Jyothy Laboratories Limited (JYOTHYLAB) Q4 FY23 Earnings Concall Transcript

Jyothy Laboratories Limited (NSE:JYOTHYLAB) Q4 FY23 Earnings Concall dated May. 03, 2023.

Corporate Participants:

Sanjay Agarwal — Chief Financial Officer

M R Jyothy — Managing Director

Analysts:

Manoj Menon — ICICI Securities — Analyst

Senthil Manikandan — ithought PMS — Analyst

Gaurav Jogani — Axis Capital — Analyst

Harit Kapoor — Investec — Analyst

Aviral Jain — Siguler Guff — Analyst

Tejas Shah — Spark Capital — Analyst

Karan Bhuwania — ICICI Securities — Analyst

Ravinder Sikand — GSS — Analyst

Khush Gosrani — InCred Asset Management — Analyst

Naysar Parikh — Native Capital — Analyst

Amit Purohit — Elara — Analyst

Dhiraj Mistry — Antique — Analyst

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Abhijeet Sinha — Pi Square Investments — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Jyothy Labs Q4 FY ’23 Conference, hosted by ICICI Securities. [Operator Instructions]

I now hand the conference over to Mr. Manoj Menon from ICICI Securities. Thank you, and over to you, sir.

Manoj Menon — ICICI Securities — Analyst

Hi, everyone. A wonderful good afternoon, good evening to you. I trust you’re having a great day. Representing I-Sec, it’s our absolute pleasure to host the results conference call as usual of Jyothy Labs Limited. The Company is represented today by Ms. M R Jyothy, Managing Director and Mr. Sanjay, CFO.

Over to the management for the opening remarks, and after that, we will open the floor for Q&A. Thank you.

Sanjay Agarwal — Chief Financial Officer

Thank you, Manoj, and very good afternoon to all of you. Welcome to the Conference Call of Jyothy Labs.

We’ll be discussing the performance of the Company for the March quarter, as well as for the full year ended March 31, 2023 with all of you, and we’ll follow it up with question-and-answer session. So, a very quick snapshot of the results, all of you must have seen our results by now. So, we have delivered a topline growth of 12.8% for the March quarter, and 13.2% for the full year FY23. This is a consistent double-digit growth now for over 10 quarters, as well as a double-digit growth for the full year on a two-year as well as on a three-year CAGR basis. So, a very healthy performance across all categories and channels for us.

So we continue to build for the scale in the business, which will give us additional economies of scale. On the margin side, despite of the entire industry facing high input inflation, we have been able to grow our EBITDA by 57% for the quarter and 26% for the full year. Our EBITDA margin for the quarter stood at 14.8% versus 10.5% in the previous quarter, same time. So, a good recovery on the margins perspective.

On the business side, we are in much stronger footing than ever. Our direct reach now has crossed 1.1 million outlets, and growing further. We have strengthened our distribution with the aid of technology by implementing Botree, which is the most advanced distributor management system, which will further enhance the efficiency. So overall, the focus is on execution to build scale, and we’ve been consistently gaining market share across brands. We have now nine celebrities endorsing our brands. Hence, we are committed for a higher allocation of our resources towards brand building initiatives. We’ve also been investing in scaling our manufacturing capacities.

Recently, we’ve added a detergent powder line at our existing Pithampur plant in Madhya Pradesh. On new launches in this year, which is April ’23, we have also launched three new variants of Margo Neem Naturals, with the three variants of lime, jasmine and rose. We believe that this will significantly enhance our Margo franchise, and also increase our personal care share in the overall portfolio. So, we’re excited with these new launches.

On the urban/rural, both continued to do well. Rural, yes, due to inflation, it has lagged a bit of the urban growth, but we believe that rural markets are expanding more quickly than urban markets, and we will continue to focus on the rural growth to build a long-term sustainable advantage for Jyothy Labs.

With a healthy P&L growth, our balance sheet too has been stronger than ever, with the Company being debt free, i.e., the gross debt is nil, and we have a cash balance of INR283 crores as of March 31, 2023, and the working capital days at 13 days. So, that’s a quick snapshot on the P&L and the balance sheet.

So, if we look at from the future perspective, and outlook on that, we are optimist with our growth plan, and working towards building a more agile, resilient, and market-focused organization, and with that for FY23-24, we’ll focus towards a double-digit growth on the top line, which will further strengthen our business franchise.

In terms of the categories, fabric care is doing well, with 20.1% growth this quarter and a full-year growth of 29%. The growth is supported by strong value proposition, which we have in our detergent brands with a very, very strong driver for relentless focus on distribution.

We forayed as you all know in liquid detergents both in Ujala IDD and Henko, which have shown very much — much better growth. Also, our mid-priced detergent brands, More Light and Mr. White, have also witnessed good demand. In the post-wash category, we are focusing on building usership to drive category growth that’s more for the Ujala fabric whitener. Our dishwash category, both our Exo and Pril continue to do well with steady growth across all SKUs, especially the [Indecipherable] INR10 in the bar category, and this, again, is due to our unique offerings and the distribution rights we have taken. Both Exo and Pril, they have established themselves as a clear brand of choice among consumers. There is an increased level of engagement we have with consumers, especially focused on the digital medium for this category. If you see for Exo, it has reached a highest ever market share of 13.8% for the calendar year ’22, so very good growth for us.

In HI segment, extreme weather conditions did impact the sales for the year. We have seen the first three quarters not so — not being so great. This quarter, the growth has been — the quarter has a flat growth, so much better than the previous quarters. We are hopeful that the next year turns out to be better, and we’ll continue to focus on our liquid vaporizers, and promoting coils as a safer alternative to the illegal incense sticks with the consumer.

Finally, our personal care segment, which is primarily Margo franchise, with its natural benefit proposition has delivered a good growth, and to raise the growth, we also have a new brand ambassador, Rashi Khanna. And in this year, April ’23, we have also introduced three variants within Margo Neem Natural soap in lemon, jasmine and rose.

So with that, to summarize, we’ll continue to focus on the volume-led top line growth, and given the strength of our brand, distribution strategy, and further strengthening our direct reach, rural footprint, and using technology for enhancing our sales efficiency, and getting higher resources for brand building and manufacturing capacity. So, we are very optimistic that and entering this FY ’24, we want to accelerate the growth and the key mantra here is going to be — which has been a key focus is on execution, execution, and build a higher scale for our business, which we have demonstrated in this last year financial performance also.

So with this, I finish my opening remarks. Happy to answer any questions or clarifications all of you may have. Thank you very much.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Senthil Manikandan from ithought PMS. Please go ahead.

Senthil Manikandan — ithought PMS — Analyst

Hi. Good evening, and thanks for the opportunity. My first question is on the Margo franchise. So, in opening remarks, you highlighted that you brought in a new brand and also new variants. So, what would be your medium-term strategy for Margo?

M R Jyothy — Managing Director

Yeah, so our existing Margo Original Neem has been doing well. We have clocked a double-digit growth on that, and we’ve introduced three new variants, which is called as Margo Neem Naturals. This is to induce more consumers into the Margo franchise, and to obviously grow the Margo personal care contribution to the overall business.

Yes, we have taken Raashi Khanna. It’s after long that we have taken one celebrity for Margo, and she is known in the south, and also foraying into the north, which is the Hindi world and a young star appealing to a younger generation with Margo Neem Naturals. So, obviously, our aim is tied to growth on Margo in double-digits in the coming future.

Senthil Manikandan — ithought PMS — Analyst

Okay. Secondly, on the laundry business that we have recently merged with our core business, so what could be the — again, the medium-term strategy for the laundry business?

Sanjay Agarwal — Chief Financial Officer

Yes, sir. So, the business is now tracking gold INR50 odd crores every year. And for the last few quarters, it’s been running on a breakeven, and this year, we’ll take it more as a year of consolidation on the top line, and build the business with profitability. So, that is where our focus will be this year on the laundry business.

Senthil Manikandan — ithought PMS — Analyst

Okay. Just for the last question, I think your press release also mentioned that you have now moved to net cash level. And so, from the capital allocation point of view, if you can just give some highlight, so how will the Company will go about over the next three to four years?

Sanjay Agarwal — Chief Financial Officer

Yes, sir. So, obviously, the business needs cash and we’ll be conserving some cash for future growth initiatives. And obviously, dividend would be one way how we share the profits with the shareholders, and the balance will depend on how — what opportunities we get in the future on the inorganic side. Yeah.

Senthil Manikandan — ithought PMS — Analyst

Thanks for the opportunity, and all the best for the entire team. Thank you.

Operator

Thank you. The next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead. Sir, your line has been unmuted. Please go ahead.

Gaurav Jogani — Axis Capital — Analyst

Yeah. Hello? Am I audible now?

Sanjay Agarwal — Chief Financial Officer

Yeah, Gaurav, we can hear you.

Gaurav Jogani — Axis Capital — Analyst

Yeah. Sir, thank you for the opportunity. Sir, my first question is with regards to the tax rate for the quarter. The tax rate for the quarter is higher at around 27% odd. So, one, if you can help us out why this has been higher this quarter, and how should we build the tax rate going ahead?

Sanjay Agarwal — Chief Financial Officer

Yeah. So, if you look at it on an annualized basis, it was going to be around 20% for this year also. And for the future — for the next few years, also, you can consider 20%. This quarter because there have been some asset sales so therefore, the tax rate for here has been higher, but for the full year, it is at around 20%, and we expect it to be in a similar range in the next few years as well.

Gaurav Jogani — Axis Capital — Analyst

Okay. Okay, sir. Sir, my next question is with regards to the margin. We have seen good sharp margin expansion, especially on the growth side this quarter. So, given where the RMs are right now, and if we sustain at the current levels, how should we expect the gross margins to move ahead?

Sanjay Agarwal — Chief Financial Officer

So tough one because little difficult to target because commodity prices are still very volatile. So, as we speak, we believe that the exit GM, or the exit EBITDA for the quarter, so the exit EBITDA for the quarter is 14.8%. I think, we’ll keep that as a benchmark for now, and we will see how things evolve from hereon.

Gaurav Jogani — Axis Capital — Analyst

Sure. And last question is with regards to the — if you specifically consider the pricing action taken by the market leader in detergent space, so do you see any increased competitive activity here? And also, if you can help us out with the volume, and the pricing growth for the quarter?

Sanjay Agarwal — Chief Financial Officer

Yeah, sir. So this quarter, the top line growth is 12.8%, volume is 3.3% and the balance 9.6% is value.

Gaurav Jogani — Axis Capital — Analyst

Sure. Sir, if you can help us out with the competitive intensity because of the price cuts taken by the leader in the detergent space, is this expected to have any material impact on the growth rates going ahead?

Sanjay Agarwal — Chief Financial Officer

See, competition is always good. We are doing very well in the detergent category, any — not — anything significant is what we have seen, but we’ll follow how the market behaves, and what the consumer wants. Accordingly, we will also take our pricing actions.

Gaurav Jogani — Axis Capital — Analyst

Sure. Sir, just last thing, have you also taken up any price cuts in the detergent segment?

Sanjay Agarwal — Chief Financial Officer

Nothing material, sir.

Gaurav Jogani — Axis Capital — Analyst

Okay. Thank you, sir. That’s all from me.

Sanjay Agarwal — Chief Financial Officer

Thank you, sir.

Operator

Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead.

Harit Kapoor — Investec — Analyst

Yeah, hi, good evening. So, just a couple questions, firstly, was on the target for double-digit growth for FY ’24. So, we are now seeing — we are now in a phase where kind of pricing is still — is coming off. As you mentioned, you’re now in single digit in terms of price growth, and it’s only likely going to keep trading going forward. In that construct, one will require kind of volume growth to come back to maybe mid to high single digits to hit your target number. So, just wanted to get a sense of how confident you are that over the next few quarters, you can kind of drive that, given that last three quarters you’re still there in the 2% to 3% range?

M R Jyothy — Managing Director

Yeah. So, going forward, we are looking at a double-digit growth. And for us, it will — it will mainly come from — also from distribution. We are also going to increase our focus on increasing the number of outlets, and also drive the volume growth. So, it will be an action from — both from a distribution, and volume-led growth. Pricing will be, it depends. As of now, no more price increases that we see, so majority will be from volume and distribution growth.

Harit Kapoor — Investec — Analyst

Right, right, right. And on the distribution side, we are at currently 1.1 million on direct. Any targets that you can share with me on next one or two years or next year or next two years where you are looking to kind of get the direct number up to? And within that also, which geographies are we kind of looking at, is there a greater non-south focus on? So, just some color on these factors.

M R Jyothy — Managing Director

So, those are internal targets, so that we would — wouldn’t want to say that out, but yes, we are looking at the similar kind of growth, which we have taken in the last three, four years. We will be on that growth path increasing number of outlets, while for us, it’s a pan-India thing. The distribution growth will come from all the — the entire country. It’s not any specific focus in any zone or area. It will be an all throughout pan-India growth.

Harit Kapoor — Investec — Analyst

Got it. And then, just one last question on distribution was that — is this more direct reach-led only, expansion-led only, or will it also be a mix of both direct, indirect going into the next say one or two years?

M R Jyothy — Managing Director

See, our primary focus is on going direct.

Harit Kapoor — Investec — Analyst

Okay. Okay.

M R Jyothy — Managing Director

Yeah.

Harit Kapoor — Investec — Analyst

Got it. Got it. If we move on the innovation side, so we’ve seen after a while some new things happening, especially on the Margo side. Just wanted to know now that you have some more money given that gross margins have seen an uplift of almost 46%. Do we see continued step-up on the E&P side? And if yes, which potential areas can we see new things happening, if at all that’s the plan?

M R Jyothy — Managing Director

Yeah, there will be brand spends. We believe in brand investment, and last year, we had introduced two liquid detergents since we see a trend from consumers shifting from powder to liquid, and we have — the last two launches have been received well in the market and it continues to do so. And now the latest is Margo, so we will be spending on — and we believe in innovations where we can definitely spend and make that bigger. Hence, you will see innovations, which are relevant innovations in that sense. So then, going and doing many at once and not able to do justice, we believe in launching something, and then backing it enough by brand spend.

Harit Kapoor — Investec — Analyst

Got it. Got it. Got it. And one last datapoint question was, within laundry, how large now is — if you can give us percentage also in terms of the overall home care segment, how large would the mid-sized brands like Mr. White and More Light be as a percentage of the home care business — of the fabric care business versus what it was maybe two, three years back?

Sanjay Agarwal — Chief Financial Officer

Sir, are you asking for us, or are you asking for the care industry?

Harit Kapoor — Investec — Analyst

For you guys. On Mr. White and More Light, how large would Mr. White and More Light be now, Sanjay, versus maybe three years back or pre-COVID or whatever kind of end-to-end datapoint you can share, in terms of percentage or whatever?

Sanjay Agarwal — Chief Financial Officer

So, Harit, they were pretty small if you’re asking three years to two [Phonetic] years back and today both the brands are INR100 crore plus.

Harit Kapoor — Investec — Analyst

INR100 crore together?

Sanjay Agarwal — Chief Financial Officer

I think each one of them.

Harit Kapoor — Investec — Analyst

Each one of them INR100 crores? Got it. Got it. Got it. Okay, that’s it from me. I’ll come back in the queue for more. Thanks.

Operator

Thank you. The next question is from the line of Aviral Jain from Siguler Guff. Please go ahead.

Aviral Jain — Siguler Guff — Analyst

Hi, Sanjay, Jyothy. Congratulations on a very good performance. My first question was on the dishwash category. Given the under-penetration, and the growth rate that we had seen till last year it was in mid-teens, and now it has fallen to less than 10%, so is the category growth have since then slowed down, or has there been any price versus value change? Just wanted to understand, are we — from the disclosures, it doesn’t look like that we are losing market share, so just wanted to understand what’s happening.

M R Jyothy — Managing Director

No, we are in line with the market growth. So, there is no issues there, just a temporary thing here and there, but dishwash has been growing, and it will be in the coming year also it will be — we foresee a double-digit growth in the coming year as well. And our market shares remain intact. There’s no issue.

Aviral Jain — Siguler Guff — Analyst

And how is some of the expansion on the post-wash side panning out, Crisp & Shine was being launched outside of Tamil Nadu and Kerala?

M R Jyothy — Managing Director

Yeah. So we have taken it to AP. And to our surprise, that’s taken us like more than it’s been received well. So we are hoping to do good numbers in that market as well. So Crisp & Shine has clocked the highest ever in the last. It has come back to obviously post-pandemic and has crossed those numbers as well, so doing well.

Aviral Jain — Siguler Guff — Analyst

And there was one brand extension to West Bengal also, which was Crisp & Shine as well or it was something else?

M R Jyothy — Managing Director

No, it was a detergent, Ujala IDD.

Aviral Jain — Siguler Guff — Analyst

Okay. And how has that come along in terms of results?

M R Jyothy — Managing Director

That’s fair. It’s just a year there. While West Bengal is a loyal — brand loyal market, it will take its time, but initial response has been good.

Aviral Jain — Siguler Guff — Analyst

Okay. And Ujala IDD is better than Mr. White and More Light and it’s significantly…

M R Jyothy — Managing Director

Sorry?

Aviral Jain — Siguler Guff — Analyst

I’m asked about the scale of Ujala IDD because it’s largely Kerala-centric, if I’m not wrong.

M R Jyothy — Managing Director

Yes, yes.

Aviral Jain — Siguler Guff — Analyst

Sure. That is all.

M R Jyothy — Managing Director

Yeah, yeah.

Aviral Jain — Siguler Guff — Analyst

Okay. That’s it from my side. Thank you.

M R Jyothy — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead.

Tejas Shah — Spark Capital — Analyst

Hi, thanks for the opportunity. Couple of questions from my side. First on increasing reach as a key growth driver. Just wanted to understand post-demonetization, we are not seeing that kind of delta for industry, not only for us, but for industry also coming from increasing reach. So pre-demon, there used to be a very big thumb rule that 10% growth in reach will actually lead to at least 3% growth in revenue or volume, but we not seeing that. So just wanted to understand, in the recent past, whatever expansion that we would have done, what percentage of growth we can attribute to reach increase?

Sanjay Agarwal — Chief Financial Officer

Yeah, So Tejas, one is, so a company of our scale at INR2,500 crore top line, having a distribution reach of 1.1 odd million is a very decent number. Now, a lot of this investment what we do in building this distribution is also futuristic. So, it’s not fair to say whether it is going to give us 3% or what because these outlets which we add do take 18 months to 24 months to stabilize and give good results. But yes, the objective is to build that because building this infrastructure takes time and it’s a hard work and that’s what we believe that, especially in the rural area, urban market is generally being captured by established companies and by us. So what we are doing is, these are future investments and which is what we are doing both on the technology side of it and on the footprint, increasing the footprint. So yes, it will add to our distribution as Jyothy said in the earlier point that the future growth, in spite of all the challenges, we will aim for a double-digit, which will come in from initiatives like these of adding direct outlets.

Tejas Shah — Spark Capital — Analyst

Sure. No, I was just trying to understand, has this growth driver lost, let’s say, in the last decade in terms of how it used to result in immediate growth uptick. We are not seeing for the industry itself, so when we actually kind of again next three years or two years, we go on that part. Based on the recent evidence that you would have seen in your number, does it kind of revive growth aggressively? I can — I understand that there is a gestation period of this growth there. But let’s say what you would have done four years back, has it turned out to be very good growth, source of growth in the last two years, or it has kind of — it is still not showing numbers because of the volatility we are seeing in the macro environment?

Sanjay Agarwal — Chief Financial Officer

Yes, yes. Two years is a fair time. And the reason why we get that confidence of adding more manpower and focusing on adding that distribution is because we are seeing the return on the investment, what we are doing in building this infrastructure for the first 12 months to 18 months do give us very good results in next, whatever, next year onwards. So, it’s all in fair time and we are seeing good results, and henceforth, we are using distribution as a strong lever for us to accelerate our growth.

Tejas Shah — Spark Capital — Analyst

Sure. Very clear. Second question is, what percentage of our current turnover comes from modern trade?

Sanjay Agarwal — Chief Financial Officer

Both modern trade and e-commerce put together is around 10%.

Tejas Shah — Spark Capital — Analyst

Okay. And what would be our concentration in Top 3 chains in the country on modern trade side?

Sanjay Agarwal — Chief Financial Officer

The concentrations on Top 3 chains?

Tejas Shah — Spark Capital — Analyst

Yeah. Top 3 or 5. I just want to understand the exposure what we have to Top 2, 3 chains in the country in modern trade.

Sanjay Agarwal — Chief Financial Officer

[Technical Issues] difficult for me to put a number, but I mean, the first Top 3 chains [Technical Issues] larger share for us.

Tejas Shah — Spark Capital — Analyst

Okay. So the follow-up question to this was that we are seeing a very relived, aggressive and then enthusiasm from all this modern trade chains in terms of launching that private labels across now and they always used to keep the cards close to their chest, but now, there seems to be a lot of aggression across categories. So just wanted to know have you seen increased hype for shelf space versus — other brands was always there, but now, you have to fight for shelf space with the private labels in some of the sales or you’re still not seeing that pressure building up, at least in the current observation that you would have picked up?

Sanjay Agarwal — Chief Financial Officer

So, in the past also we have seen it, in the last year also we have seen it, and if the results are there with you, yes, these will already — developments in the market and we are ready for it, and we believe we’ll be able to have a — our growth irrespective of these challenges, which will keep coming up.

Tejas Shah — Spark Capital — Analyst

So you are not sensing any increased intensity on private label side versus past two, three years?

Sanjay Agarwal — Chief Financial Officer

Definitely, it is there. I’m not saying it is not there. But then, on businesses [Technical Issues] challenges or opportunities, so we are ready for that, and we don’t see much of an issue for us.

Tejas Shah — Spark Capital — Analyst

Perfect. That’s all from my side, and thanks a lot.

Sanjay Agarwal — Chief Financial Officer

Thank you, sir.

Operator

Thank you. The next question is from the line of Karan Bhuwania from ICICI Securities. Please go ahead.

Karan Bhuwania — ICICI Securities — Analyst

Yeah. Hi, good afternoon, sir. Sir, if you could help us with some color on how your growth has been in terms of rural versus urban and are you seeing any recovery from the rural markets in terms of volumes?

Sanjay Agarwal — Chief Financial Officer

So Karan, as I mentioned earlier, rural is a long-term growth strategy for us. And we sell around 40% of our portfolio in rural market. There is a gradual improvement in the growth with the rural market and we believe the initial challenges of the slowdown, what we have seen, they are bottoming out and we see good growth, both in urban and rural for us.

Karan Bhuwania — ICICI Securities — Analyst

Also if you could talk about the liquid portfolio for dishwash [Technical Issues] your laundry segment, how [Indecipherable], and if you could quantify, what are the [Technical Issues]?

Sanjay Agarwal — Chief Financial Officer

Karan, I’m not clear with the question. What — you said the share of liquids in the detergent portfolio?

Karan Bhuwania — ICICI Securities — Analyst

Detergent and both dishwash also, dishwash segment — dishwashing segment.

Sanjay Agarwal — Chief Financial Officer

Yeah. So we don’t give a specific number of a liquids portfolio in the detergent or dishwash, but for detergent, definitely, it is quite small as of now because both the liquids, Ujala and Henko liquids were launched just 12 months to 18 months back. So, we still have to gain size, and yeah that’s it.

Karan Bhuwania — ICICI Securities — Analyst

Thank you, sir.

Operator

Thank you. The next question is from the line of Rabinder Sikand from GSS. Please go ahead, sir.

Ravinder Sikand — GSS — Analyst

Good evening. My questions are three. One, considering that you have just — as you just mentioned that you have just launched liquid detergents, is there any move to launch detergents in pods, which is quite common outside, and is actually being sold by quite a few online retailers in India? Is there any move to pods?

M R Jyothy — Managing Director

Nothing right now, sir.

Ravinder Sikand — GSS — Analyst

Nothing right now. Okay. The second question is a space that has not been addressed, but with the advent of dishwashers, the popularity of dishwashers in India, considering that there is only one — actually one dishwash liquid and tablet available in India, is there any move for you to move into this space. Any — I mean, there is no Indian company that I know is manufacturing that any. Have you considered moving into this space.

M R Jyothy — Managing Director

Sir, right now the dishwasher penetration in the country is way, way miniscule and we will do that at the right time.

Ravinder Sikand — GSS — Analyst

So there is no move right now to venture into that?

M R Jyothy — Managing Director

Nothing right now. We need a particular size and this thing — [Technical Issues] this thing to launch it. Our focus is right now to grow the existing liquid and the bar market.

Ravinder Sikand — GSS — Analyst

Okay. Thank you. I think that’s all I had to ask. Thank you very much.

Operator

Thank you. The next question is from the line of Khush Gosrani from InCred Asset Management. Please go ahead.

Khush Gosrani — InCred Asset Management — Analyst

Yeah, hi, thank you for the opportunity. I wanted to ask, since we have been gaining market share across our key product categories over the last three years, is the trend are sustainable going ahead as well or is competition increasing for us?

Sanjay Agarwal — Chief Financial Officer

So, definitely, we will be increasing our market share. We aim to grow or accelerate our growth, and which would mean in most of the categories, we should be doing better than the industry growth. So, we are hopeful. And all the efforts — all the asset points which we spoke will help us in gaining market share. We have done it in the past. I think gives us enough confidence to build those market shares for each of our brands better in the next few years as well.

Khush Gosrani — InCred Asset Management — Analyst

And in terms of distribution reach, what is our strategy over there. We used to be — right now at 1.1 million direct reach, which used to be 6 million. So how should we think of the direct reach distribution going ahead, and overall distribution strategy for us as well?

Sanjay Agarwal — Chief Financial Officer

Yeah, I think on the previous question, Jyothy mentioned that there are internal targets for us to drive our distribution to higher numbers, but as we speak, also the number is good enough for INR2,500 crore top line, what we have. So, we will deliver — we will take all efforts to build an efficient distribution, or increase the distribution from 1.1 million to a higher number, in the years to come, and it will be pan-India basis, and we’ll continuously gain or get benefits out of that distribution.

Khush Gosrani — InCred Asset Management — Analyst

Okay. Sure sir. Thank you. I’ll get back in the queue.

Operator

Thank you. [Operator Instructions] The next one is from the line of Naysar Parikh from Native Capital. Please go ahead.

Naysar Parikh — Native Capital — Analyst

Yeah, hi. Thanks for the opportunity. First question is can you give us a way to — how much is for the year, how much have you done in North, West and South and Kerala if you can give some indication?

Sanjay Agarwal — Chief Financial Officer

Well, I didn’t get the question. On which brand are you asking or on a pan-India basis?

Naysar Parikh — Native Capital — Analyst

No, on a pan-India basis, and also our strategy of growing in North and West for the house brand name. So, on a pan-India basis, if you can give that number?

Sanjay Agarwal — Chief Financial Officer

So, the South is 40% of our business and non-South is 60%, and there are brands, which we are focusing. It depends on each brand to brand, and it’s a much larger question. It depends on each brand to brand, what are the geographical expansion, and the focus markets we have taken. And it depends on the opportunity what we are seeing, the competition. And so — but South remains a good market for us. There are some brands like Maxo where we are much stronger in North and East. So, it depends on each brand to brand and — but we have brands across India, and the distribution is also equally distributed across India.

Naysar Parikh — Native Capital — Analyst

Sorry, if I can, I think North and West still what I last understood was around 25%, 30% for you, which is obviously much lower versus most of the competition. So in that context, what was the contribution of North and West to your business and what steps both from distribution and branding are we taking to increase that share at least at par with what the industry is?

Sanjay Agarwal — Chief Financial Officer

Yes, sir. So we don’t give any numbers for each zone, and states, and area every quarter. But having said that, yes, both North and West offers us very good opportunity and we are working towards it to have better growth in these markets as well, alongside all-India penetration what we have.

Naysar Parikh — Native Capital — Analyst

Got it. And the second question is just on the modern trade channel. What would be the share of modern trade for us now and any further progress over there in terms of penetration or share reach or something?

Sanjay Agarwal — Chief Financial Officer

Yes, sir. So modern trade and e-commerce, put together is broadly 10% of our total business and we are doing good, both modern trade and e-commerce, specifically, there are very good plans for us and both the categories are — both the channels are doing well.

Naysar Parikh — Native Capital — Analyst

Okay. Okay, fine. That’s it Thank you so much.

Sanjay Agarwal — Chief Financial Officer

Thank you.

Operator

Thank you, sir. The next question is from the line of Amit Purohit from Elara. Please go ahead, sir.

Amit Purohit — Elara — Analyst

Yeah, hi. Thank you for the opportunity, sir. Just on the distribution side, I wanted to understand, you said the technology investments and more fleet on the Street, so we have some 1,000 plus sales team. Has that increased or what is the outlook on that? Just wanted to know the current number. And second also on the rural initiative, how do you define rural for you and what is the number of villages count reached now versus the prior sale and what’s any plans if you could share?

Sanjay Agarwal — Chief Financial Officer

Yeah. So Amit, to your first question, yeah, so on the manpower, yes, it’s a natural — it’s a — every year, they will be addition of the sales team and which will be in line with the geographical expansion, which we are taking, and the increase in distribution what we’re doing. We don’t give a breakup of each zone and the number of people we are adding every quarter or every year. But as we said, the overall growth will be led by — will also have the element of adding manpower and increasing our distribution. Sorry, if you could just repeat your second question, I just forgot.

Amit Purohit — Elara — Analyst

So I mean, and on technology, what do you mean by the technology initiatives, investing behind technology and the distribution?

Sanjay Agarwal — Chief Financial Officer

Yeah, see, one of the important things was to further enhance our sales distribution and the channel, there is a fast DMS system called Botree, which is what we have implemented and we believe that that will make the schemes management much simpler for our sales team and for the channel partners, and henceforth, we have invested in it and we have been able to do that, which will give us benefits over a long period of time. And on the last question, we reached 100% of the villages, about 10,000 population.

Amit Purohit — Elara — Analyst

Okay. And any outlook or maybe what was that probably three, four years back? Is that increased or it will increase now?

Sanjay Agarwal — Chief Financial Officer

So reaching 100%, up to 10,000 population, again, it’s a initiative which we have taken few years back and it will keep improving because there is a cost to go much deeper into it. And as we scale our business, yes, we will go to further down. But as we speak, I think we believe we can sell more lines to these outlets which we are currently servicing. That itself will give us decent growth for many years. So we’ll rather increase the efficiency of the current distribution and keep adding more outlets for future growth.

Amit Purohit — Elara — Analyst

So I mean, so broadly — and I’m sorry, but what would be the share of rural in our space now?

Sanjay Agarwal — Chief Financial Officer

So currently, it’s around 40%.

Amit Purohit — Elara — Analyst

Okay. And it is safe to assume that the direct reach initiative would be both largely more towards the urban side or it will be well balanced?

Sanjay Agarwal — Chief Financial Officer

It will be both urban and rural as well.

Amit Purohit — Elara — Analyst

Okay. Thanks.

Operator

Thank you. The next question is from the line of Dhiraj Mistry from Antique. Please go ahead, sir.

Dhiraj Mistry — Antique — Analyst

Yeah, hi. Thanks for the opportunity. So first question is regarding A&P spend. Now that we have started witnessing softening of some of the raw material prices and hence improvement in gross margins, what would be the A&P spend as a percentage of sales going ahead?

Sanjay Agarwal — Chief Financial Officer

So right now, it’s around 7%, 7.5% for now. It will be in the similar range, and we will see how much benefit we are going to see in the GM going forward and accordingly we’ll take a call on that.

Dhiraj Mistry — Antique — Analyst

Okay. Okay. And some couple of bookkeeping question that in this year, we have seen that depreciation expense going down. Can I know the reason for that?

Sanjay Agarwal — Chief Financial Officer

So, depreciation, I think, in the consolidated business — consolidated revenue, depreciation charge remains the same across the years.

Dhiraj Mistry — Antique — Analyst

What would be the effective tax rate for FY ’24 and ’25?

Sanjay Agarwal — Chief Financial Officer

It should be in the range of around 20%.

Dhiraj Mistry — Antique — Analyst

Okay. That’s it from my side. Thank you.

Sanjay Agarwal — Chief Financial Officer

Thanks.

Operator

Thank you. The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead, sir.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Yeah, thanks for giving me the opportunity. I have a couple of questions. First, can you give us the volume growth excluding the HI business for this quarter?

Sanjay Agarwal — Chief Financial Officer

We don’t give each — ex whatever other businesses. But overall, as I said, it’s — for the quarter it’s 3.3% volume growth, and for the full year it’s 3%.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay. And for HI, you said that you expect this year to be better. So, can you just elaborate on that what exactly your strategy would be to regain the growth back in the HI business?

Sanjay Agarwal — Chief Financial Officer

So, first, instead of giving the volume, I can still attempt to answer your question on the value side of it. So, for the full year, the business has grown by 13.2%. If we exclude the HI business, then it would have been 17.8%. Now, to answer your question on HI, see we have seen challenges which have been more seasonal issues, which impacted us much more in the core markets in which we are present. There is nothing much which we can do other than hoping that the coming year, the season will be a little better.

Second is the illegal incense sticks which has impacted the category. I think we, as the industry is trying to educate the consumers on the health hazard which comes with the usage of illegal incense sticks. So, while we are doing that, we are also trying to work towards coils to ensure that the consumers use coils and understand the health hazard of the illegal incense sticks. Beyond these measures, and continuing to focus on our liquid vaporizer as a strategy. I think all these three things, if they all work well, this quarter we have seen a better numbers than the past three quarters, and that gives us the confidence that, yes, hopefully, we’ll have a better year the next year.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay. Okay. Okay. Thanks. Thanks.

Operator

Thank you. The next question is from the line of Abhijeet Sinha from Pi Square Investments. Please go ahead.

Abhijeet Sinha — Pi Square Investments — Analyst

Good evening, sir. Just wanted to understand what are the growth drivers that we’re expecting in the next two years? What should be helping us grow our volume, as well as any hikes?

Sanjay Agarwal — Chief Financial Officer

So we’ve spoken the — so we’ll be engaging more with the consumers, we’ll be investing more behind the brands, expanding the distribution network. The good thing about our portfolio is its status across different categories, and at different various price points. So, I think, these all things makes us believe that we have a portfolio which is again, of essential goods. We are seeing good demand across both urban and rural portfolio, as well as in the modern trade e-commerce. So, these are few things which gives us enough confidence that yes, we should deliver higher growth, and win more market share in next years to come.

Abhijeet Sinha — Pi Square Investments — Analyst

Sir, if you could throw some highlight on this quarter’s taxation. I think it’s about 28%, which is quite higher significantly compared to our 18% to 20% that we were keeping in the previous quarters. So, was there some one-off thing, the tax?

Sanjay Agarwal — Chief Financial Officer

Yeah, yeah, no issues. This quarter — see, this year we had some asset sales on which the tax rate is going to be higher, but if you annualize it for the full year, the tax rate is at around 20%, and even in the next two to three years also you can assume the tax rate in the range of around 20%.

Abhijeet Sinha — Pi Square Investments — Analyst

Perfect. So, we don’t go into that whole 25% lap? We stick to the 20% odd rates right?

Sanjay Agarwal — Chief Financial Officer

Yeah.

Abhijeet Sinha — Pi Square Investments — Analyst

Perfect, sir. Thank you so much.

Sanjay Agarwal — Chief Financial Officer

Thank you, sir.

Operator

Thank you. I would now like to hand the conference over to the management for closing comments.

Sanjay Agarwal — Chief Financial Officer

Thank you all. I think it’s been a great discussion this afternoon. We look forward. If you have any further questions, please do reach out to us or to I-Sec team. Thank you once again and have a good evening. Thank you. Bye.

Operator

[Operator Closing Remarks]