Marico's September Quarter: Gross Margin Up 600 bps, Ad Spend Up 44%, and Parachute's Price Was Cut

Marico's consolidated revenue from operations rose 13.0% (our arithmetic) to ₹3,897 crore in July-September 2026, on restated comparatives and 10% domestic volume growth. Material cost rose about 1% (company table), so the gross margin, revenue less material cost, went from 42.1% to 48.1% (our arithmetic): the company's "600 bps". Advertising and sales promotion rose 44% to ₹451 crore, taking back about 250 bps of it (our arithmetic). The company credits softer copra prices and a favourable portfolio mix; Parachute Rigids grew volume 13% on revenue growth of about 1% after price reductions to pass on cheaper copra (the company also cites the anniversary of earlier pricing actions). The filings do not say how much of the gain is mix and how much is cheaper copra, which is the difference between a position and a cycle.

The idea in one sentence

If a company's main raw material falls in price, every producer's margin widens; what separates a moat is what the leader does with the saving. Marico cut price, gained volume and share, put part of the gain into advertising and still widened its margin.

The fact that breaks the assumption

The conventional sign of pricing power is revenue per unit rising. Here the headline is the reverse. Consolidated revenue from operations was ₹3,897 crore against ₹3,450 crore a year earlier (restated), up 13.0% (our arithmetic; the company prints 13%). Material cost was ₹2,022 crore against ₹1,997 crore, up 1% as the company prints it ([IP], slide 24). Material cost fell from 57.9% of revenue to 51.9% ([IP], annexure 1, slide 25), a 600 bps move in what the deck calls "Material Cost (Raw + Packaging)".

Yet the largest category the deck sizes did not raise price. Parachute Coconut Oil is 34% of India revenues, the largest of the three categories the deck sizes (trailing twelve months, [IP], slide 9; the slide attaches the 13% volume and ~1% value growth below to Parachute Coconut Oil, and the press release text attaches them to Parachute Rigids). The company says: "Revenue growth stood at ~1%, reflecting the anniversarisation of prior pricing actions and the impact of price reductions undertaken at the beginning of the year to pass on the benefit of easing copra prices to consumers." ([IP], press release, p.37). Against volume growth of 13%, which the company calls "its highest growth in the last 22 quarters" ([IP], press release, p.37), revenue growth of about 1% implies revenue per unit about 11% lower (our arithmetic from the two rounded figures, 1.01 divided by 1.13; the filings do not state a realisation).

One concrete thing, followed: Parachute Rigids

The company says it gained "over 570 bps market share to reach a new high of 60% volume market share" ([IP], Information Update, p.1), and the market-share annexure lists Parachute Rigids within coconut oil at about 60% volume share, ranked 1st (MAT September 2026, [IP], slide 28). The company calls this "formidable equity, deep consumer trust and supply chain led competitive advantage" ([IP], p.1); that is its description, not a measurement.

What the filings give on the cost side is a copra price that "remained range-bound during the quarter at 35% below peak levels of last year" ([IP], Information Update, p.2), and a chart that puts copra's market price down 31% year to date on a year-ago basis, with the footnote that the charts "do not represent Marico's actual purchase prices" ([IP], annexure 3, slide 27). Our reading: input cost falls, the leader passes part of it on, volume and share rise, and the unit margin is kept. The filings give neither the size of the price cut nor Marico's actual copra cost, so the saving kept cannot be measured.

The mechanism: where the 600 bps went

The deck's margin table ([IP], annexure 1, slide 25, as a percentage of revenue, Q2 FY27 against Q2 FY26) shows where the gain went:

• Material cost 51.9% against 57.9%: 600 bps lower.
• Advertising and sales promotion 11.6% against 9.1%: 250 bps higher (our arithmetic).
• Personnel and other expenses (6.6% and 11.7% against 6.3% and 10.5%): together about 150 bps higher (our arithmetic).
• EBITDA margin 18.2% against 16.2%: 200 bps higher. The deck's "PBDIT before ASP" went from 25.3% to 29.8%, 450 bps (our arithmetic: 600 less 30 less 120).

In rupees (our arithmetic), gross profit rose ₹422 crore (₹1,875 crore against ₹1,453 crore) and advertising and sales promotion ₹138 crore, a third of that; EBITDA rose ₹149 crore to ₹709 crore, up 27% as the company prints it.

The saving therefore went three ways: to consumers through lower Parachute prices, to the brand through more advertising, and to the margin. The company's reason for the advertising: "A&P investments were up 44% YoY as we continued to invest behind strengthening the long-term equity of our brands and supporting growth initiatives." ([IP], Information Update, p.1). The 44% is on the restated basis in both periods (₹451 crore against ₹313 crore, [RS] income statement and [IP], slide 24).

The company names two causes of the gross-margin gain, copra and "a favourable portfolio mix", and does not quantify either (see the header). Its mix evidence is growth: Foods up 45%, Value-Added Hair Oils up 21% in value with 80 bps of value share gained, Premium Personal Care past ₹500 crore annualised ([IP], slides 9-11). The margin those lines add is not given.

The reclassification: what it changes and what it does not

Note 7 of [RS] says the group "has reclassified certain customer-related advertisement and promotional expenses". It adds: "These amounts, previously included within Advertisement and Sales Promotion expenses, are now netted off from Revenue from Operations, as a change in accounting policy." The comparatives are restated, and "The reclassification does not affect profit before tax and interest, profit before tax, profit after tax, earnings per share (EPS), or shareholders' equity."

The note's table (an image, page 10) gives the restatement in ₹ crore:

The adjustment is about 0.9% of Q2 FY26 revenue and about 1.0% of H1 and full-year revenue (our arithmetic). In our reading:

1. Profit is untouched, so the reclassification is not where the 600 bps came from. But Q2 FY26 material cost was 57.9% of restated revenue and 57.4% of the previously reported revenue (our arithmetic, 1,997 divided by 3,482), so about 50 bps of the base ratio is the new basis. The 600 bps compares restated with restated and is like for like; a comparison with earlier published ratios, or with a company that does not net such spend, is not.
2. Spend paid to customers is in effect a price concession; netting it off puts revenue closer to net realisation.
3. The note tabulates only comparatives, so we cannot tell how much of Q2 FY27 was netted off, or how much of the 44% is brand advertising and how much consumer promotion.

Where the profit came from, by segment

The segment note (an image, [RS] page 11) shows India revenue of ₹2,916 crore against ₹2,655 crore (up 9.8%, our arithmetic) and a segment result of ₹540 crore against ₹398 crore (up 35.7%), a margin of 18.5% against 15.0% (our arithmetic). International revenue rose 23.4% (our arithmetic) to ₹981 crore, but its result rose only 11.3% to ₹217 crore, a margin of 22.1% against 24.5% (our arithmetic). India supplied 86.6% of the ₹164 crore rise in the total segment result (our arithmetic). Note 6 says the results include Skinetiq, a Vietnam business acquired through Marico South East Asia Corporation with effect from 2 April 2026, and "are not comparable with other periods reported in the Statement"; the filings do not split Skinetiq out of the International segment.

India revenue grew about 10% (the deck: "India Business Revenue up 10% YoY") on 10% underlying volume growth ([IP], slide 7). Our reading: price and mix net to roughly nothing across India, so the margin gain came from cost and mix, not from taking price.

BEAR CASE: where this breaks

• The input is cheap, and the company says other inputs are not. The Information Update says crude-linked derivatives and vegetable oil prices "inflated further" in the quarter, and the strategy slide lists "Copra tailwinds alleviating other input cost inflation" ([IP], slide 16). The raw-material annexure shows market prices of liquid paraffin up 91%, HDPE up 54% and rice bran oil up 22% year to date (market averages, not Marico's purchase prices, [IP], slide 27). The company credits copra for part of the margin gain; the filings do not test what a rise in copra would do to it.
• The year-on-year picture flatters the sequence. Against the June quarter, revenue fell from ₹3,957 crore to ₹3,897 crore (down 1.5%, our arithmetic), net profit from ₹652 crore to ₹558 crore, the EBITDA margin from 20.7% to 18.2%, as advertising went from 8.3% to 11.6% of revenue while material cost fell from 53.4% to 51.9% ([IP], slide 25). The filings do not say whether the step-up in advertising is a timing effect or a new level.
• The quarter shows a price cut winning volume, not a price rise holding it. Parachute grew volume 13% on about 1% value growth. Saffola Edible Oils, 16% of India revenues, grew value 6% with a "High Single Digit Volume Decline" ([IP], slide 9); the company says it is "structurally resetting the business to improve the long-term profitability of the franchise by rationalising the supply of select variants" and, "Towards the end of the quarter", passed on the benefit of a reduction in import duties on vegetable oils through pricing actions ([IP], p.1). The deck lists "Pricing Power of Core Brands" among its supports ([IP], slide 16). Our reading: the quarter shows the ability to cut price and win volume; it does not show the ability to raise price and keep volume, which is the harder half.
• Profit grew faster than the operations because tax was lower. Profit before tax rose 22.5% (our arithmetic); net profit rose 29.2% (our arithmetic). Tax was 17.2% of profit before tax against 21.5% a year earlier (our arithmetic; ₹116 crore on ₹674 crore against ₹118 crore on ₹550 crore), with a deferred tax credit of ₹95 crore against ₹30 crore ([RS]). The filings give no reason for the lower rate; in our reading, part of the PAT growth the company cites as the highest in 51 quarters is therefore a tax effect and not operations.
• Working capital and borrowing rose. Inventories were ₹2,297 crore at 30 September against ₹1,611 crore at 31 March, up 42.6% (our arithmetic); inventory days were 50 against 40 in Q1 ([IP], slide 26); current borrowings were ₹1,046 crore against ₹355 crore; and cash from operations in the half was ₹692 crore against ₹701 crore a year earlier on profit before tax up 21% ([RS]). The deck says the company "has maintained healthy working capital ratios". The filings do not say whether the extra inventory is copra bought at lower prices or finished goods.
• Strongest case against our thesis. The company's argument is that this is a position, not a cycle: Saugata Gupta, MD & CEO, says the business shows "a proven ability to deliver strong growth across commodity cycles" ([IP], press release, p.38), and Parachute's 570 bps share gain is evidence of a brand that held on when price fell. We cannot refute it. The filings cover one quarter, in the falling-input phase.
• Review, not audit. The limited review reports are not modified, but the auditors call a review "substantially less in scope than an audit"; the consolidated report notes 14 subsidiaries were not reviewed and are "not material to the Group".

Why it costs the reader something

A reader who sees gross margin up 600 bps and EBITDA up 27% and treats it as a new level of profitability is reading a falling-input quarter as a structural one. What the filings support is narrower: a leader that cut Parachute's price, still lifted gross margin to 48.1%, spent 44% more on advertising, and ended 200 bps higher at the operating line. Whether that survives a copra rise depends on facts the filings do not give. MoatSCORE: not yet scored (Moat Screener, 3 Nov 2026).

What to watch

1. Gross margin and the Parachute volume-to-value gap in the December quarter, against 48.1% and 13% volume on about 1% value growth, and whether the company says how much of the 600 bps is copra.
2. Advertising and sales promotion against 11.6% of revenue (Q2) and 8.3% (Q1), and the tax rate against 17.2%.
3. Inventory days against 50 and current borrowings against ₹1,046 crore.
4. The call transcript, when filed, and the company's guidance of "teens revenue growth this year", to "comfortably cross the ₹15,000 Cr. revenue mark" and "mid-twenties EBITDA growth in FY27" ([IP], Information Update, p.2).

The concrete thing, again

The Parachute line reads: volume up 13%, value up about 1%, volume share at a new high of about 60%, in a quarter when copra sat 35% below last year's peak. On its face, a leader that gave consumers a lower price and was paid in volume and share. Until the filings say how much of the margin is a cheaper input and how much is a stronger brand, and until copra turns, the line shows that Marico used a good input market well. It does not yet show how the margin looks when the input market is not good.

Sources

• [RS] Marico, results for the quarter and half year ended 30 Sep 2026, notes and review reports (NSE)
• [IP] Marico, Information Update and Q2 FY27 earnings presentation (NSE)
• [CL] Marico, covering letter on the earnings call recording (NSE)
• Earlier Moat & Margin piece on the same question of spread versus moat: Deepak Nitrite, Q2 phenolics spread

Educational research, not investment advice. Every figure above is drawn from Marico's own filings of 2 November 2026, read from the primary documents on 3 November 2026; derived figures are our arithmetic, labelled as such. MoatSCORE: not yet scored (Moat Screener, 3 Nov 2026). No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.