: the first quarter has been pretty stagnant. There has been no increase either up or down.

Now we are reasonably confident that there would be some pressure in terms of the

advertising rupees being spent particularly by the financial companies also by the high

value durable companies that have a quite a lot of spends. And so there would be pressure

on the part of the media houses to lower the rates - hard to say how it will pan out but, I

do not expect any significant media inflation to happen this year and that would go in our

favor.

P. Panthaki: Okay, thanks a lot, I will come back if I have any doubts.

Sunil Duggal: Yeah sure, sure.

Akhil Kejriwal of Enam Securities

Akhil Kejriwal: Hi Mr. Duggal.

Sunil Duggal: Hi Akhil.

Akhil Kejriwal: I just had a question on your foods business, actually if you could just give us some

clarity because now it is been about 4 quarters that we have seen relatively subdued

growth in the food division. And you know during the 4th Quarter of last year, we were

told that the integration is complete and the growth should come back and then again this

quarter you are saying some supply side issues have impacted growth. Can you please

give us a clarity on how do you see this business pan out going forward?

Sunil Duggal: Yeah sure, you know I think the issues with regard to food have been a little bit

unexpected. The integration process has been completed and it has been happening very

smoothly.So the machinery is operational wherever supplies are good it is able to execute

extremely well, but 1st Quarter this year was probably bad in terms of supply chain. There

was 21 days of closure in the Nepal factory consequent to the Nepal elections and the

subsequent fall out. There were supply side issues with regards to you know accurate

forecasting of demand because when you change from one system to the other a lot of the

planning processes go haywireas you have a new set of people running this business who

havn’t got acquainted to the business. So the issues, which we are having today are

largely supply side. And I think we will be able to correct them in July itself. The

moment we are able to get the supply issues out of the way I think the 20% growth is

very clearly available on the horizon even without any significant new product

introduction. And the big kick off would happen if we are able to execute the Rs.60 price

point strategy well in which case the growths could be significantly higher than what you

have even seen in the past.

Akhil Kejriwal: Okay but in Nepal factory, as far as I remember you all had moved significant production

to India I think.

Sunil Duggal: No just 30% production to India.

Akhil Kejriwal: So 70% is still in Nepal.

Sunil Duggal: 70% still in Nepal and it will probably remain that way because Nepal dynamics are far

more attractive than in India as of today.

Akhil Kejriwal: But how would you counter the issues in Nepal which is going on because I mean, it is

pretty volatile actually.

Sunil Duggal: Yeah it is volatile but having said that I think the volatility is reducing, you now have a

government there and things are reasonably stable, I am not saying that it is going to be

you know absolutely smooth there but we cant afford this level of disruption going

forward. So we are preparing for that.We have ramped up our inventories on the ground.

We are investing significantly in cold storage facilities so that we have much larger

inventory of both raw and packing material. So in a sense we are planning for disruption,

we are planning deliberately for a higher level of inefficiency in our working capital for

the food business., If we do that we would be able to manage our supply much better. So

our working capital will go up in foods by almost 10 days, which is not significant in the

overall scheme of things but it would make a material impact in terms of smoothening the

food supply chain.

Akhil Kejriwal: So should we expect a better number at least next quarter onwards.

Sunil Duggal: I think so yeah, I think so.

Akhil Kejriwal: And second question is on the oral care, as you were briefing in the beginning I think you

said something about that you grew ahead of market and everything. So if you could just

repeat that because I did not get those facts correctly.

Sunil Duggal: Yeah if you scan AC Neilsen it shows that our value growth in toothpastes was 20.7%.

Category growth for Colgate (value growth) is 13%, Unilever it is 14.6%, Dabur it is

20.7% and total toothpastes value growth is 14.4%. So in terms of toothpaste we still

remain the fastest growing brand with respect to other companies by a wide margin. So I

think the issue is with regard to primary sales,. With regard to significant initiatives and

changes with the format of Babool , the SKUs and in terms of gram weight etc we needed

to dry up the pipeline a bit. We also have now got a new packaging in place, a new

variant has just been launched which is the neem variant. And Meswak is going to be

completely revamped in fact you will see a very new form of Meswak on the shelf in the

next month which we believe will give this brand a lot more traction.

Akhil Kejriwal: Okay.

Sunil Duggal: Full year’s growth will certainly be much ahead of what you have seen in the 1st Quarter.

Akhil Kejriwal: Okay and one last question was on retail have we, correct me if I am wrong, but have we

slowed down slightly because now we plan to end the year with about 14 stores and I

think the number earlier was a little higher.

Sunil Duggal: See the issue that we are facing today iswhen you go to hire a store you see a certain

rental, which we feel is very high. When you scan at the horizon say 6 months to 9

months to 1 year down the road you see significant rental corrections. The moment you

get into a store you lock yourself into into a 3 years arrangement with regards to the

rentals. Now we have this dilemma of ramping our business getting into a high rental

environment now and then seeing rental soften when we do not have choice to slowi

down the rate of rolling out getting into cheaper real estate because I believe this business

is critically dependent upon much more reasonably priced real estate. So I think we have

taken a call that we will slowdown the pace in accordance with the real estate prices. And

ramp up when we believe that the stores would breakeven almost immediately on their

opening and that would mean a much lower rental environment then what we have today.

Akhil Kejriwal: Sure.

Sunil Duggal: And we believe that it will happen very soon.

Akhil Kejriwal: Okay Sunil thanks so much.

Sunil Duggal: Welcome.

Priyadarshan Jha of Standard Chartered

Priyadarshan Jha: Hello good afternoon sir.

Sunil Duggal: Good afternoon.

Priyadarshan Jha: Congrats on a good set of numbers.

Sunil Duggal: Thank you.

Priyadarshan Jha: Can you throw some light on hair care business.

Sunil Duggal: Yeah please continue.

Priyadarshan Jha: Yeah I want to know, more about the hair care business.

Sunil Duggal: Yes see hair care in basically divided into two parts, there is shampoos and there is hair

oils, both have done extremely well as shampoos grew by 26% and hair oils grew by 12%

and total growth of hair care was 15%.

Priyadarshan Jha: Yes.

Sunil Duggal: So shampoos again performed well for the 2nd year or the 3rd year in a row. We remain

the fastest growing company in terms of velocity of sales. And the hair oil is pretty steady

at around 12%..

Priyadarshan Jha: Thanks so much.

Sunil Duggal: Thank you very much.

Vivek Maheshwari of CLSA

Vivek Maheshwari: Hi Sunil.

Sunil Duggal: Hi Vivek.

Vivek Maheshwari: My first question is I think I missed on this can you tell me again the volume versus

realization growth for domestic as well as international business.

Sunil Duggal: Okay let me talk about the domestic business, we have a volume growth of 8.5% and a

price growth of 3.8%.

Vivek Maheshwari: Okay and how about international overall.

Sunil Duggal: See in international operations it is very hard to give a volume value breakup because we

are opening up new geographies, now the growths there is obviously entirely volume,

because we started from 0 base or low volume base. But having said that, in our core

markets price increases have been in the range of 10%. I am giving this number with

perspective of Amla hair oil which is our biggest brand is Saudi Arbaia and there its price

has gone up by 10-12%, so we cannot give you a number in terms of volume-value

growth but the price increase internationally have been much ahead of India because

inflation impact there has been much ahead of India.

Vivek Maheshwari: Sure. And you mentioned that you totally took 104% to 105% weighted average price

hikes so that impact was partially felt in the current quarter. So I mean could you give

some sense like the price impact for a month or one and half month or can you just…

Sunil Duggal: Yeah you know we took a second round of price increase in Amla in June. Now the

impact of that will be felt for the full year. So going back the CCD business would be

expected to take up prices by around 7% for the full year that is what our outlook is. Of

course depending upon the inflation we ramp up or ramp down the business accordingly,

but I think 7% is what we are likely to do in the current year for CCD and for CHD it is

more in the region of around 8% to 10%. In Foods there have been little or no increases

because there is no significant margin impact on the food business and we do not expect

it to happen. So food business is steady, CCD expected price increases is around 7% to

8% CHD is around 8% to 10%.

Vivek Maheshwari: Okay. And how much of this 7% in CCD, have you have already taken? I think would it

be around like 3.5% …

Sunil Duggal: Yeah around 3.6%.

Vivek Maheshwari: Okay, second is I mean although you have mentioned sometime back, can we see 20%

Plus growth in food and something like 15% Plus in CCD from 2nd Quarter onwards.

Sunil Duggal: Well you know food 20% is the fairly visible; CCD 15% is never going to be easy

because given the size of the business and you know the fact that moving into the next

quarters, the price impact is going to be around 4% to 5%. So I would say that CCD is

expected to be up from a current 10% odd growth to something like 12% to 13% for the

next couple of quarters. But I expect robust growth coming from CHD and International

business.

Vivek Maheshwari: Okay next question is on CHD, do you think that 20% Plus kind of growth which you

have seen in the current quarter would continue even in FY2010 and 2011 or you think

next year would get impacted because of the higher base of the current year.

Sunil Duggal: No you maybe right, now the base would be high for getting to the 20% growth next

year, as it would be little bit more difficult. Everything depends upon how well we

execute our new product introductions. The existing products will not be able to get us to

20% because the market is not going like that. This year we have grown with the current

growth of 25% odd and the full year expected growth of of around 20% it would be

driven significantly by new product introductions. So future growth will be contingent

upon how well we keep the innovation funnel going and how well we execute on the

ground. The business as it stands without any new product introductions can be expected

to grow at only 10% to 15%.

Vivek Maheshwari: Okay. And two questions on the financial, one is your tax rate has jumped up by you

know something like 130 basis point YOY, is it on account of the retail venture because

your PBT would be lower to the extent of 4.9 Crores so that is why effective rate is

looking high.

Sunil Duggal: Yeah that is correct - that is the only reason for that

Vivek Maheshwari: Okay so Dabur India will continue to be under MAT for the next 3 to 4 years right.

Rajan Varma: That is correct for the next 10 years is what our planning is. So next year/next fiscal we

will be putting up significant amount of CAPEX, into Greenfield locations to ensure that

we remain under MAT till 2020.

Vivek Maheshwari: Okay, okay and if you are on your plan in terms of retail venture then there could be

incremental upside once retail venture starts making profits at that time, because I am

sure auditors would not have allowed you to carry it forward you know - the deferred tax

assets for the losses in the retail venture.

Rajan Varma: That is correct; also you know nothing has been carried forward at the moment so that

impact will be felt in the future.

Vivek Maheshwari: Okay. And sir on the retail front you have made a loss of 4.9 Crores during the quarter.

So I mean if I simply multiply it by 4 it will be something like 20 Crores so is that the

number that we should look at for the year or it can be higher or lower.

Sunil Duggal: I think that is indicative.

Vivek Maheshwari: Okay and last thing on your other income it has jumped up by something like 55% so

what has been the key reasons of this.

Sunil Duggal: We are sitting on large cash reserve in the current quarter and the higher other income is

basically attributable to treasury operations, essentially income from our investments in

liquid funds.

Vivek Maheshwari: Okay, sure thank you so much.

Sunil Duggal: You are welcome.

Prashant Kothari of Prudential ICICI Asset Management

Prashant Kothari: Sir couple of questions, firstly on Vatika soap there seems to be huge decline in that are

we like kind of discontinuing that brand.

Sunil Duggal: Yes we are. The margins in soaps have eroded to the extent that it is not worthwhile to

continue that particular business. And in that context as I had told six months ago, so we

are in process of liquidating inventories and basically putting the brand on float so that

we do not go on investing. But it is no longer a category which we find worthwhile to

invest in given that the margin pressures which are coming on soaps at this point in time.

Prashant Kothari: Okay. And sir in the hair oil space the Vatika brand is gone down by 8% or so, what is

has been the reason.

Sunil Duggal: See the brand has been re-staged and if you look at secondary sales data,we had put in a

lot of stock in March so the secondary sales have been good for the current quarter. So

we believe that the brand has turned around consequent to the revamp of its packaging

and a new campaign and we believe that we will see much better growth for the brand in

the coming quarters.

Prashant Kothari: Sir in both hair category and oral category you are mentioning that you have cut down on

the inventory but if we look at your inventory number as on June and compare it to

March number it has actually gone up.

Sunil Duggal: You know that could be from variety of reasons. I think you should compare inventory on

a Y on Y basis and not sequentially.

Prashant Kothari: Okay even on June last compared to this year.

Sunil Duggal: You are just looking at overall build up of inventories and that will not give you visibility

about toothpaste inventories or hair oil inventories. I see 54 days of inventory cover last

year and 55 days cover this year so there is similar inventory as compared to last year.

They have gone up from March you are right but like I said you should not see this

sequentially.

Prashant Kothari: Okay sir one question about your international business, if I could just see the difference

between consolidated and the standalone and I think that should be the international part

of the business …

Sunil Duggal: There are three elements to our consolidated business- there is international, there is

H&B and there is Dabur India.

Prashant Kothari: Okay. And sir one last question on Hajmola brand, is it that the you have taken some

price cuts in Hajmola segment in last one year.

Sunil Duggal: No we have not taken any price cuts but neither have we taken any price increases on it.

Hajmola is a Rs.1 offering so we do not want to break that price point so we are seeing no

prices changes in Hajmola..

Prashant Kothari: Okay. And sir we had some benefits last year on raw material front due to some re-

engineering activities that you are doing - are those benefits continuing.

Sunil Duggal: Yeah I mean they are obviously being neutralized significantly by inflation but the

reengineering of the products, , which we had done are more of the permanent nature. In

fact one of the reason why our inflation has been much lower then many of our

competitors is because we have managed cost better in terms of you know better

sourcing, better sourcing practices, better control over material cost, adopting a very

aggressive hedge strategy. Most of first quarter requirements were covered at much lower

prices in the 4th Quarter. So we went long on many of our commodities. So I think our

sourcing department is doing a very strategic role and they are just not buying at spot

prices from the market. So they will continue to provide us with competitive advantage

over a lot of competitors that is what I think would keep our inflation lower than the

benchmark.

Prashant Kothari: Okay thank you sir.

Sunil Duggal: Welcome.

Shirish Pardeshi of Anand Rathi

Shirish Pardeshi: Hi good evening Sunil.

Sunil Duggal: Good evening.

Shirish Pardeshi: Couple of questions in the last conference call if I am not mistaken we heard that you

mentioned about 60% of the product portfolio was relaunched.

Sunil Duggal: Well relaunch as in, renovated you know. Relaunch is a much larger exercise in which

you change the entire marketing mix.

Shirish Pardeshi: Correct.

Sunil Duggal: Renovations would mean just a packaging change so I think what I wanted to mention

was a 60% of portfolio has been renovated out of which maybe a 20% would have been

relaunched.

Shirish Pardeshi: Okay so how this initiative you would is going to help us in the coming quarters.

Sunil Duggal: See relaunch is an event you do when you want to change the brand dynamics for

example Vatika hair oil which was not showing any kind of growth. So we relaunched it,

so the packaging changed, the advertising changed, some re-formulation was done. And

renovations are more evolutionary measures which keep the brand salient into the mind

of the consumer. For example we say Babool got packaging change or even Meswak for

that matter had product renovation. And that is done on a more continuous basis. Now

these exercises are almost essential both as to keep the portfolio vibrant and to record the

growth, which we have been recording in the past. So it is an ongoing exercise.

Everything will be relaunched after 4 or 5 years or even sometimes 2 or 3 years. And

product renovation will happen for example Chyawanprash is being completely

renovated. Thus you will find completely new packaging when you see it on the shelves

from October onwards. There will be obviously a new campaign so this is renovation of

fairly significant nature.

Shirish Pardeshi: So do you expect that the balance portfolio will get renovated in this year.

Sunil Duggal: Yes, I do not see any significant products, which are not being renovated either in the

previous fiscal or current year.

Shirish Pardeshi: Okay my next question is on hair oil business; in the hair oil business we have taken

significant jump in expanding cooling hair oil initiative. Where do you see that cooling

hair oil categories growing and which initiative of yours will help us to gain the market

share?

Sunil Duggal: See we have made a small foray in cooling oils, it has not been a very aggressive foray

and it has not been under CCD, which is our main hub of FMCG but it has been under

CHD. So we would offer an interesting brand, which is at a sharp discount to that of its

comparative brands because these are very expensive products surprisingly enough and

that strategy seems to have worked. we have not put into full gear because we wanted to

test the waters. This category is dominated by a couple of very strong players which are

pretty entrenched, so we have to do something which offers better value. And I think we

are now in a position that next year we will ramp it up and the brand would become

reasonably large.

Shirish Pardeshi: Would you be able to give us some sense that how it is growing, is it growing higher then

the hair oil category itself or.

Sunil Duggal: If you track it over the last few years it is has been growing faster than overall hair oil

category; it is fastest growing sub category within hair oil. In the first Quarter cooling oils

recorded 19% growth as against total hair oil growth of 17%. There has been a slowdown

in this category as it was growing well above 25% to 30%, but it is still growing a little

bit ahead of rest of hair oils.

Shirish Pardeshi: Okay my next question is on oral care - would you be able to share how is the white tooth

powder category growing, I mean if the whites are growing faster or reds are growing

faster.

Sunil Duggal: The overall tooth powder category is very unpredictable and looking at the numbers it

shows that the category has degrown for the quarter. Now within that there has been no

significant change of shares of white versus red. So they have maintained themselves.

Shirish Pardeshi: You know I was just worrying because we saw that there is a decline of 2% in Red tooth

powder and in the same quarter our competition has taken an aggressive stand by

launching red toothpowder…

Sunil Duggal: No the Red tooth powder launch by Colgate has not impacted our brand so far.

Shirish Pardeshi: Would you be able to give us some sense of how Colgate’s Red toothpowder is doing in

Bihar and UP.

Sunil Duggal: They did a fairly ambitious effort to get into our core markets. Colgate’s brand however

has not been able to impact at all or Red franchise and i do not even see their products on

the shelves anymore. So there is no threat of Red toothpowder from the Colgate version

of Red toothpowder. Our brand is still pretty much intact, the challenge in front of us is to

grow the red category because we have unquestioned leadership in this category.

Shirish Pardeshi: Okay do with regard to Chyawan Junior, do you feel that our pricing strategy in is right.?

Sunil Duggal: I believe so… it is on parity with Bournvita and I think that is the price point, which has

worked with the consumer, but the product has not been really launched till yet. You will

see it launched from October or thereabouts. And it is in a completely different shape

than what we test launched in Bombay and Calcutta. So a lot of work has been done and

lot of learnings have been taken on the desktop and we will be doing a fairly major

launch in the 3rd Quarter, but there is a seasonality element here which makes sense to

launch it at the start of the big season.

Shirish Pardeshi: Okay I am sorry if I am going back on the oral care, would you be able to tell us what is

the growth that you have achieved on Babool in this quarter.

Sunil Duggal: Babul has been on 2.5% but let us say this was consequent to a complete renovation of

the product, which has happened now. And we did shrink up inventories consequent to

that relaunch. If you take tooth paste category as per AC Neilsen, Babool has grown by

25%, so the growth remains fairly impressive as far as secondary off takes are concerned.

So I think you will see a much better growth emerging from Babool in thenext quarter.

Shirish Pardeshi: You just mentioned that you are going to relaunch or have relaunched it, have you

changed the price point or what …

Sunil Duggal: No we have done some tinkering with the price point so for example you know the key

SKU there is Rs.10 for 50gm . Now that has been the main stay of this brand, We used to

give a bundle comprising of 50gm toothpaste and a toothbrush, now the toothbrush prices

have been climbing exponentially for obvious season. So our profitability was being

squeezed here so what we have done is we have changed these SKU i.e Rs.10 for 50gm

with toothbrush SKU and we have now introduced into the market a brand new SKU

which is Rs.10 for 150gm which surprisingly enough forked us better margins than the

earlier SKU. So in other words we are offering much better value to the consumer and at

the same time making much better margins for ourselves. We believe this is the key

initiative in Babool which will propel the growths.

Shirish Pardeshi: Okay and just last one question, on the international business we have seen a significant

quarter-on-quarter growth and what are the key categories growing in the international

business.

Sunil Duggal: Well all the categories are growing and the brand which is growing the least is actually

Amla hair oil. Because it is a brand which is in a fairly mature state of evolution but what

we have done is we have flanked that with another brand call Amla Gold which is a much

more, what should I say, user friendly version of Amla hair oil. Now the aggregate Amla

franchise is going at a good pace, but the key driver there is the Vatika brand and Vatika

brand has now significantly overtaken Amla in terms of size.It is by far our largest brand.

And within Vatika it is not really the coconut hair oil which has done any significant

growth, because those markets are not coconut hair oil markets it is really the hair creams

and the other hair oils which are very local and which are very different from what you

find in India which have driven the growth. Now for example hair cream is now a 40

Crores product in the international business, it is 0 in India we have not even introduced

it but it is 40 Crores internationally. And in Nigeria growth has been very high on

account of toothpaste. Our herbal toothpastes are very popular there - we are the #3

players in oral care in Nigeria and growth has been stupendous there. Growth in these

markets has been extremely high on the back of Vatika new product offerings. So

basically why I am very optimistic about growth in international is that this is not driven

by just increase in the market share which are very finite ways to grow but by expansion

in different geographies and innovation and that expansion would continue so I think the

growth trajectory would remain high.

Shirish Pardeshi: So you would say that this kind of growth continues for the full year.

Sunil Duggal: I would not be surprised, it is hard to stick a neck out and say a growth of 35% to 40%

will continue, but I think this growth is sustainable.

Shirish Pardeshi: Okay thank you.

Richard Liu from JM Financial

Richard Liu: Good evening Mr. Duggal.

Sunil Duggal: Good evening.

Richard Liu: Sir three questions actually- in the food business the Real portfolio grew 16% and you

mentioned that culinary grew around 34% but the overall category growth is roughly

around 15% what is there in the portfolio which has actually depressed the overall

growth.

Sunil Duggal: Real Activ was pretty flat it de-grew by a percentage or 2. And then we had test

launched some new products like Coolers etc. last year which we have decided to exit,

now consequent to the takeover of the foods business by the main business there has been

a change in strategy and now we are not going to have the sub brand called Coolers. So

the new lower priced drink at Rs.60 a liter would be again under the Real franchise So I

think the disengagement of Coolers has also been partly responsible for this lower

growth, because there was no sale of the lower priced portfolio in the current quarter. The

culinary and the Real franchise has grown. Activ we are now doing a relaunch and you

would have seen some of the advertisements which we are doing entirely on the health

and immunity benefits they are very, very benefit centric we think that would propel the

Real Activ portfolio to grow much, much ahead of what we have seen in the 1st Quarter.

Richard Liu: Okay so what about the mid priced juice brand that Twist, I mean how that has grown.

Sunil Duggal: No Twist again I think we are going to subsume. All these brands you know Coolers was

in fact alow price initiative, Twist was another low price initiative, Coolers was summer

drink, Twist was a little bit more mainstream. We believe that there is no point in

fragmenting the business, it does not have the scale to support too many brands so we

have a very strong franchise of Real and we should subsume everything under Real and

obviously with sub brands which will give each its own distinct identity. So our

marketing guys have crafted a completely new architecture for Real and that is the way

we go forward, but short term in terms of discontinuation of the earlier portfolio it would

just mean that it had some impact on the top-line.

Richard Liu: Sure sir and if one looks at the juice market in totality I mean what would be the overall

size and what is the breakup between premium and mid priced juice.

Sunil Duggal: See the lower priced juice, I feel I would not call it mid priced I will call it low priced.

Richard Liu: Sure.

Sunil Duggal: That is much larger than you know by a factor of 3 or 4 larger than the premium, which

includes mega brands like Frooti and Mazza and all that.

Richard Liu: Sure.

Sunil Duggal: So these are much larger, they are largely mango centric and some other flavors, which

have just come in and we believe they have lot of growth. So while we play actively in

the mango space because that is already pretty crowded and players are entrenched. We

will be looking at new flavor options at lower price points.

Richard Liu: And indication of the market sizes …

Sunil Duggal: The overall size would be around a 1000 Crores and the lower priced would be around

600 to 700 Crores, it is around 600 Crores.

Richard Liu: Okay I remember discussing about your farm linkages on Orange you know which is I

think the core product here, any development on that vis-à-vis Dabur.

Sunil Duggal: If you track the margin profile importation via the nepal route is actually much cheaper

than producing in India even if we were to solve the flavor issues, but what is happening

is that there are large plantations coming up in Punjab which will yield orange. Now that

product is available to us if you want it. If it fits our specs in terms of flavor profile etc.

we will tap into those sources and buy from India but at the moment the Nepal piece is

very compelling and if you do a stats of our foods number while the top-line maybe just

15% to 16% there has been quite a significant margin expansion which has happened.

And so the business has become far more stable with regards to its profitability partly on

account of better gross margins and partly on account of the leverage and the consequent

reduction of cost post integration with CCD.

Richard Liu: Sure. Sir the next question is, you know I was just looking at the standalone numbers vis-

à-vis the consolidated numbers, I mean the COGS impact seems to be more evident in the

consolidated number I mean it is up 80 basis point as compared to standalone.

Sunil Duggal: Yeah COGS impact in international has been very high. In fact the international margins

have shrunk,- the material cost to sales ratio has gone up by more than 4% but even then

a very strong top-line has meant that our profits has been very, very strong in

international, because as high top-line has given rise to operating leverage so even though

there has been a pressure on the material cost our bottom-line has grown by, what was the

bottom-line growth in IBD… IBD profits almost doubled. So the margin profile of foods

has been better compared to earlier and in international no worries given that the margins

at the gross levels have been eroded but our profit margins are still very, very firm

Richard Liu: Sure and continuing with IBD which is actually the fastest growing amongst all the

categories so to say. I think the growth of 40% in IBD I do not think there any other

category that has grown more than that and with this kind of COGS impact are we still

saying that we are going to maintain our full years margin as compared to previous year.

Sunil Duggal: Yes we are.

Richard Liu: Inspite of the 4%...

Sunil Duggal: See excluding retail losses I do not see any shrinkage in the margins, there would be

some expansion of EBITDA I do not see any shrinkage there.

Richard Liu: Okay I know that retail is just about 1 Crores of the top-line but has retail also

contributed to this COGS impact in any manner.

Sunil Duggal: No not COGS because we do line by line consolidation, it has impacted the EBITDA

margins.

Richard Liu: Okay and the other question you know is with respect to retail. Are the retail stores

breakeven at the gross profit level?

Sunil Duggal: No and that is the reason why we are going slow because the current rentals are not

supporting store breakeven.

Richard Liu: Not store breakeven I mean sale less COGS.

Sunil Duggal: Yeah COGS is not very much so yeah broadly I think sales minus COGS we are at

breakeven but then there is a operating cost of the stores, which so far the margins are not

supporting. So basically the current rentals have to come down.

We are now at 25% gross margins in retail ahead of our estimates but the higher rental

cost neutralizes that.

Richard Liu: Sure and my last question I am sorry for going back again, but you know we were

discussing about tax rate if one looks at the standalone accounts I mean even the tax rate

there is actually pretty high compared to full year FY2008 I mean we are at a number of

around 14.8% in the current year versus 13.5% full year FY2008. What could be the

reason for this?

Rajan Varma: See there are two or three elements to the tax rate out there. There is the normal MAT

tax, there is the deferred tax and there is the FBT tax …

Richard Liu: Sure.

Rajan Varma: Now the FBT as business grows it does go up which may not be in direct proportions as it

depends on various expenditures. So therefore that creates a slight imbalance - not a very

major one. And the second area which creates a slight imbalance is the deferred tax. So

these items do create some imbalance, but it is not majorly changing the tax rates even on

the standalone basis. And if you see on a consolidated basis excluding the H&B impact

we have about 13.8% going up to 14.1% odd which is really nothing more than a base

effect.

Richard Liu: Okay so it is mainly the deferred tax impact.

Rajan Varma: A little bit of deferred, little bit of FBT and that is what causes the slight changes out

there.

Richard Liu: Okay the full year so to say guidance remained at roughly around 14% for tax rate.

Rajan Varma: Yeah we will maintain, let us put it this way that MAT will remain, it is there to say.

Richard Liu: Okay sir, thanks a ton.

Vandana Luthra of DSP Merrill Lynch

Vandana Luthra: My question relates to the home business, it looks like it was flat this quarter. So could

you throw some color on the home care business? And also I wanted to understand that in

your international business what is the EBIT margin level that you are on a consolidated

international level.

Sunil Duggal: See the largest product in home care is Odomos and we are trying to reduce our reliance

on Odomos by focussing on our air freshener business in order to grow that aggressively.

Now Odomos continues to remain flat the overall insect repellent category is not

growing. Likewise Odomos is not growing. And this is pulling the overall growth rates

down. If you take the air fresheners particularly the Aerosol those are doing well. I think

the road ahead is to diversify outside the mosquito repellant range and to have very

aggressive introductions both in air fresheners as well as in the hard surface cleaners.

And if we are able to execute the Dazzl strategy, which is the hard surface cleaning

strategy then we will be able to regain strong momentum in this business. So we have got

the tools into play now and we really have to execute and lot of the strategy would be

contingent upon this successful introduction of the Dazzl brand.

Vandana Luthra: Right and in the international business what is the level of profitability there.

Gagan: Yeah the EBITDA margin in the international consolidated business in this quarter was

around 14% and it went up by about 70 basis points. During last year in the same period

it was 13.3%.

Vandana Luthra: So how would it be comparable to the EBITDA margin in the domestic CCD business/

Sunil Duggal: It is in the region of 17% in the domestic business.

Vandana Luthra: As we go forward and as you build scale in the international business, is there a case of

the international business EBITDA margin moving closer to the domestic margins or you

expect the gap to always persist.

Sunil Duggal: In margin it can converge, there maybe a marginal gap but it will be more or less similar

there. I think if you are able to grow the international top-line at this level there is nothing

in the mix, which could constitute any kind of an erosion of EBITDA. So it should creep

up to domestic levels in you know 3 to 4 years time.

Vandana Luthra: But is this going to be really that easy because your international business is spread

across so many geographies. In India you have concentrated in India so you have got the

media benefit and stuff like that whereas your international is spread across so many

geographies. Would not the lack of scale in one particular geography be a hindrance to

get your margins to the same level as the domestic margin?

Sunil Duggal: No, bulk of our international business - perhaps 2/3rd or 3/4th - comes from the Arabic

belts stretching from Morocco in the west to Iraq in the east. Now there is actually a far

more convergent and a cohesive media environment then what we have in India, because

there are couple of platforms. The main one being the MBC the Middle East Broadcast

Company which provides excellent level of reach and coverage over the Arabic

geography. As far as media is concerned there is really no issue and as far as Arab areas

are concerned. Of course when we expand outside the Arab – Nigeria or South Africa etc.

then the fragmentation issue which you mentioned could be a question, but at this point in

time the more we spend the more we get in terms of revenues and I think our media cost

actually are dropping there as a percentage of sales. So there is some operating leverage

which we are getting out of this consolidation of media under the MBC umbrella. In fact

we spend more on MBC than we spend on any Indian channel.

Vandana Luthra: Thanks Sunil.

Sunil Duggal: Thank you.

Swati Vishwas Rao from NVS Brokerage

Swati Vishwas Rao: Good evening sir.

Sunil Duggal: Good evening.

Swati Vishwas Rao: Sir I had to just ask you, could you just briefly tell me as you have mentioned about the

relaunches - which are the relaunches if you could tell me just briefly which would likely

boost up the revenues in the next coming quarter. And if possible for the full year also

Sunil Duggal: Three brands come to mind immediately; one is Babool, second is Meswak and third is

Vatika hair oil. Now these are relaunches - so I am not talking about new launches now

and I am talking about relaunches.

Swati Vishwas Rao: Yeah.

Sunil Duggal: These should be the 3 brands would grow significantly ahead of what you have seen in 1st

Quarter.

Swati Vishwas Rao: Okay and any new launches sir like you mentioned about the stores going slow and

everything. Sir any new launches as such.

Sunil Duggal: So that is a retail business which is completely separate so we are maybe going slow on

the store opening, but I am not taking my foot of the gas as far as the FMCG business is

concerned. So we have a lot of new products in the 3rd and 4th quarter. Having said that

maybe in the beginning of the launch they may not contribute significant revenue. I am

not seeing those brandsto contribute significantly to our top-line, but there will be a lot of

activity which has already began starting with the relaunch of Meswak and Babool in the

current month and several new initiatives to flow in around September- October.

Swati Vishwas Rao: Thank you so much.

Sunil Duggal: You are welcome.

Moderator: Thank you Ms. Rao. Our next question is from Mr. Shishir Manuj of Mangal Keshav.

Please go ahead.

Shishir Manuj: Hi just wanted to check no the retailing business last quarter or quarter before that you

had guided for you know year wise losses at around 17.5 Crores for FY2009 and

cumulative losses of around 40 Crores do you still maintain that, one.

Sunil Duggal: This year it will be broadly along what we have indicated …

Shishir Manuj: Okay and just a clarification on these - are operating level losses or you are talking about

PAT level losses.

Sunil Duggal: PAT level losses.

Shishir Manuj: Okay PAT level losses. Okay and if you could help me if you do internally workout, if

you have worked out packaging cost as in if you could index to let us say FY2008

average levels or something of that sort. Has that been bothering you if at all ?

Sunil Duggal: You know what we have seen is COGS margins compressing by 107 as compared to for

the full year. Now what you are saying is actually very interesting because the packaging

will be almost entirely responsible for these COGS. NSo 80% of our material inflation it

is going to be from packaging materials where there is no place to hide whether it is PET

or Glass or HDP or Laminate everything is going up because all of them are hydrocarbon

derivatives.

Shishir Manuj: And if you could give also a sense as to what are you doing to contain, there is something

actively being you know sought to be done on that.

Sunil Duggal: You know what we did was we covered most of our 1st Quarter requirements in the last

quarter so which were at, obviously oil level was much lower. So till now as of 20th of

June we had almost full cover of most of the packaging material apart from glass. From

the first of July is when the oil prices started to peak, now going forward we are not

looking at taking any forward position because – you never know which way the oil table

will swing. If the oil table goes southwards as what seems to be the situation today then

the material impact will be much lower than what we anticipate, but like I said we are not

taking any positions because we do not know which way the market will go.

Shishir Manuj: It will be more linked to the spot markets.

Sunil Duggal: Yeah at the moment we are doing spot when some clarity emerges in terms of the

movement then we will start taking positions. At the moment neither in FOREX or any

other commodity, we are not taking positions because there is still lot of opacity about

which way the table will go.

Shishir Manuj: So the 107 that you spoke about that is for Q1 of FY2009 am I right.

Sunil Duggal: That will be full year, 107 to 108 that means 7% to 8% material cost inflation.

Sunil Duggal: But so far it is 4% aggregate.

Shishir Manuj: Okay, just a clarification has there been some kind of pipeline filling up in CHD …

Sunil Duggal: No! Growth you see are not of any pipeline fillings.

Shishir Manuj: Okay, and if you could share some numbers on retailing I mean beyond what you have

already shared as to you know how many stores or let us say the total area that you intend

to you know close at the end of this year. Obviously 12 stores is what you have

mentioned, but let us say FY2010 where do you intend to close so what is your outlook

on the rental there and you know…

Sunil Duggal: See I would not be able to give you a clear outlook for 2010 like I said the rental

environment would be very critical in terms of our store opening strategy. In the current

year we would be having between 15,000 and 20,000 square feet of retail space spread

over 12 to 15 stores.

Shishir Manuj: Okay so roughly around 1000 to 1200 square feet…

Sunil Duggal: See I think what we have realized is that a smaller footprint yields better results so the

sweet spot which we envisaged at around 1500 to 2000 is now 700 to 1000.

Shishir Manuj: That will be a little lower than the …

Sunil Duggal: Much lower than what we initially planned but that is part of the learning curve t, because

we have also discontinued certain product lines like for example we have discontinued

the pharmacy piece, because that is not very attractive and we are moving more

aggressively into the beauty care domain…now these require smaller footprints.

Shishir Manuj: Okay if I were to just, a sense of what is the COGS to sales that I mean gross margins if I

were to ask you. I mean for the first 7 stores or let us say for the first 3 …

Sunil Duggal: Currently, I think we will be able to maintain it around 25. Now the pivotal part of this

whole model would be that if you are able to introduce private label successfully which

would come at much higher margins.

Shishir Manuj: And that should be towards this FY11 some …

Sunil Duggal: No that would start happening very soon and I think you will have visibility by the end of

the current fiscal but that is important in terms of testing the waters.

Shishir Manuj: Where are you likely to keep this private label levels at I mean of the total.

Sunil Duggal: The higher the better, I will be delighted if it is 100% but obviously that cannot happen

so, but I think the whole feedback to the team is that maximize private label, maximize

gross margins, bring them to the mid 30s level then the model becomes robust. Now that

is a hard act to do, because private label is comparatively new domain. So again it

depends how well the team is able to execute. We are at the moment getting all our

housing experts on how to gets the best practices in for private label. So I think the

visibility will happen by the end of the current year.

Shishir Manuj: Just one last question I mean that is like more like a clarification. Did you mention earlier

that the deferred tax benefits of the losses in retailing are not being right now accounted

for.

Sunil Duggal: At the moment yes.

Shishir Manuj: And when do you see those getting accounted for I mean is it only when the retailing

turns around.

Sunil Duggal: That is correct.

Shishir Manuj: Okay thanks a lot for taking my questions.

Sunil Duggal: Thank you.

Ganesh from Equity Masters

Ganesh: Hi sir I am Ganesh here. This question is regarding what are your CAPEX plans for next

2 years.

Sunil Duggal: See current year CAPEX would be in the region of 120 odd Crores, next year that could

be significantly higher on account of new plant which will be setting up at a cost 130

to150 Crores. Now that plant is essential because, first to continue –a to enhance our

capacities which are falling little short and -b to optimize tax benefits for which the

window is going to close by March 2010. So we will have to commission this plant

before March 2010 and we have budgeted a very tentative outlay of around 150 Crores.

So this plant will be commissioned next fiscal and most of the CAPEX will be spent

during the next fiscal. So we estimate next fiscal total CAPEX of around Rs 200 Crores.

Ganesh: Okay current year to …

Sunil Duggal: Currently 110 to 120 but next year will be a blip and then you will find the CAPEX is

coming down.But next year for fiscal 2010 would be our highest ever year for CAPEX.

Ganesh: Oh okay yeah thank you sir.

Sunil Duggal: Welcome.

Sameer Deshmukh from IL&FS

Sameer Deshmukh: Hello sir.

Sunil Duggal: Hi.

Sameer Deshmukh: Sir any specific product category where raw material, inflationary pressure is high if we

remove the impact of the packaging materials.

Sunil Duggal: Yeah, good question - edible oil, coconut oil and honey, which are the two big test points

for us.

Sameer Deshmukh Okay and how do you see the outlook for these three - edible oil, coconut oil and honey

going forward?

Sunil Duggal: I think that will improve, as we do not see any significant upward or downward

movement. We are hopeful that there will be some softening of edible oilsbut again we

have to watch as the monsoon outlook also seems to be a little uncertain at this point in

time..

Sameer Deshmukh: Right sir.

Sunil Duggal: But having said that I do not expect coconut prices to fall significantly, but the prices of

other edible oils could fall.

Sameer Deshmukh: Okay and sir in your foods portfolio has the Twist brand been completely shelved off.

Sunil Duggal: Yes we are, but that does not really mean that we are not going to have products under

the lower price point segment. I do not know if you were in the conference at that time,

we are going to have a new brand under the master architecture of Real which will be our

entry into this lowerRs.60 price point segments.

Sameer Deshmukh: Okay that will be basically a fruit juice only or it will be a fruit drink market.

Sunil Duggal: It will be both, in terms of drinks and nectars this would not be juice, you cannot have

juice which is at Rs. 60 a litre.

Sameer Deshmukh: No I was asking this because we have now positioned Real as our advertisement states

that we have 8 times more juice content than drink. So if we bring a drink brand it will be

difficult.

Sunil Duggal: No it will be under Real sub-brands and we will put it under the Real architecture. We

will make sure there is no confusion so our 8 times juice story will remain for that type of

offering and the other strategy would remain very distinctly separate.

Sameer Deshmukh: Okay and sir in terms of consumer health division if we leave this quarter and the last

quarter of FY2008 before that for 7 quarters the growth was subdued. So this growth

basically 20% to 25% growth is coming on a lower base. So if you remove the impact of

FY2009 do you think going forward we can maintain a double digit growth rate.

Sunil Duggal: Like I said you know growth what we have seen last year that should have corrected but

everything would depend upon our strategy in terms of new product introductions. So this

growth as you see has been driven substantially by OTC and fortunately we have a very

strong pipeline in terms of new product introductions under OTC, which can be

launched at comparatively low cost.. And so I am fairly confident that we can keep

growth going at 15% even for the next couple of years. 25% will be you know hard to get

that is almost the best case scenario, but even if we get you know 15% to 20% growth I

would be reasonably satisfied.

Sameer Deshmukh: Okay fine.

Sunil Duggal: This year probably

Sameer Deshmukh: Right that is all from my side and all the best.

Sunil Duggal: Thank you very much.

Sameer Deshmukh: Thank you.

Abhijeet Kundu from Antique

Abhijeet Kundu: Hi I had a question on your home care division. Your Odomos brand is under pressure,

and what has been according to you the key reason for flat growth in this quarter.

Sunil Duggal: Yeah it has been the largest drag.

Abhijeet Kundu: Right what are the kinds of initiatives taken to revive growth in this particular category?

Sunil Duggal: The big initiatives, which are happening here is the launch of a herbal version of

Odomos. Now one of the barriers for people trying Odomos is the perception that this is

not good for your skin and it can do some damage especially to children and babies. So

the new avatar of Odomos, which will be a new variant, will be completely natural that is

i think a initiative which would removemany of the barriers with regard to consumption

of this product, which hopefully will go down with the introduction of this product. So

with that I think Odomos will come back to track.

Abhijeet Kundu: And in case of oral care we are seeing that we are mainly renovating you know Babool

and Meswask as a brand…

Sunil Duggal: Also introducing new variants under Babool I think a neem variant has already just been

introduced and we will be introducing another variant before the year end.

Abhijeet Kundu: So any new introduction under these two brands in the sense a gel based paste or

something like that could we expect something like that going forward.

Sunil Duggal: There is a sort of a gel-based product under Babool; we already have a product like that

in the overseas market so we are just trying to see whether that product has relevance for

India - that is a herbal gel.

Abhijeet Kundu: Okay so in case of Babool it would be that no new platforms. You would be introducing

new variants which would be at new price points you are saying or…

Sunil Duggal: No this would be a higher price point, all the variants are at higher price point then their

mother brands.

Abhijeet Kundu: Okay.

Sunil Duggal: So whether it is Babool Neem or Babool Gel or Babool ABC they would be all at higher

price points because the whole Babool price point it does not support much flexibility in

terms of margins .So Babool is a mid 30 margins product and we do not want to launch a

whole lot of products at 30s.

Abhijeet Kundu: And what could be the revenues from retail if you could give any guidance on that for the

year.

Sunil Duggal: There is a kind of slow down and I think we are still looking at options with regard to the

improvements with regard to the format. So lot of work is being done in terms of you

know there is no hurry as far as ramp up because the cost of ramping up today which may

not be something which we would like to incur. So I would not at this point in time give

revenue guidance.

Abhijeet Kundu: Okay with kind of a lot of renovation and re-packaging coming in across your categories

could we expect higher advertisement expenditure during the year as compared to…

Sunil Duggal: We are now at 13%, we are at around 12%-13%. Our budget for the year is 14%. So it is

a little bit higher, yes.

Abhijeet Kundu: Yeah it would be about 100 basis points higher over last year.

Sunil Duggal: Yes 75-100 bps higher than last year.

Abhijeet Kundu: Okay. In Baby and Skin Care there has been a decline here because you are coming out

of soaps. Any initiatives for growth there by introducing new products into it?

Sunil Duggal: You see Gulabari franchise which just was test launched last year and did well. You see

this will be very important in the current year as we will get the full season in the current

year and also get a national footprint. I am not putting any revenues to the new skin care

initiative, which is a completely different introduction so that is something which we will

be just launching and we don’t like to put numbers.

Abhijeet Kundu: Okay.

Sunil Duggal: But that would be in the next year, if it works the next year that would be a significant

source of revenue.

Abhijeet Kundu: Okay sir thanks a lot.

Sunil Duggal: Okay thanks.

Gagan Ahluwalia: Thank you ladies and gentlemen for joining us for this conference. The transcript of this

call will be available on our website shortly www.dabur.com. Thank you once again and

wishing you a nice evening for the entire Dabur Team.