Zydus Wellness Ltd (NSE: ZYDUSWELL) Q3 2025 Earnings Call dated Feb. 04, 2025
Corporate Participants:
Tarun Arora — Chief Executive Officer and Whole-Time Director
Unidentified Speaker
Analysts:
Karan Bhuwania — Analyst
Madhur Rathi — Analyst
Anshul Jain — Analyst
Kinjal Mota — Analyst
Aiswrya Dave — Analyst
Jay Modi — Analyst
Akshay Krishnan — Analyst
Viren Deshpande — Analyst
Lokesh Gusain — Analyst
Mayur — Private
Mayur — Analyst
Presentation:
Operator
Hello, ladies and gentlemen, good day, and welcome to Zydus Wellness Q3 FY ’25 Results Conference Call hosted by ICICI Securities Limited. [Operator Instructions] I now hand the conference over to Mr Karan Bhuwania from ICICI Securities Limited. Thank you and over to you, sir.
Karan Bhuwania — Analyst
Thank you. It’s our pleasure at to host Q3 FY ’25 earnings conference call of Wellness. From the management, we have Mr Tarun Arora, CEO and Whole-Time Director. We have Mr Umesh Parikh, CFO. I would now hand over the call to management for their opening remarks, post which we can open it for Q&A. Thank you. Over to you, sir.
Tarun Arora — Chief Executive Officer and Whole-Time Director
Thank you, Karan. Good evening, and welcome to the post-results teleconference of Zydus Wellness Limited for quarter three financial year 2024-’25, we have with me a Mr Humesh Parik, CFO on the call. During the quarter, amidst muted demand in the FMCG industry, we have observed green shoots of growth in some of the categories. While rural consumption continued to expand steadily, the urban command — our urban demand remains sluggish. Notably, small unit packs are growing at a faster pace, while the trend towards premiumization remains strong. Inflationary pressures are impacting consumption patterns and driving input costs higher. However, these challenges were managed through operational efficiencies, strategic sourcing and calibrated price adjustments. Meanwhile, organized trade continues to surpass expectations with both e-commerce and modern trade channels experiencing sustained upward momentum. During the quarter, company successfully completed the acquisition of 100% equity shared capital of Natural India Private Limited. As a result, the financial results include about one month’s performance of the natural business.
As a result, as a result, the company recorded a consolidated net sales growth of 12.7% with volume growth of 4.8% year-on-year. Since the acquisition concluded in the later part of the quarter, few weeks of business contributed low single-digit share of top-line and operated at breakeven at breakeven at breakeven at EBITDA level. The Personal Care segment witnessed strong consumer demand, achieving a remarkable double-digit growth of 50.3% for the quarter and continuing its upward trajectory over the last few quarters. At the same time, Food and Nutrition segment recorded a growth of 8.8% for the quarter. Leveraging on company’s strong research and development capability, few more product launches and extensions were introduced this quarter. Neutralized professional range expanded into process cheese category.
Our natural business introduced a fiber bar melting chocolate along with two variants under the fruit-filled bar range, blueberry blast and berry delight as well as protein bar bikes. Despite inflationary pressure, gross margin has held steady with a slight upward trajectory in both sequential and year-on-year basis. This stability is driven by effective hedging strategies, a favorable product mix and well-calibrated price adjustments here are some highlights of the consolidated financial performance of quarter three financial year 2024-’25. Our net sales grew by 12.7% to INR4,508 million. EBITDA grew by 16.5% year-on-year to INR148 million. Net profit-after-tax surged to INR64 million. With that, let me share some of the highlights of the operations for the quarter gone by, which will also cover category growth and market-share numbers as per MET December 2024 report of Nielsen and IQVIA. On the personal care front, continues to outgrow the category growth, maintaining a strong and consistent performance.
The recently launched and charcoal infused anti-pollution range has received a good response in the market. Face crup category has grown by 18.8% at MAT level. Club has maintained its leadership position with 47.3% market-share in the facials club category, marking a remarkable increase of 418 basis-points over the same-period last year. The PLOF category has grown by 29% at MAT level. PLOF maintains — remains the market-leader with a 77.8% market-share, reflecting a 106.7 basis-points increase over the same-period last year. Youth brand holds the fifth position in the overall Fisher Cleaning segment with a 7.2% market-share. Has helped surpass category growth, delivering strong and consistent performance. The pretty heat powder category has grown by 20.3% at MAT level. Has maintained its number-one position with a market-share of 33.9%. On the Glucondi front, Glucondi maintained its leadership in glucose powder category with a 58.9% market-share at MAT level. The glucose powder category has grown by 18.7% at MAT level.
On the compliant front, the nutrition category shows a sign of revival across key metrics. The category has grown by 0.9% and comp plan holds up 4.1% as a market-share at MAT level. Brand continues to maintain its dominant position, holding a commanding 95.4% market-share in the sugar substitute category, which has grown by 6.3% at MAT level. Sugar Fee Green is experiencing a strong double-digit growth driven by increasing volume uptake. In-quarter two of financial year 2025, company extended Delight cookies offering in the domestic market, which has received favorable feedback and continues to build-on it on the light front, the brand launched AI-powered recipe platform to tap into digital food market offering unlimited recipes at the touch of a button through various methods such as uploading a photo to get a recipe or sending a message with a dish name to a WhatsApp number.
Brand continues its upward trajectory this quarter, driven by well-planned digital and on-ground activations. On the natural business, we engaged in the business of manufacturing, research and development, marketing and selling of nutrition bars, cookies, chips and other food products under the brand right back and right back at Max, this business continued to support the brand through digital media, e-commerce activation and consumer engagement at marathons and other events. Looking ahead, we are confident in our strategy to drive sustainable long-term growth on the back of innovation and staying in tune with changing consumer preferences. We expect that the demand setback, especially in urban areas is temporary in nature and anticipate a revival in the coming quarters. Additionally, supportive measures in Budget 2025 are expected to boost consumer sentiment and drive upward consumption trends.
Thank you, and we will now begin the Q&A session over to the coordinator.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] First question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go-ahead.
Madhur Rathi
Hi, thank you for the opportunity, sir. Sir, I wanted to understand sir, what would be the margin differential or how — by what percentage would be the margin lower for smaller parts which has grown at a past period.
Tarun Arora
Typically it varies from category — category to category. Some of the categories actually see a very similar margin, some have a tendency to be lower because it’s a low unit price, so some of the categories will be lower. So on an average, we are able to balance between — across the portfolio.
Madhur Rathi
Okay. And sir, what percentage of our revenue would it come from smaller parts if I consider YTD FY ’25.
Tarun Arora
It’s small, we don’t share those specifics, but it’s building up much faster. In some of the categories like personal care, we’ve seen a very smart uptick of that, which is driven by, like I mentioned, small packs being low unit price, but also a consumer behavior, which is shifting to one-time use packs for freshness and you know experience. So here the share of the smaller tax is much higher than other categories.
Madhur Rathi
Sure, when would we come to you 21 crore in tax-rate. So when will our tax-rate change that.
Tarun Arora
From 27.
Madhur Rathi
Okay, got it. And sir, we had guided that our margin should improve to 17% 18% with some gross margin improvement as well as of operating leverage. So we have already seen some improvement in our gross margin as well as — so when do we expect this to improve to the 15% from 15% to 17% 18% and what kind of operating leverage growth does it require? So right now we are growing at mid-teens. So does it mean that we grow at the mid 20% to improve the margin maybe.
Tarun Arora
So I think you got it right. We continue to focus on two drivers of our journey to our, 17%, 18% EBITDA margins where with the mix of gross margin and operating leverage, you’re already seeing, like you mentioned, gross margins move-up and operating leverage is also moving up. Now the specifics will vary because it’s also a function of the quarter-by-quarter what is happening in the environment. But if you see last four quarters, I think we’ve consistent four — actually more than four quarters, about five to six quarters, our gross margins are constantly going up and we’ve also been very sharp in focus in cutting our operating costs.
The only place where we are investing more aggressively is that since ’21 to ’23, FY ’21 to FY ’23, we saw a gross margin dilution and we had cut some advertising. So we’ve invested part of the gross margins back into advertising, which will not necessarily continue to grow at that same pace. So it will be a balancing of fact where some of the gross margin improvements will — and operating leverage will translate into this. But most other things, we are very conscious of balancing our cost structures as we move forward. So in next, I think six to eight quarters, you should see us touching a much higher-level of EBITDA margins.
Madhur Rathi
Okay. And sir, how is the Q4 of this summer season, I think it’s starting right now. So how is that panning out?
Tarun Arora
So it’s early days. We can’t share any specifics, but we remain optimistic given our last four quarters of how our business performance is, we remain optimistic on our numbers and we’ve been able to demonstrate also over last few quarters.
Madhur Rathi
Okay. Just a final question from my side. So in FY ’26, what would be our ballpark range of guidance where we see our revenue and margins going?
Tarun Arora
Yeah. Double-digit growth. I think we remain double-digit growth on our top-line and EBITDA growth to be or faster than our top-line growth.
Madhur Rathi
Okay. So thank you so much and all over you.
Operator
Thank you. A reminder to all participants, you may press start and one to ask questions. The next question is from the line of Anshul Jain from M Tiger Consultants Private Limited [Phonetic]. Please go-ahead.
Anshul Jain
Thank you so much for this opportunity. I actually had two questions.
Operator
Can you first speak a little louder, please?
Anshul Jain
Yeah. I actually had two questions. So first one would be, can you give some insights on the sauces condiment category like heins?
Tarun Arora
We don’t sell. We do a third-party manufacturer for them, which is a very small portion of the business. So it’s not something we can share. I mean, we don’t have anything. We don’t — it’s not part of our business model.
Anshul Jain
Like any broad high-level sense on the size or margin or growth for this category?
Tarun Arora
Okay. No, we are not into — that’s not our business. Ketchup is not our business, sauces, condiments, that’s not our business. I think we are just third-party manufacturer for them. That is — which is continuing since the acquisition, which is a very small portion, it not be meaningful for any number. We are just a third-party doing work for them, small.
Anshul Jain
Okay hello. Sir, that’s all I have asked. Thank you.
Tarun Arora
Thank you.
Operator
Thank you. The next question is from the line of Kinjal Mota from Banyan Tree Advisors. Please go-ahead.
Kinjal Mota
Hi, sir. Sir, I have two questions. First question is on the acquisition that we have done of. So if you could give some flavor on what would be the sustainable margins that you see moving forward once it turns profitably.
Tarun Arora
I think we can’t say specifics, but what we can tell you is, prior to acquisition, we saw 3% to 5% kind of margins, but with synergy and scale and our work with them, we obviously expect the margins to grow in to a much higher-level and we believe FY ’26, we could have our EPS accretive for this business.
Kinjal Mota
Okay. And sir, second question is given that our beauty and personal care segment is of very good growth in last couple of quarters. Given the market is really suffering a lot on that part. If you could, if you could elaborate that what has driven this sort of growth. Is this a new product that have come in or what has changed because has been there for so long and scrub and, they’ve always been the market-leader and had a good chunk of market-share. So what has led to this kind of?
Tarun Arora
So I’ll just say that we have now reported the segmental numbers on Personal Care for now seven quarters, if I remember correctly. And you would see that we have consistently delivered a good double-digit growth. That has gone up further specifically in recent quarters because we’ve been very consistent with our strategy on building the categories, especially building around the spaces where we are market leaders, both in and. Particularly since you asked about it, scrub and peel off, we are the market leaders and as significant market leaders, our task is to grow the categories. And that focus on category-building is helping us not just expand the categories, but also help us improve our share. So we are getting the benefit of both of them coming together. And that really is helping us size up the whole personal care space.
Kinjal Mota
Okay. Okay. Got it. That’s all from my side. Thank you.
Operator
Thank you. A reminder to all participants, you may press char and one to ask questions. The next question is from the line of Aiswrya Dave from iThought PMS. Please go-ahead.
Aiswrya Dave
Hello. Yes, we can hi, sir. So I wanted to ask you about your revenue-share from all your brands. If you could give me a breakup of all — like the revenue shares coming from your brand the segment share.
Tarun Arora
Unfortunately, we do not share brand-wise revenue-share.
Aiswrya Dave
Okay. So one question I had regarding neutral light, I would love to know where are these markets where neutralite is being performing good, like which are neutralized markets?
Tarun Arora
So there are two or three spaces where neutralite is performing extremely well. One is the food service, where we are able to sell a lot of focus on both fat spreads. We’re also building and now launching more products like cheese like that I mentioned in my conversation. The other space we are seeing a good traction is the CSD market where we are able to sell this well, especially nutralite. And these are the main markets. We are also seeing good traction now when the quick commerce is picking-up the cold-chain. We are seeing a good traction there, though it’s still very small, but we are seeing good traction on that as well.
Aiswrya Dave
Okay. So it is mentioned that you have certain B2B, you know, like you sell to restaurants, if I’m right.
Tarun Arora
Like food services are largely what is also said called as Hotel restaurant catering. So it could be a small thaba, sandwich guy, it could be a large five-star hotel, could be a catering house, cloud kitchens, whole lot of them, all varieties. There are various segments within that foodservice that we cover.
Aiswrya Dave
Okay. So why I’m asking this is because since I neutralite brand is like the neutralite is also from Gujarat and Gujarat has everywhere, like if I see a small Dhaba, AP, I get — I see people making food in a move, for example. So I just wanted to know what kind of — you know what is the different thing that we are doing to you know for distribution that we are doing good with some other competitors. What is the different thing?
Tarun Arora
I think this needs a little bit more conversation, but substant to say that if especially on a fat spread, if Amul launches a product away from the dairy into a their brand delicious, they obviously think we are doing something meaningful impacting their business, otherwise why would they move-out of dairy and get into a butter substitute with another brand. So that shows that we have a decent reach through our cold-chain, which is pan-India and we are able to do a good job in terms of reaching out to foodservice channel.
Aiswrya Dave
Okay. Sir, one last question, which like is it doing really good in the Southwest or Northeast? Where-is it more?
Tarun Arora
It says across India, we are a pan-India distribution. We have more than 20 core courtrooms servicing across the country, across states. From Northeast to Kashmi to Gujarat to right down to Kerala.
Aiswrya Dave
Okay, great. Thank you so much for answering my questions.
Operator
Thank you. The next question is from the line of Madhur Rathi from Counter Cyclic PMS. Please go-ahead.
Madhur Rathi
So thank you for the opportunity on for them. Sir, I wanted to understand when I look at our market-share in most of the categories that we are, we are number-one player. So that would mean that it’s — it will get consistently difficult for us to protect our market-share as well as difficult for us to grow. So I wanted to understand how are we planning to either grow these segments or get market-share from other players? And a complementary question would be, sir, why are we not focusing on launching extension brands or extension products of these brands that we have rather than going and acquiring brands and then turning it around. So these are my crushing. Hello.
Operator
So your voice is not audible. The management line got disconnected. Please wait till then we connect up the management oh, we have connected the management. Over to you, sir.
Tarun Arora
Yeah, Mr Rathi, I think you had mentioned your question, but could you — if you could — because we lost you in-between when you were saying that why are we not launching extensions with you?
Madhur Rathi
Yes, sir. Yeah, I’ll do that. And sir, I wanted to understand like in most of our brands, either we are market-leader or we have a majority of market-share. So that would mean that it’s difficult for us to grow this because the market is growing at a certain amount of space for us to grow at a faster pace as well as to protect our market — our market-share., I wanted to understand how are you protecting this or what are the strategies that you are following? And the second thing was, sir, rather than going and acquiring the brands with lower-margin and then turning it around, why are we not launching extension brands.
Tarun Arora
So thanks for asking this question. You’re right and that’s a good observation because if you look at it, most of our brands with an exception of one is actually a market-leader. We are — most of the brands are market leaders. So therefore, you will see that all our conversations are focused on category growth and category development rather than just market shares. A good example will be on, say, Glucon D, where I’m focusing on how do I grow the category, which is about INR1,100 crores to INR1,500 crores rather than worry about a 1% market-share gain because for us, that’s a bigger opportunity. We have been able to demonstrate and just now somebody was asking us about what is driving personal care.
Over the last seven, eight years, we have demonstrated since we focused on scraps where we are significant market player where we’ve grown the segments and also strengthened our shares. So our focus remains on priority one to grow the segments we play because we do believe that penetration levels are still much lower than what the opportunity is and therefore, therefore expand through increasing penetration and also drive consumption. Having said this, the second opportunity obviously does exist in terms of extending our brands into spaces which are adjacent to us. A good example let me take you through is. Now till five to eight years back was only a fat spread brand, which was basically a butter substitute. Over the years we’ve been able to extend it into other spreads like mayonnise, chocolate spread, we’ve also been able to extend it into dairy range where we have jee, we have butter and we are also launching cheese.
So clearly, the brand has got into a much wider presence and much larger-scale. Having said this, there are opportunities where we are not able to extend everything. So acquisition comes like we have explained even in earlier calls more from a point-of-view as a bolt-ons where we believe there are gaps, which the external opportunities can fill much faster than we’ll be able to extend. But be assured that we are quite focused on growing the categories and segments. And therefore, our investment is largely focused on category development, followed by extending — making our brands much larger. So leverage our brand presence, which is much larger than the category that we already operate in.
A good — another example will be sugar-free extending into chocolates and cookies, which is what we are doing. And within the sugar-free portfolio of the sugar substitutes, we also launched building that segment. So a lot of our work goes around this. And acquisition is clearly a bolt-on gap filling. And there also we are very focused on being should I say, financially prudent where we see an opportunity of bottom-line expansion is where we are looking at.
Madhur Rathi
Got it. Yes, that answers. So just a follow-up question. Like what I understand is like launching extension brands, what we are doing at, but sir, the market is already penetration. There are a lot of in either chocolate or. But when we think about the sugar frequency, maybe there are not. So how do we decide on which extension brands to follow? Yeah, sir, that’s that was my last question.
Tarun Arora
Largely we look at differentiation, what do we bring to the table? If we are launching a new extension, how will we differentiate in an already crowded market? I don’t think we can shy away from the fact that market is going to be crowded. So I can’t shy away from that. So if I have a differentiation, I have a new to the market, I will do it. A good example is while we are doing a lot of extensions, we realized we could launch a blended sugar and that’s all we have right now, we had launched a sugar light, it got into some trademark issues, which will resolve at a period of time, but we launched, which is a completely new space, no players and we are doing category-building there as well.
But existing spaces like cookies and chocolates, I think there are very few sugar-free — sugar, I mean low-calorie players and we believe there is by replacing sugar with sugar-free, we are able to bring some differentiation and finally, we have to deliver on the category codes of taste and experience. So we clearly look at extendable — what is extendable within our portfolio and how do we bring differentiation?
Madhur Rathi
Okay, sir. Thank you so much and all the best.
Operator
Thank you. The next question is from the line of Jay Modi from EML. Please go-ahead.
Jay Modi
Hello. Am I audible, sir?
Operator
Yes, sir.
Jay Modi
Yeah. Sir, I have a question around Foods business. So while we’ve been growing really well in our other portfolio, how do you look at growth in our Foods and Nutrition segment because, see, if we were to consider the base — lower base of Q2 and Q3, the growth would be around 3% or 4%. So how are we looking to address the growth for this segment?
Tarun Arora
So no, you’re talking about how you’re calculating lower-growth.
Jay Modi
So basically my question is that if I were to adjust for the lower base in Foods and nutrition, right, Q2 had a Q2 of last year had a decline of 1% and Q3 a decline of 5%. Yeah. On that base, we’ve grown at around 10% and 9% respectively for Q2, Q3, right? So if you were to adjust for lower base, the growth would be around 4%, 5% for this segment. So I just wanted to understand your views on this segment and the growth that we should look-forward to.
Tarun Arora
So there are two or three factors when we look at and utrition. I think one of the factors that really impacts us on the growth from our food and nutrition part is that we have a low-growth sizable brand, which is basically the nutrition drink compliant, which impacts our mix. Now we have learned some various initiatives that’s building up, but that’s a larger category issue, which we are tackling and building on. So that’s one thing that impacts us. And that I think having said that, we have few things which do very well. For example, D becomes a very small portion of this business and a lower-growth sizable brand. So therefore, there is — I think I don’t have to look at in isolation in 1/4, but at an overall level, if you look at moving averages, I think it’s improving and moving faster.
But obviously, there are opportunities for us to do to keep working at it in food and nutrition. And since it’s a larger — it’s a sizable portion of our business. We do aspire to improve our growth. It is also something which has got impacted by the consumption because of the inflationary impact on this category where the consumption has got impacted. So we hope that we will build further on it as you move forward?
Jay Modi
Yeah. And also, sir, the inflation for this — so for HFD category, the — the input costs have been fairly stable for past two quarters. So have you seen any improvement in-demand with stability of prices?
Tarun Arora
So yeah, it’s a still — if I look at our moving average thing, it’s a still a low, very low-single digit is what Nielsen is reporting if you — as I mentioned earlier. And therefore, yes, we’ve seen improvement in the category growth, but they are still very small. And at MAT level, Nielsen is still reporting a 1% kind of growth, 0.9%, as I mentioned in my conversation earlier. So we’re seeing improvement. What I’m seeing improvement actually is better traction on organized channel and which is working for us.
So if I look at e-commerce, we are seeing a good traction. We are seeing a good traction in non-trade as well. In the general trade, we are finding that the low-price packs are driving much faster, which we are a little bit, you know, held back-in our effort on because we are also conscious of a profitable mix of our portfolio.
Jay Modi
Okay. Okay, understood. And sir, I know it is early days, but any read-through for protein, chips and cookies that we’ve launched, how has the demand been acceptance been on?
Tarun Arora
So we are quite should I say positive and optimistic on this category. There are good tailwinds given the fact that we are operating in the protein range and Max protein as a brand fits in very well for it. So we remain optimistic and bullish about the prospects of it. We’ve now had it for a couple of months and we’re seeing a good buildup. We’ll have the full-quarter results at the end of this — once we report our Jan — I mean quarter-four Jan-March results and we’ll be able to share more color to this.
Jay Modi
Got it. And sir, last bookkeeping question. Has we recorded any consultant expense for the quarter and nine months? And if so, could you get the numbers if possible yeah.
Tarun Arora
So we have reported consultant expense, but we won’t be able to share that numbers less because specific engagement confidentiality. Yeah. But we have to record those.
Jay Modi
Okay. Great. Thank you, sir.
Tarun Arora
Thank you.
Operator
Thank you. A reminder to all participants, you may press charge in one to ask question. The next question is from the line of Akshay Krishnan from ICICI Securities Limited. Please go-ahead.
Akshay Krishnan
Hi, sir. Thanks for the opportunity. So FY ’25 to date, it’s been a great quarter-on-quarter with double-digit growth. But given the current macroeconomic condition, how do you see the company plan to maintain or sustain the growth momentum in the coming quarters? And second thing is, is there any specific market or a segment that we are targeting on to see expansion opportunities to contribute meaningfully to the growth lever down the line?
Tarun Arora
So we do believe that current momentum on growth will continue. And our belief is because if you look at last six to seven quarters, I think Personal Care has shown a consistent growth. So across both the brands in personal care has shown consistent growth. Glucond D, also over the last three to four years, if I see, I can tell you that it’s a double-digit growth. So it’s a function of season, but in a short-term that impacts, but over two to three years, there is no concern about growth. Also continues to move forward in the right direction. We had challenges in FY ’24, largely in the early part of FY ’24, which was related to sweetness both from WHO and some trademark issues, which have got reversed and which have been addressed by us and we’ve seen a positive momentum back on the brand on the portfolio of sweeteners between sugar-free, sugar-free delight and.
And also has seen at least a positive movement. It’s not to my satisfaction, but yes, we have work to do. So across our portfolio, we’re seeing a good reason to believe that we will continue the momentum. Plus our acquisition also is showing a good tailwind in terms of moving forward. So my belief is our double-digit growth is something we can sustain over next few quarters and build further on it.
Akshay Krishnan
Perfect, perfect. So on the margin side, so we’ve been sustaining our gross margin despite the commodity price inflation. Now are there any strategic pricing action that is on the pipeline and how are we mitigating the cost so that we maintain this margin level. Any strategic supply-chain back-end integration that’s coming into play or what is the efficiency improvement that’s getting up so that you can ramp-up your expectations of EBITDA margin reaching up to 17%? How is the play and action that’s working around in this particular segment.
Tarun Arora
So as a company, I think we are quite focused on playing both back-in front, the full value chain on this. Typically being a leader and premium player across most of the segments that we operate, we are able to price up our products and drive the margins individually. Sometimes the product mix can be not necessarily in our favors what we saw in-between the years of ’21, ’23 range where they were — I mean, the whole commodities across-the-board went shot up and it was no way we could escape that. But otherwise, we are well-equipped to hedge ourselves when some commodities go up. It could be through mix of buying forwards wherever we see opportunity to do a replacement opportunity of various things that we are doing in terms of formulations, buying forward and pricing up to ensure that our gross margins are protected.
So FY ’21, ’23 was really a tough time across-the-board for the industry. But as I being the market-leader, we have a decent pricing power across our portfolio. So we are — we remain focused that we have to keep moving up our gross margins as a part of strategy to build-up.
Akshay Krishnan
But is there any pricing that’s coming into play in the coming quarters?
Tarun Arora
Yes. So there would be a price increase across multiple products wherever we are seeing the costs going up. Largely commodity-led products. We are taking wherever required price increases. Even the last quarter, if you see, our volumes are 4.8% versus 12.7% overall sales growth — revenue growth. So clearly there is a price space that we work on.
Akshay Krishnan
Okay. One final on the e-commer or the quick commerce channel. That’s becoming a very important space, especially for all the FMCG brands. And you did allude that it’s a strong growth area that you’ll have to focus on. Now what will be the total revenue that the digital channel is actually contributing to our company as a whole? And second thing is, how are we leveraging the digital transformation through AI or data analytics so that you get some consumer insights, which will help you in improving your distribution efficiency at an hold.
Tarun Arora
So digital AI and data, I think we use at multiple levels. So first of all, from the online business perspective, about 10% to 11% of our revenue comes from selling in online platforms. And that’s been growing at a much faster pace than the rest of the business and we are quite conscious of the fact that since the consumers are shifting to this, we should be ahead of the curve and typically we find most of our market-share higher in these channels and therefore, we are embracing it very fast. But we don’t stop here because if you have to win in the online marketplace, we must engage with our consumers in various formats. So the share of digital marketing, online marketing as an overall investment has gone up significantly over last couple of years. And even the TV channels are struggling today and we find a lot of shift happening to online marketing.
Having said this, we are using AI in various forms. One such example is where we’ve launched share where consumers can engage any idea — any food product they want, they have a picture, they have an idea, ingredient, anything, we are able to recommend them recipes of what to do and simultaneously also support with some neutralized product in their — in that recipe. Having said this, we’re also using AI or not AI, but digital data and analytics on a recommendation engine for our salesmen at the last mile. So almost 1,500, 1,600 of our salesmen at the last mile who service more than 6 lakh outlets. They work on handles which are where they pick-up orders.
Now there is a recommendation engine based on data analytics, which suggests them what they could sell more in the shop given a certain profile of outlets. So we’re using a data analytics engine to build-on that as well. So we’re using data analytics, AI, all those things as we build forward. We are also building a strong back-end in terms of dashboards, which is again will rely on a lot of digital data that we are pulling together. So as an organization, we are focused and we believe our decision-making business will shift a lot more to data and digital world and we are well-equipped to be ready for the future for that.
Akshay Krishnan
Perfect, perfect. Thanks and good luck.
Operator
Thank you. The next question is from the line of Viren Deshpande from Alphapeak Investments. Please go-ahead.
Viren Deshpande
Hello, sir. Hello.
Tarun Arora
Yes, sir. Yes, we can hear you.
Viren Deshpande
Okay. Good evening, sir. Congratulations for good results. I would like to know what will be our effective tax-rate for the year because if you take-in this quarter because of a comparatively lower profit, our tax-rate has gone up by 35% or all. But what will — what will be the effective tax-rate for the entire year, ’24, ’25?
Tarun Arora
So yeah, it all depends on the amount of EBITDA and profit that we are going to generate the profit before-tax. But certainly for partners, you would have noticed that we have recorded deferred tax liability in the range of about INR3.5 crore to INR4 crore, right? So that’s the deferred liability and that is the reversal of the earlier gains that we have accrued in the books of account. So that’s the reversal of deferred tax asset, which is happening now and about INR3, to INR4 crores you can assume has a deferred tax liability getting recorded in the Q4 as well in. Because in nine months, the non-cash it’s a nor it’s a non-cash item, we don’t get to really paid around of that.
Viren Deshpande
No, that is true. But in the nine months, if we see the tax, it is only INR10.5 crore if you take the net of deferred. So INR10 crores on 85 crores.
Tarun Arora
Whatever has been accrued so-far, which you are seeing at INR10 crore, what I’m saying is that we are going to offer more about 3.5 to-4 in next quarters.
Viren Deshpande
Okay. So our effective tax-rate will continue to remain low for the last quarter also.
Tarun Arora
So it all depends because the quarter-four is very heavy in terms of the sales and EBITDA as a profit before-tax. Yes. So the effective tax-rate will come down significantly. The amount-wise it will remain the same about INR3.5 crores to INR4 crore, but the effective tax-rate will come down.
Viren Deshpande
Naturally because of the higher profit before-tax. Normally our Q4 and Q1 are the constituting almost 85% to 90% of the total profits of the year. And they will continue to be there. There is — is there any way we can even it out with some sort the product-line which can be addressing that issue.
Tarun Arora
We would love to, but I think to change the structure of business takes a much longer time. We are keen, but we will see. It will take some time. But for now and next in short-to-medium term, I don’t see that changes.
Viren Deshpande
Okay. Thank you and all the best. Thank you, sir.
Operator
Thank you. The next question is from the line of Madhur Rathi from Counter Cyclic Investments. Please go-ahead.
Madhur Rathi
Hi, sir, do we sell our to FMCG companies or pharma companies?
Tarun Arora
Or you tell us we believe we are largely FLCG company, but yes, sir.
Viren Deshpande
So my question was regard — my question was regarding a company called BlueJet Healthcare that does high-intensity. So they earn a very-high margin, sir. So my question was regarding that. Do we plan to sell this or are we selling them currently?
Tarun Arora
Don’t understand. In fact, we serve every channel, including its you know, GTMT e-commerce as well as we serve B2B as well from part, a very small part, but we serve most of the channels. Yeah, we have food, food service, we have CSD, we have grocers, chemists, even a cosmetic outlet, food outlets, all sorts of so we have a — actually our variety of outlets, the retail environments service is wider than many FMCGs. Typically you’ll find out because most FMCGs are very limited because of our diversity of portfolio, we have more FMCG than many other.
Viren Deshpande
Okay. And sir, what would be the B2B portion of our overall sales as well as modern trade and general trade.
Tarun Arora
So B2B how would you define B2B? You’re saying food service if you’re looking for food service which is largely the Hurrica channel, that would be about 8% to 10% for greens.
Viren Deshpande
Okay. And for the institutional kind of clients, that would be additional or —
Tarun Arora
Also about it is not a. It’s not — it’s just not institutional clients. It is a lot of — I mean, these are businesses, therefore, we Call-IT business B2B, but there is also a distribution part to it. There are wholesalers, vendors who buy from us and sell to some of these institutions, some of the small outlets, Dabas, small bakeries, food stores, a lot of variety of spaces who are making food and use neutralite as largely neutralized as ingredients and even large hotels in cloud kitchen also.
Viren Deshpande
Sir, I’m trying to understand that between our general paid trade business, between modern trade, e-commerce and quick commerce, which channel has the highest-return on capital, which is the lowest credit period and the highest-margin so if you could tell us in each of these segments, how does our profitability differ?
Tarun Arora
We — that would not be possible for us to share. What I can tell you at a high-level is that our general trade business and our foodservice business is serviced through distributors who are on same-day payment, I mean cash-and-carry kind of system. We don’t have any significant credit on a routine involved. The e-commerce and business, since we deal directly with the banners, large organizations, we have a credit system which is standard to any terms of rate that we would have, whether it’s Reliance, and Flip, we deal directly with them or through their sellers. So there is a standard thing. So those are things. But beyond that return on investment and margin profile, I think we’ll not be able to share this point.
Viren Deshpande
So I’m not asking a specific number, if you could just tell us that whether the profitability overall that the company enjoys with each of these channels, sir, for example, if the profitability is higher than general trade, then sir, the mix is shifting towards e-com and modern trade. So that means that over the long period, the profitability is expected to decline. So that’s what I’m trying to understand different.
Tarun Arora
Yes. So all I can explain to you is cost-to-serve are fairly comparable because general trade also while may have supposedly higher profitability, but there is a cost-to-serve because there’s large number of people involved to serve it while e-commerce has fewer. So it’s also how we manage it, but cost-to-serves are reasonably similar across channels as we find out.
Unidentified Speaker
And in the evolved channel like e-commerce, we also try to sell the big pack packs with higher costs. There we balance the profitability. So we largely a cost-to-serve level, we are — with the profitability, we are quite balanced across.
Viren Deshpande
So fair to assume that going-forward, as the proportion of e-com and modern trade increases, the working capital intensity of the business will increase though the margins might not get impacted that much.
Tarun Arora
Yes. Yes, yes. That’s how we see it. That’s right. That’s right. That’s right. That’s how what we are dealing with.
Viren Deshpande
Sir, but on the other hand, general trade, I think we are more-and-more we are doing direct selling to the retailers and setting out the distributors, so will that not balance out the working capital increase on the e-comm and side?
Tarun Arora
So I think the market is shifting towards more organized trade-in the urban India, while we are expanding our general trade and we are continuing to work with distributors. So I mean, we’ll have to see how the market moves, but we are responding to the consumer’s purchase behaviors and we see that shift towards organized aid to be a secular trend and that will continue to move at least in medium-term.
Viren Deshpande
Great, sir. Thank you very much and best thank you.
Operator
The next question is from the line of Lokesh Gusain from BOB Capital. Please go-ahead.
Lokesh Gusain
Hi, thanks. So my question is around gross margin percentage. Just a follow-up on that. On how you have been able to offset the inflation to maintain or improved gross margins. So you mentioned buying forward replacement opportunity, formulation and pricing as the key drivers. Are you able to — I understand a breakup won’t be possible, but are you at least able to rank them in the order of which ones have helped you the most and which ones down the rank?
Tarun Arora
So I think one of the important thing is when the costs go up, we look to increase the pricing. So that remains the number-one lever for us more often than not, only in the categories where we are not able to be the price driver or there is a significant problem in the market, which send them happens, but sometimes does happen. We usually drive the pricing as the first lever. We also look at what we can do from a sourcing point-of-view if there are opportunities or reformulation part. But reformulation is a very long-drawn process. So unless there is a fundamental issue, we don’t go back to changing structural issues, but largely it’s led by pricing. Of course, there is a product mix issue, there is a measures — cost measures. Cost measures in terms of our actions, they also follow-through.
Lokesh Gusain
And in terms of cost efficiencies, do you have a certain — like some SMCG companies have a certain annual run-rate like some quote it as 2% of sales, they take-out 2% of sales equivalent of cost every year from their operations. Is that — is — do you also have a similar internal target?
Tarun Arora
Yeah, we have a fairly step targets taken by manufacturing and supply-chain teams, both procurement and manufacturing teams who work on cost-efficiency and improving our costs on a regular basis. In fact, we’ve — Zydis Wellness does it consistently, but Zydis Group also has a very strong program, which we work with them and we’ve been constantly been able to build our capability around that. So these targets are taken by the teams on a consistent basis.
Lokesh Gusain
So they are like a standard thing that you follow like some companies follow 6% of sales, some follow 2% of sales on an annual basis to take the cost-out just so they have some lever against inflation as and when it comes or they can use that efficiency to kind of get more volume share. So just trying to understand if you have a similar target and what it is, if you can share that —
Tarun Arora
I cannot share a specific target, but I can tell you that there is every year we plan certain numbers to come through a, better efficiency, better cost takeouts, which work across various levers, which could be in terms of vendor negotiation, vendor develop — new vendor development, various — I mean, these are standard things that most procurement teams will do. There is a yield improvement, there are so many other factors that we do, which work on — which contribute to this. So there is a clear targets taken by the team, which have gone into several level of details and do not work at just high-level of saying 3%, 5% with the opportunities, 8%, why would I do a fixed 5%.
So I would look at every year as a part of the process, we go into depth of what are the opportunities, identify and work to a plan. Some are aspirational targets also taken sometimes because things that we don’t have a visibility, but the business needs it, we do that as well. But we don’t have just a fixed number and just deliver on that. But look at opportunities specific to each space that we work with.
Lokesh Gusain
No, that’s most understandable. Very clear. So just one more follow-on. You mentioned you’re using buying forward like you’re buying your raw materials in advance. So is there a company-level policy like how much in advance do you buy?
Kinjal Mota
Category to category. For example, when we buy palm oil, Malaysian Palm oil Board you know shares the forward numbers for several quarters. Now if the procurement team with some advice does feel forward, we will do it. And that too also the seller should be available. It’s not just palm board because we buy refined palm oil. We do some cover. So it’s specific to categories that we are commodities, we are buying we have been opportunities in the past where we said the price was right, we’ve covered for a full-year also, not on this specific, but other category. So it’s an opportunity and understanding led. But we are — we do have product-wise policies of what we would cover and what we would not, which is based on our learning and experience and some advice that we get from expert groups.
Lokesh Gusain
Understood. So just one more clarification. So when you’re buying your raw materials, is that sourced from the local — like the Indian vendors or you directly buy it from overseas, for example, farm oil requirements.
Tarun Arora
So I think we are clear that we are sizable wherever required, we work with global vendors also. But like you mentioned, palm, no, there is no point buying from international vendors because we buy refined palm oil, international vendors would be selling crude. So refined has to be bought locally. So I mean, these are things which matter step — product-to-product. And therefore, we try to buy from some of the best sources available, which have a strong capability. And wherever global is required, we are able to work with the global partners as well.
Lokesh Gusain
Understood. Thank you. Appreciate it.
Operator
Thank you. The next question is from the line of Mayur [Phonetic] from Wealth Managers. Please go-ahead.
Mayur
Good evening, sir, and thank you for taking my questions. Am I audible and clear?
Operator
Yes, you are.
Mayur
Yes. Yes. Thank you. So sir, just two questions. One is on the margin side and if you have given some answer on that, sorry for repeating it. Just to get some clarification again. When we look at the margin performance over September and December quarter, relative to the September and December of previous year. So we understand there is a good seasonality. We understand it is a weaker quarters. So keeping that in mind, this question is, so it’s not that we don’t understand. We understand the seasonality for both these two quarters as we. The margin improvement or has it largely flattish and the year-to-date, which is a nine-month performance what’s a margin improvement of more than 200 basis-points is largely come in the June quarter, which was the — which is normally a very strong quarter for us. And March is also very strong quarter for us.
So what I just wanted to understand is the fact that the margin performance in September and December is lower despite we are comparing year-on-year. Is it only because of the lower seasonality and product mix issue and this should — the improvement should come back-in the March quarter, again in June quarter or there is the large part of that improvement is now behind us as far as the whole year is concerned and we are heading into — the low-hanging foods are behind us and we may be heading into some kind of a on a margin stability as we go-ahead.
Tarun Arora
So let me ask you, are you talking about operating margins or gross margins?
Mayur
Sir, while the focus is on the EBITDA margin, but if there is a lever on the gross margin also, you can — because gross margin have been improving and now they are getting stabilized. So maybe if you can along combine that to the gross margin, it will be okay. But the primary question largely is on the operating profit.
Tarun Arora
So let me answer at three levels, gross margin, EBITDA margin and net profit. So first of all, if you look at it almost for six, seven quarters, except for last quarter, which is flattish, we have constantly improved our gross margins like-for-like over previous year. So gross margins, we’ve been very, very focused on driving it back to the levels and I think October, December numbers would reasonably match October, December ’21 kind of levels. So we’ve been able to recover back what we lost between FY ’21 and ’23. So our focus remains on improving our gross margins because that’s the first product call-in terms of improving our profitability and we are as an organization, quite focused on driving that. Despite inflationary challenges, so it’s a journey which continue. We believe there is some more margins to pull out of — if there is a stable inflation, we could manage to build further on it. But we’ll have to see how much our actions play-out versus the environment.
Now looking at EBITDA margins, I think you will find that last two quarters, our EBITDA margin growth is faster than our top-line growth. So there is a small movement consistently up on our EBITDA margins versus the earlier year. Yeah, one would like to see more, but like you also mentioned, it’s small quarter. So you can’t really show a significant shift, but our EBITDA margin growth has been faster and leading to a small improvement on EBITDA margins as well. Net profit is a different piece altogether because it’s a function of two or three non-operating variables coming into the piece which is largely impacted by tax — a tax and that impact whatever is happening is because we have a deferred tax liability, which plays out. But otherwise from an operating piece, we are quite focused that our margins — operating margins will continue to improve.
So beyond EBITDA, in fact, because our — largely the debt has also come down over the coming years. So we believe our — we’ll keep getting better at it and therefore you should see some further improvement.
Mayur
The point was the fact that March — March and June is a good quarter. The improvement which we have seen in the past, last March and June should broadly continue because we will get the benefit of seasonal mix and the operating. It’s not that the — all the low-hanging fruits are behind and we will — we may see stagnation of the improvement.
Tarun Arora
No, no, we do believe that there is still scope for us to continue. We believe our journey is still not completed where we are stabilized, it’s still going to go up. Sir, one more question, it’s in a slightly different direction. I understand — we understand Kurt for so many years in-market that our market does is not in the hands of the — in terms of the investor returns is not in the hands of the management fully. But just to give a broad point and I’m sure you will also be sensitive to it and if you can add some understanding for help for long-term investors. You know, we have seen last five to four, five years have been investor returns from our side has been lower and yes, there have been reasons we understand there is no one. But the point I was trying to understand is from twofolds.
One is just when you know we have started to improve the performance, the overall market sentiments are down. So that much more pull we will require in terms of our execution because the past five years has been anyways low for us in terms of investor wealth creation and significantly lower compared to even many other peers. So that is on one-side, do we believe that we will be able to recover this and the pool will be — which is required and expected will be there. And secondly, a slightly more specific question. Has been the private-equity kind of or no, I don’t know too much about it, but they have been on the selling side. And given the large stake which we had, there is a continuous selling pressure which some which has been there. So just a small — we are not trying to understand that strategy and not — but given the large holdings, is there any kind of understanding that by when this is expected to complete and you know what any directionally — anything which you have any color? Because I’m sure given that take of holdings, there would be some understanding which — just as a — directionally, nothing specific on-strategy and company, but just directionally, how does it play-out? Sure. Let me answer the first question. I think you rightly said management has that much limited degrees of freedom. If I look at trailing-12 months numbers for us from a top-line point-of-view and not just last one year, but even a three-year — we’ve been growing — top-line has been growing much faster than most of the other peers that you could bunch up as a group. We do believe that our — the expectation from the management is to improve performance and therefore, we are quite focused on driving growth ahead of the industry. So we are — I would look at it not just one year trailing-12 months, but even a three-year, if you look at it, our growth rates have done reasonably well. ’23 was a hard year because of seasonality, but one and three, if you look at it, we are reasonably sorted. Secondly, having said that, within that profitability, the journey which we’ve seen five, six quarters, we hope that we’ll continue. So we appreciate your point-of-view and we believe that as a management, we — the expectation from our critical stakeholders, the shareholders, specifically is to have a better performance and we are quite focused on that. And that at least from our execution and our intent, you will see those things playing out. The results will start to speak for themselves. Having said this, moving on to your second question, I think is a large investor who came on-board at the time of acquisition. They run the full-cycle from their fund point-of-view. We not specific to their plans, so they will take the call when they have to. So I hear the selling pressure but I also hear some investors also talking about liquidity of our shares. So I can only say that you will have to reach-out to them to understand, but beyond that, we would not be to any of those things. Thank you and wish you best — wish you all the best and hope to continue to see the continued superior execution as we go-ahead.
Mayur
Thank you, sir.
Tarun Arora
Thank you. Thank you, sir.
Operator
Thank you. That was the last question for the day. I now hand the conference over to the management for closing comments. Over to you, sir.
Tarun Arora
Thank you very much. We’ve had a good run over last few quarters. With government also showing signs of taking, you know, supporting consumption, there is a movement on rural. We also believe that our actions are in-place. We are hopeful that we’ll continue this double-digit journey and execute well on our existing brands as well as new product portfolio. So look-forward to talking to you again after this quarter and the full-year performance. Thank you. All the best and take care. Thank you.
Operator
[Operator Closing Remarks]