Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Globus Spirits Ltd (BOM:533104, Financial) reported a 15% year-on-year increase in net revenue from operations for FY24, reaching INR2415 crore.
- The company has commenced commercial production at its new bottling unit in Uttar Pradesh, which is expected to boost brand presence and sales in the state.
- A joint venture with a Caribbean conglomerate aims to introduce a new beer brand in India by FY26, potentially expanding the company's product portfolio and market reach.
- The consumer segment witnessed robust growth, with sales volume increasing by 70% in Q4 and 84% year-on-year for the full year.
- The company is optimistic about using maize for ethanol production, which is expected to provide better margins, by-products yield, and environmental benefits compared to rice.
Negative Points
- The company experienced unprecedented low margins in Q4 FY24 due to a change in the raw material mix, specifically the discontinuation of rice supplies from SCI.
- Net debt increased to INR241 crores at the end of FY24, up from INR194 crores in FY23, due to expanded operations and new units.
- The Prestige & Above segment remains loss-making, with losses exceeding revenue growth, and profitability is not expected for another couple of years.
- The manufacturing segment faced significant headwinds due to raw material price volatility, resulting in lower capacity utilization and reduced bulk alcohol sales.
- The company is dealing with a tax demand of INR40.93 crores, of which INR25.11 crores has been deposited in protest, adding to financial uncertainties.
Q & A Highlights
Q: When can we expect the Prestige & Above segment to be profitable?
A: As we expand our presence, initial markets will start reducing their losses and head towards profitability. We aim to keep annual investment in this business around INR25 crores or less. We expect the initial markets to start contributing to the bottom line between this year and next, with overall profitability likely a couple of years away. (Shekhar Swarup, Joint MD; Paramjit Gill, CEO - Consumer Division)
Q: How are you differentiating your ethanol products in the market?
A: We leverage innovation in both liquid and packaging. Our new brands will benefit from an already stabilizing route to market, unlike earlier brands that had to create this route while being distributed. (Shekhar Swarup, Joint MD)
Q: Do you expect further drops in margins?
A: No, we expect growth in margins due to the new maize crop and its success in ethanol production. Our regular and others segment has been growing in profitability, and we expect further growth in both profitability and volumes this year. (Shekhar Swarup, Joint MD)
Q: What is the status of the UP bottling plant and its impact?
A: The UP bottling plant started operations in April. We plan to launch our regular and other brands in UP by Q2/Q3. The plant will cater to both IMSL and IMIL segments, using a combination of in-house and externally sourced ENA based on quality and price. (Shekhar Swarup, Joint MD)
Q: What is the outlook for FY25 in terms of top line and bottom line?
A: We haven't provided specific outlooks for top line or bottom line but have given expectations for segmental performance. Detailed information is available in the investor presentation. (Nilanjan Sarkar, CFO)
Q: What is the current tax structure for your RTD product?
A: The RTD product has a different tax structure compared to beer. It is produced under a winery license in Himachal Pradesh and is stronger than a normal strong beer. (Shekhar Swarup, Joint MD)
Q: What are the expected revenue targets for the new business segments like Not Out and the beer business?
A: We have aggressive growth targets for these segments. We delivered 85% year-on-year growth and over 150% growth in Q4. We aim to continue this aggressive growth this year. (Shekhar Swarup, Joint MD)
Q: What are the benefits of using maize over rice for ethanol production?
A: Maize uses less water and has a higher yield per acre compared to rice. It allows for a direct farmer-to-factory model, eliminating intermediaries like rice mills. This makes maize a more sustainable and cost-effective option for ethanol production. (Shekhar Swarup, Joint MD)
Q: How do you plan to increase brand awareness in new markets?
A: We are expanding our digital marketing efforts and supporting our brands with a 360-degree approach, including presence at the shelf and other marketing initiatives within regulatory limitations. (Paramjit Gill, CEO - Consumer Division)
Q: What is the expected impact of the recent CapEx on FY25 revenue?
A: The recent CapEx in Bengal and Jharkhand will add an incremental revenue of INR215 to INR230 crores. The UP bottling plant's impact has already been accounted for in our volume growth projections. (Nilanjan Sarkar, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
