Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Radico Khaitan Ltd (BOM:532497, Financial) achieved strong premium volume growth despite a challenging operating environment.
- The Prestige & Above category saw a 14% year-on-year volume growth and a 19% value growth.
- The company launched several new luxury brands, including Rampur Asava, Sangam World Malt, and Jaisalmer Gold Edition, enhancing its premium portfolio.
- Magic Moments Vodka continued its growth momentum, recording 1.9 million cases in Q1 FY25 and crossing sales value of INR300 crores.
- Radico Khaitan Ltd (BOM:532497) is focused on strengthening its brand portfolio through targeted marketing and the introduction of new luxury and premium brands.
Negative Points
- IMFL volume reported a degrowth of 4% year-on-year, primarily due to a decline in the regular category.
- Gross margin decreased to 41.5% from 43.6% in Q1 FY24, impacted by significant food grain inflation.
- The regular category volumes were affected by ongoing strategic rationalization and state-specific excise policy issues.
- There were delays in excise policies and elections in certain states, impacting industry growth and sales volumes.
- Increased net debt over March '24 due to cyclical inventory buildup and higher receivables in certain states.
Q & A Highlights
Q: What was the rationale behind the decline in ad expenses, selling, and distribution expenses by about 8% during the quarter? Will this be a recurring trend?
A: The ad spend for the first quarter was an aberration due to muted industry growth and delays in excise policies and elections. We typically guide for ad spend in the range of 7% to 8% annually, and this will catch up in the following quarters. (Dilip Banthiya, CFO)
Q: When do you expect the regular category volumes to improve, given the strategic moderation and state-specific issues?
A: We expect muted growth in the regular category due to strategic rationalization and state-specific excise policy delays. However, we aim for a 4% to 5% growth in this segment. (Dilip Banthiya, CFO)
Q: What is the status of receivables in Telangana, and how does it impact volumes?
A: Payments in Telangana are coming at a slower pace but are being received regularly. This trend is likely to continue, and we are supplying based on payments. Industry interactions with the government are ongoing to improve this situation. (Dilip Banthiya, CFO)
Q: What is your estimate of the volume loss due to external issues like elections and excise policy delays?
A: We estimate that the industry lost about 3% to 4% of volume due to these external issues. (Dilip Banthiya, CFO)
Q: What is the outlook on pricing for the rest of the year?
A: We expect the price increase for the whole year to remain between 150 basis points to 170 basis points. Some states are still considering price hikes, which we hope will happen soon. (Dilip Banthiya, CFO)
Q: Can you provide an update on the CapEx plans and future projections?
A: After the major CapEx, maintenance CapEx and brand listing CapEx will range between INR70 to INR80 crores annually. This year, there will be additional CapEx of INR80 crores to INR90 crores for ongoing projects. (Dilip Banthiya, CFO)
Q: How will the new regulations on surrogate advertising impact your marketing strategy?
A: The government is focusing on preventing misleading ads but allows brand extensions with a revenue model. We are prepared to follow these guidelines and will adopt more innovative and creative marketing strategies. (Abhishek Khaitan, MD & CEO)
Q: What is the growth outlook for the non-IMFL segment in the coming years?
A: We expect the non-IMFL segment to grow in line with the industry at about 7% to 8%. The growth will stabilize after the base effect wears off. (Abhishek Khaitan, MD & CEO)
Q: Are there any significant tax increases in state budgets that could impact your business?
A: Some states are considering price changes and rationalizing duties, which could be beneficial for the industry. We are monitoring these developments closely. (Abhishek Khaitan, MD & CEO)
Q: What are your margin targets for FY26?
A: We are targeting mid-teen margins, around 15% to 16%, by the end of FY26. (Abhishek Khaitan, MD & CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
