Zydus Wellness Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Resilient core, weather-hit summer brands: Excluding the summer portfolio, all key brands cumulatively delivered strong double-digit growth, but unseasonal rains pushed seasonal brands down 12%, dragging the headline.
• Comfort Click turns the corner: The acquired business became EPS accretive from Q4 FY26 and continued that trajectory, with management expecting further improvement in net margin, EBITDA and profit before tax.
• Complan defies category gravity: The brand grew for a second straight quarter despite the kids' nutrition category degrowing, driven by segmentation into core kids, toddler and adult nutrition.
• Premiumisation and digital channels are the twin engines: Quick commerce and e-commerce sustained strong double-digit growth, while consumer spending continued shifting toward higher-value products across personal care, beauty and packaged foods.
• What to watch next quarter: Whether the second-half recovery in Glucon-D and Nycil converts into full-quarter growth, the pace of new launch scale-up, and if Complan can sustain momentum against persistent category headwinds.

Summer Portfolio: The Weather Hit and the Recovery

• Glucon-D was flattish: Double-digit growth in West and South was offset by weakness in the East, a highly salient market, where frequent showers suppressed demand; North posted moderate growth.
• Nycil bore the brunt: Performance was significantly impacted by unseasonal rainfall in North and East, its key saliency markets; West and South saw double-digit growth but could not compensate.
• Channel stocking amplified the drag: Nycil also faced cautious retailer stocking and slower offtake because retail inventory built over the prior year was still sufficient, compounding the weather effect.
• Recovery underway but incomplete: The second half of the quarter saw good recovery in growth rates for both brands, and momentum was continuing as of the call date, but it was not enough to recover full-quarter growth.
• Inventory risk contained: Own inventory is not higher than last year and probably a bit lower; with a three-year shelf life, management does not see this rolling over into a next-year issue, and positive growth on a low base was already visible in the last couple of months.

Tarun Arora: "As we speak, we are seeing growth momentum coming back, and we should end up on a more positive note for the remaining part of the financial year, hopefully."

Core Domestic Brands: Premiumisation Driving Broad-Based Strength

• Everyuth sustained strong double-digit growth: The tan removal franchise continued to outperform internal expectations, and the brand's ranking improved from fifth to fourth in the overall facial cleansing category, supported by digital-first consumer engagement.
• Sugar Free maintained category leadership: The core portfolio delivered double-digit growth and significantly outperformed category trends; Sugar Free D'lite sustained high double-digit momentum.
• Nutralite delivered strong growth: Portfolio strength, innovation and AI-driven consumer engagement supported performance, with a high double-digit six-year CAGR.
• RiteBite Max Protein reinforced leadership: Growth was more than double the historical rate, driven by brand building including the FIFA World Cup, distribution expansion and portfolio enhancement; quick commerce remained a key growth driver.
• I'm lite and Cuticolor gained traction: I'm lite delivered higher double-digit growth year-on-year, while Cuticolor witnessed strong demand traction with positive consumer feedback across organised retail channels.
• Digital spend pivot: The share of marketing spends is shifting completely toward digital platforms, where consumer engagement is sharper and consumption is rising.

Complan: Growing While the Category Shrinks

• Segmentation unlocked growth: Management broke Complan into three or four segments; the core kids' segment, the most pressured part of the category, returned to growth through superior nutrition positioning, high-quality advertising, distribution expansion and celebrity endorsement.
• New adjacencies added reach: The brand entered specialised nutrition with Complan NutriGro for toddlers and VieMax plus VieMax Diabetes Care for adults, and extended into ready-to-drink with Complan Powerplay milkshake.
• Core kids' nutrition remains the driver: While growth is coming across segments, the substantial kids' nutrition piece is the primary engine, and management hopes the momentum continues after navigating category headwinds for two to three quarters.

Tarun Arora: "There is headwinds, thanks to what the category faces, but we've been able to navigate now for two, three quarters. We hope to continue that momentum."

Comfort Click: International Expansion and Margin Accretion

• EPS accretion sustained: The business became EPS accretive from Q4 of last financial year and continued to be so in Q1, with momentum expected to persist and net margin, EBITDA and profit before tax all set to rise further.
• Portfolio and geographic expansion underway: Multiple product launches and range extensions continued across key categories; internationally, the company launched the WeightWorld D2C platform in the U.S., entered the Walmart marketplace, accelerated Middle East growth via launches on noon UAE, and established a physical UAE base.
• U.S. entry is early but on track: The U.S. business is very small, growing well and in line with expectations, though management says it is too early to predict whether it becomes a meaningful driver over the next two years.
• Debt refinancing lowered interest cost: The company transitioned from a GBP loan to a euro loan at a much reduced interest rate, generating a saving in interest cost.

Margins, Costs and Financial Levers

• Gross margin expanded: Core business gross margin expansion remained strong during the quarter and was further supported by the significantly higher margin of the Comfort Click business.
• EBITDA improved on a like-to-like basis: Robust improvement in EBITDA percentage in both the core business and Comfort Click led to overall EBITDA percentage expansion of approximately 0.4% on a like-to-like basis.
• Net profit declined 7% on a reported basis: Excluding amortisation of acquired brands, net profit registered growth of 26.5%.
• Input costs remained manageable: Divergent commodity prices and currency movements were navigated through disciplined pricing strategy, improved product mix and continued focus on premium offerings; geopolitical disruptions had limited impact due to proactive mitigation.
• Tax rate visibility: For FY27, the effective tax rate is expected at approximately 25% including deferred tax, with a cash component of 12% to 15%; from FY28 onward, the full 25% rate is expected to be in cash.
• Interest cost outlook: Going forward, effective interest should hover around current levels, subject to the euro benchmark rate; unless there is too much variability in the euro base rate, the effective interest amount will remain broadly the same.

New Launches and Innovation Pipeline

• Recent launches span nutrition and snacking: Complan Powerplay RTD milkshake extended the franchise into ready-to-drink; VieMax Diabetes Care entered diabetes management nutrition; RiteBite Max Protein launched a millet-based wafer bar, Roots with traditional ingredients, Korean flavoured chips and RTDs over the last four quarters, and was expanding the Max Protein cookies range as of the call.
• Near-term focus is scaling, not launching: A couple more launches are planned in coming quarters, but management's priority is scaling up the NPDs already launched, some of which have shown very good consumer and trade response.
• Long-term pipeline robust: The innovation pipeline looks fairly robust for the next two to three years.
• Protein portfolio conviction is broad: Management is driving bars, beverages and snacks with equal conviction, saying each has substantially large possibilities, though it is very hard to predict which part will grow much bigger three years out.

Tarun Arora: "We have couple of more launches in the coming quarters, but I think our focus is the launches that we have done, the NPDs we've done, how to scale them up, and we are quite excited with the possibilities because some of them have shown very good response from consumers and trade."

Guidance & Commitments

Key Metrics