Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Margin improvement in Q1 FY25 due to a shift from rice to maize and a good Rabi crop in East India.
- Procurement of additional maize inventory helped control raw material costs.
- High-growth Prestige & Above segment saw a sales volume increase of 292% year-on-year and 50% quarter-on-quarter.
- Expansion into new markets like Goa, increasing the total number of states to seven.
- EBITDA margin improved to 8% in Q1 FY25 from 4% in Q4 FY24.
Negative Points
- Volatility in margins due to changes in raw material costs and government policies.
- Challenges in maintaining consistent supply and quality due to the shift to maize.
- High raw material prices, particularly maize, continue to pressure margins.
- Significant capital expenditure (INR120 crores) required for new facilities in UP.
- Lower throughput on maize compared to rice, leading to reduced production capacity.
Q & A Highlights
Q: Congratulations on good margin recovery quarter on quarter. So my first question would be on -- I want to understand what is the distribution strategy going forward for the Prestige & Above segment. Now you mentioned you've entered seven states, so I'm from Maharashtra, for example, sir, Mumbai and Pune, when I asked a few shops for Terai gin, they said it was unavailable. So I just want to understand that how do you plan to increase the distribution going forward? What is the thought process here?
A: The distribution strategy is two-pronged. One is where our mainstream bouquet of brands, including the luxury brands, Terai and the forthcoming offerings will all collectively go in a sequence, because this particular state will depend on the route to market centering by us and then building up the brand portfolio on it. The second string of states, which is going to get ahead of this is the states where we will only have our luxury portfolio, and this segment is planned to expand further. Because our national footprint will be much slower than the luxury footprint, and Goa is an example of this, where we have only introduced Terai and we'll be introducing our future coming luxury brand ranges. The mainstream of brands will follow a lot later. Whereas states like UP, Delhi and West Bengal have a full bouquet of range, and this will get added to it with the new excise policy coming which allows the additional bouquet of new brands to come through.
Q: My second question was now I've been reading multiple articles where there's a big growth in single-malt whiskeys in India, especially with your competitors also launching new products. So even I saw that product launch planned this year for single-malt whiskeys for Globus, too. So I just wanted to understand that what would be the unique selling point for your company when there's already so many players who already established themselves over the last few years? So how do we plan on penetrating in this segment?
A: The unique strategy of the new offerings, which are planned for, we will obviously divulge at the time when the brand is in the market, which you will appreciate purely for confidential purposes. However, I am very confident to say that even the brands which have started building up traction and in a very strong momentum, like Mountain Oak, Snoski, they have been able to carve out their own unique place in heavily crowded markets, which shows the uniqueness of our offerings not only in terms of liquid, in terms of blend, but also in terms of packaging. And the way we are robustly using our route to market, we have been able to successfully do it. This gives us sufficient confidence that the emerging segments, which include single malt because this segment is nowhere close to getting saturated yet, will allow us even more healthier opportunities to use our differentiated brand offering and brand catering strategies to allow a consumer to not only experience our offerings, but to start offering us his loyalty measures as well.
Q: My last question was in the next two, three years, what are the internal targets or aspirations for the company? Let's say, Prestige & Above will make up how much percentage as a pie of your revenue going forward?
A: Currently, we are at a stage where the level of growth that we've shown in Q1, we would like to sustain for some quarters. Our Regular & Others business too is growing at a pretty good rate. Some -- maybe about a year or so, I have said that our target is 20% of our consumer business should come from Prestige & Above. But frankly, with the growth that's happening even in the Regular & Others category, that it's very difficult for me to give you a number or a date by which we'll reach the 20%. But with the current levels of growth in both businesses, we are pretty happy to sustain this for a few quarters, and those are our targets right now.
Q: Sir, two questions. One on the accounting front of the subsidiary. I believe the subsidiary has only one brand, an RTD brand, which is NOT OUT. Is that correct?
A: Yes, it's just a single product. There was another brand in this subsidiary, but after we invested, we have taken a decision to scale down that brand and focus only on NOT OUT.
Q: So the question regarding the subsidiary is that there seems to be a significant amount of loss. If I compare the stand-alone balance sheet to the consolidated balance sheet -- there is loss compared to the size of the company, which is a subsidiary as of now, I think roughly INR5 crores is loss, which is booked.
A: The loss is INR54 lakhs, not INR5 crores, and it's a onetime write-off that we had to do. We are chasing for the money, it's a debtor's write-off that we have to do of around about INR45 lakhs. So it's onetime. We are pursuing that money, but it's not a significant loss because it's a onetime write-off that we had to do.
Q: So these subsidiaries numbers are not included in the Prestige & Above category EBITDA, is that correct?
A: No, it will not be included because for separate legal entities, it will not be included.
Q: I wanted to understand about the UP market. We have a INR120 crore CapEx planned out. So the timeline is ready with us. We have received all the approvals. I think that is already in hand. So is the timeline with us, by when we have the plant up and running and what will be the capacity?
A: The capacity is going to be 80 KL. It's going to be a multi-feed -- not a multi-feed, but well, it will have the option of using molasses as well as grain. It can run on either or not both together. So 80 KL is the capacity. And because of the nature of having two raw materials, the CapEx is a little bit higher than our typical average. The construction will start straight after monsoons. Engineering is in progress. I believe it will take about 12 months, so maybe 14 to 16 months from today.
Q: The size of the UP market is about 200 million cases, about 100 million cases would be IMIL and about 50 million to 80 million cases would be Regular and Above. Is that accurate?
A: The IMFL market in UP is between 250 million to 300 million cases, which includes the Regular range. The Regular range, regular price point across various flavors, should be 65 million to 75 million cases. And the rest is Prestige & Above segment. In Regular -- sorry, in Regular, I have missed out the rum. There will be some element of rum also.
Q: In your P
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
