Second Quarter - Dabur India Limited

Richard Liu:Dabur India Limited Q2/H1Earnings Conference CallOctober 31 st , 2008But I would presume that orange is the largest chunk amongst all.Sunil Duggal:Well apple is big, that is also imported unfortunately. Apple and orange are big let us say itaround 50% is at this point in time does not make sense to make in India, so we have 50%or 55% depending upon the mix Nepal content in our portfolio.Richard Liu:So what could be the contingency plan in case such incident happens in Nepal again, I meanconsidering the fact that you cannot keep large stock covers.Sunil Duggal:Let us put it this way. Disruption which is of a temporary nature means that we can shift,we are building capacities which are purely surplus to shift the whole manufacturing toIndia, so we will incur that temporary bleed but at least the business continuity will bemaintained but that is the near term contingency over the next couple of years but then weare seeing higher level of indigenization as far as packing material is concerned, also dutiesare coming down in agri-products as per wage agreements, so India manufacturing willincreasingly become attractive and we will shift manufacturing progressively here, that iswhat the game plan is.Richard Liu:The next thing is with regard to gross profit margin erosion, the amount of erosion you hadis one of the lowest in the sector in this particular quarter at least while we have seen amuch larger amount of gross profit margin erosion even for companies which are in similarlines of business like yours, I mean to the extent you can disclose I mean what is differentabout the raw material strategy in Dabur which has lead to this kind of up rise surprise.Sunil Duggal:I think I would give a lot of credit to our purchase people who once again have risen to theoccasion and managed cost extremely well, but also we have been proactive in priceincreases and we have mapped out whole input cost scenario and taken steps to mitigate itthrough price increases, I think these have come at the right time, they have served toneutralize the raw material impact but a lot of good work has been done by purchase.Richard Liu:Sure but if one excludes that for the time being I mean accounting for volume growth itseems that the raw material price inflation impact for the quarter was only in the range ofaround 6 to 7%, which is pretty low in comparison to what we saw in most othercompanies.Sunil Duggal:If we got lets say a soap or a hair oil company then that would have been much worse it isperhaps little bit connected to the peculiar product mix we have which has a large numberof agri-commodities etc., which did not have the same level of inflation as many others. Soit is perhaps a question of mix but we did adopt very aggressive hedging strategies in theearly part of this year and we went long on many commodities and that helped ussubstantially managing costs.