Globus Spirits (NSE:GLOBUSSPR) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Q1 FY 'twenty seven Earnings Conference Call of Globus Spirits Limited hosted by MUFG In Time. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded and will be sixty minutes long. I now hand the conference over to Mr. Sumit Ketan from MUFG End Time. Thank you, and over to you, sir. Thank you. Good morning, everyone. I welcome you all to the earnings conference call to discuss Q1 FY 'twenty seven results of Globus Spirits Limited.

0:53 To discuss the results, we have from the management, Mr. Shekhar Swaroop, CEO and Joint Managing Director Mr. Paramjit Singhal, CEO, Consumer Division and Mr. Leonjan Sarkar, CFO. They will take you through the results and the business performance, after which we will proceed for Q and A session. Before we proceed with the call, I would like to mention that some of the statements made in the today's call may be forward looking in nature and may involve risks and uncertainties. For more details, kindly refer to investor presentation and other filings that can be found on the company's website. With this, I now hand over the call to the management for their opening remarks. Thank you, and over to you, sir. Hi, good afternoon, everyone. This is Shekhar Spirits. Thank you for joining us for the Q1 earnings call of the company.

1:44 Param and Milanjan are also with me on the call today. Q1 has been a good start to the year. Revenue from operations grew 13% year on year to INR 7,887 million. EBITDA grew 33 to INR $795,000,000, and PAT grew 50% year on year to INR $278,000,000. EBITDA margins improved to 10% at an overall basis and PAT margins improved to 4%. The point I want to emphasize here is that this performance reflects structural improvements we've been working on across the business. Better capacity utilization, improved manufacturing profitability and continued resilience in regular and others with stronger traction in prestige and above.

2:39 Over the last few quarters, we have consistently described Globus as a consumer focused alcobev company built on a strong manufacturing base. Manufacturing gives us supply security, cost control, quality consistency and free cash flow. Consumer business gives us the opportunity to build brands, deepen distribution and improve the quality of growth over time. During the quarter, the manufacturing business performed well. Segment grew 11% year on year to INR 4,720 million. Sales volumes stood at 56,110,000 liters with capacity utilization at 89%. This business was supported also with strong E and A demand across The States.

3:33 Overall, the EBITDA margin for this business was INR 6.6 per liter. Manufacturing is not a passive capacity business for us. It is an active operating platform. We continue to optimize between products, raw materials, geographies and customer opportunities. Our objective is not simply to maximize volume in a quarter. Our objective is to optimize margin, cash flow and strategic supply for our consumer business. The Uttar Pradesh facility is also becoming increasingly important in this context. UP is a key consumer market for Globus. Having manufacturing capability in the state gives us a structural advantage over time. It improves our ability to service demand, manage costs and support both segments of the consumer business, R and O and P and A, in a disciplined manner.

4:33 On consumer side, both parts of the businesses have contributed to growth. Ardento not only continued to provide resilience in cash generation, but has also started growing volumes, while prestige and above has delivered much stronger growth. The consumer business is becoming more meaningful, more diversified and more visible in the overall performance of the company. For the balance period of FY 2027, our priorities are clear, keep manufacturing business operating efficiently and within a disciplined margin framework, continue to build R and O as resilient and growing consumer business, scale P and A with focus on market depth, brand strength and profitable growth, and of course, maintain balance sheet discipline while investing behind the long term opportunity.

5:36 We are building Globus quarter by quarter. The objective is to create a stronger, broader and higher quality alcobev company with manufacturing depth, consumer reach and financial discipline. With that, I request Param to take you through the consumer business. Thank you, Shekhar. Good morning, everyone. I will focus specifically on the consumer business. Q1 was an encouraging quarter for both parts of our consumer portfolio. Regular and others delivered steady growth and profitability, while prestige and above continued to scale across markets and brands. Let me start with prestige and above. PG and E revenue grew 35% year on year and 38% sequentially to INR $550,000,000.

6:27 Volumes grew 45% year on year and 45% sequentially to 420,000 cases. This growth was broad based across states and was supported by stronger traction in brands such as Feray, Snorsky and Brothers and Company. The key point is that growth is not dependent on a single brand or a single market anymore. It is coming from geographical expansion, deeper distribution and better market execution across the portfolio. EBITDA for the quarter was negative INR 13,000,000. We are comfortable with this at the current stage because the investments are going into distribution, brand visibility as well as market development.

7:18 Our focus is not just to deliver volume growth, but to build markets that can become profitable and sustainable over time. We continue to think about P and A through the same market architecture we discussed earlier, core markets as well as emerging markets. Core markets are where we are building depth and profitability. Emerging markets are where we are making the foundational investments so that they can become future growth engines. The framework is important because it keeps our expansion disciplined. We are not entering markets merely for presence. We are entering markets where we believe the portfolio has a right to win, where group to market execution can be strengthened and where the market can move towards profitable scale over time.

8:09 In regular and others, Q1 was steady and healthy. Revenue grew 10% year on year to INR 2,564 million. Volumes grew 13% year on year to 4,480,000 cases and EBITDA grew 13% year on year to INR $440,000,000. Rajasthan continued to deliver stable and consistent performance. This remains an important mature market for us and demonstrates the strength of our execution in R and O. Uttar Pradesh is now scaling well. UP R and O volumes grew 2.4x year on year and crossed 200,000 cases per month during the quarter.

8:57 This is an important milestone because not UP is not only a large market, it is also a market where our manufacturing presence, distribution capability and portfolio strategy can work together sustaining growth over time, surely due to the size of the business available there. Across the consumer portfolio, our strategy is to build value in layers. R and O gives us the foundation for scale, distribution and cash generation. P and A is the future core where we are expanding reach and improving mix. And our luxury portfolio is intended to strengthen aspiration, innovation and long term brand equity. This balanced architecture allows us to generate cash today, premiumize the business for tomorrow and selectively build brands that can shape the category over time.

9:49 At the same time, we will remain disciplined. We will continue to build this business market by market and brand by brand. Q1 gives us confidence that the strategy is moving in the right direction. With that, I hand over to Nilanjan for the financial performance update. Thank you, sir. Good morning, everyone. Let me briefly take you through the financial highlights for the quarter. Q1 FY 'twenty seven reflects a continuation of the stronger operating and balance sheet trajectory we delivered in FY 'twenty six. The company reported a revenue of INR789 crores, representing a year on year growth of 13%. EBITDA for the quarter stood at INR79.5 crores, registering a growth of 33% over the corresponding period last year, while EBITDA margins stood at 10%.

10:39 Profit after tax for the quarter was INR 28 crores, reflecting a strong year on year growth of 49%. PAT margin for the quarter stood at 4%, alongside the refinancing and debt optimization actions already undertaken, including the improvement in current ratio to 1.01x and the interest coverage to 3.14. With that, we now conclude our remarks and open the forum for questions and answer. Thank you. Thank you. We will now begin the question and answer session. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

11:35 The first question comes from the line of Agnish Roy with Nuvama. Congrats on good numbers. I have three questions. First is on the manufacturing part. So on ethanol, of course, one positive news which has come out is government is thinking of ethanol being used for the cooking fuel also. Of course, this is currently in initial stages. On the other hand, there has been the controversy on the E20 ethanol mixed fuel, damaging the passenger cars, etcetera. So if you could tell us how the industry is likely to see the demand drivers.

12:23 And on profit, you always said that broadly 5% to 7%. And this quarter also, have demonstrated that. But if you could discuss on the demand side? That is first question. Thanks, Abhish. So regarding your first question regarding ethanol for cooking. So ethanol does have a lot of applications in Africa. We've seen a massive adoption of ethanol stoves. However, there needs to be a lot of distribution and also packaging of those canisters for for ethanol in India. I think a drop of that is not going to be very fast to begin with.

13:11 However, if, if gas supplies, cylinder refills start becoming a problem again, then perhaps the speed increases on that front. I think the main demand driver is going to remain ethanol blending. Government has clarified that E20 is very much part of India's special supply situation. There has obviously been certain, how do I say, pushback on whether ambiguity rather on whether E20 is damaging petrol engines, especially in social media and the press last few weeks. But automobile association, automobile manufacturers as well as battery companies has clarified that there is no such damage that is being reported.

14:10 So E20 is very much part of the country's supply, petrol supply. We are expecting ethanol demand at this scale to grow at about 7%, 7.5%, which is in line with petrol growth. There is also talk about multiple more blending grades, whether it's E85 or E50. But however, for that, cars need to be made compatible. We've seen some launches from Maruti recently. But as far as I know, there aren't enough cars compatible for higher blends yet. The focus will remain in 2020, growing at the same rate as spectrum consumption grows in the country.

15:03 What's interesting for our business, Avnish, is that at E 'twenty, there is a significant oversupply of ethanol, overcapacity of ethanol in the country. And that's been the case in the last few quarters as well. And despite that, we're able to perform our facilities, utilize our facilities at well over 85. In fact, this quarter, we've seen a record 89% at a higher installed capacity base. And that's due to this flexible product nature that our facilities have between E and A and ethanol. Sir, one or two quick follow ups. So first is, in spite of very high oversupply, which you mentioned on the ethanol, if you could tell us which industries are driving demand for you? You did mention the flexible nature. But if you could elaborate on the end customer, which one is driving?

16:01 And second, one small follow-up on this controversy. Does this impact demand? Because customer doesn't have a choice, right? It might be in the new slow. But does it impact the overall demand? No, it does not impact overall demand. No, we have not seen any of that. I mean it's our ethanol offtake, the ethanol offtake of the industry is very sticky, as you can imagine. It's been fairly consistent over the last few months. Of course, it's growing year on year at about 7.5% or so. However, month on month is fairly sticky. We are able to utilize our capacities by increasing our E and A supplies both in India and overseas.

16:47 We've got a significant international sales option, and we've seen prices form up overseas, and therefore, we've taken advantage of that. Sure. Now two quick questions. One is now the new Bihar signature has been there for two months. And of course, adjoining state rupee is one of the gold standard in terms of how health of the policies could be there, and you have a increasing presence in Uttar Pradesh. So any update if you can share of any discussions happening in the government corridors on any provision getting lifted at some stage in Bihar? And secondly, we also the first company this quarter. Other companies are saying that because of Iran prices, glass inflation is a reality.

17:38 So if you could talk about your R and O and P and A, what is the impact of glass inflation? Yes. So regarding Bihar, it's it's difficult for me to say... To give any timelines on the change of policy, obviously. But, you know, our belief is for me that prohibition in Bihar is a thing of... Or will be a thing of the past. In it's... In terms of time lines, my expectation is one to two years, you know, of the new chief minister for it to... For a change to start happening over a two year period would be a complete reversal.

18:25 That would be my sort of sense to what's going on there. With regard to glass prices, in fact, we've seen inflation across the board, glass PET. But Param, maybe do you want to talk a little bit about that and our mitigating strategy? Yes. The cost push of GLOBUSSPR niche, depending on the brand and the pack, is in double digits. It is in mid teens. It moves between 1016%, 17% depending on which brand, which pack. And this year of cost push, we are expecting that looking at the current situation of the environment, we are expecting that this GLOBUS is going to be here with us for a while now in both glass as well as PET.

19:24 And I mean, prices end up coming in various forms across various parts of the business. So thanks. That's all from my side. Thanks. Thank you. The next question comes from the line of Nitin Avasti with Incred. Please go ahead. Hello, sir. Congrats on a good set of numbers and also delivering on all the promises you had made once you had entered UP and the, what do call, stabilization of your plant and operations there. So looking forward for that market to also grow going ahead. Two questions from my side. One was given the UK FDA is now a reality, will you be seeing a gross profit expansion due to lower scotch prices?

20:15 Because you have your whiskey segments is still dominating in your whole pie. If I'm not wrong, Mountain Oak and Brothers and Co are still the two dominating whiskies in your overall sales? Should I you want me to take it, Shekhar? Yes, yes. Nitin, it's a good point. We do, like most of the industry players, expect to benefit out of that as we go along and when the inventory is getting transitioned. I think a lot will depend if partners on the other side start changing the base prices. It's still a bit of a vague situation.

21:01 But overall, we are expecting a tailwind here and a favorable climate going forward for sure. The actual numbers, while their workings are very easy on paper, but to see them transformed, I think we need a few more time to actually see them lively getting transformed onto the paper. Understood, sir. So just getting a little further on this, since now it's a reality, what has flipped? Is it the sellers now like one thing you pointed out, the sellers couldn't increase the base price? Or is it to the substitutes or not substitutes rather the core prices, let's say, more from other places, even India? Are those prices now moving downwards for you?

21:50 Too early. As of now, no indication whatsoever of any tinkering on any other front. At this point of time, the only focus is on the tailwind and how to effectively materialize it in the quickest possible time. At this point of time, that's the only. And obviously, our discussions are on a very hectic basis to try and land these opportunities before some other variables, which we can't see come into play. Overall, it is going to be a favorable anyway. Just want to jump in here a little bit on this. Listen, like Param said, we're expecting some improvement, obviously. However, if you just look at the FX position, the rupee has depreciated by 20% over the pound in the last one year.

22:48 And so overall impact on our business is not going to be very significant in my view. And therefore, we are 100% focused our efforts on just execution in markets. So when this benefit comes, get it as will the other people, but we are not the market makers for scotch price revisions. Fair enough. Okay, sir. Second question, moving to a place where you are one of the market makers. In Rajasthan, you had a very big position in your consumer segment, regular and others. And you obviously used that to jump on with the consumer prestige and above segment.

23:33 In Uttar Pradesh, it was the other way around. The prestige and above had started earlier. Regular had started using another supplier. And then Regular, you guys have started once your plant came online. Now you are scaling it up. There is a similar situation in West Bengal, but West Bengal is, again, Prestige, you have been pushing it for some time. At least the market is recognizing the product there. Regular and others, although it started sometime back, has not gone as planned in West Bengal. What is the status currently of that? And because there have been certain changes, at least we are hearing that regulatory changes, etcetera, have happened, making it easier and some actually news flow is saying that it's making it harder. Some news flow is saying it's a steeling rate right now. So just some clarification on West Bengal front regular and other segment. So with regard to the R and O of West Bengal, we are only going through the steps of getting regulatory approvals.

24:29 So we are still confident that we should be around the corner. These things do regulatory for the final last hurdle regulatory approvals can always be a month or two months this way or that way. But as soon as the regulatory approvals are in place and as of now, there is a reasonable view that this quarter we should be able to secure them. We will after that within sixty days or so, we should be able to get back into the market. So we see the market environment as applying for everybody. If the market gets a bit more complex, it will be for everybody. If it gets a bit favorable, it will be for everybody. We have to fight our way. Having said that, I do not see the market getting unfavorable investment growth.

25:21 At worst, it could be status quo or it may move for a slightly better is my view as I see West going forward. Understood, sir. Okay. Understood, sir. Thank you. Yes. We will be entering R and O in West Bengal hopefully sooner than later. Got it. Thank you. The next question comes from the line of Parth Soda with Trinitra Asset Managers. Please go ahead. So am I audible? Hello? Yes, ma'am. Morning. And first of all, thank you for the opportunity. My question is on utilization. Like with utilization now close to 90%, how much additional volume growth can be achieved without any major capacity expansion?

26:13 At what utilization level would the next CapEx cycle become necessary? I can take this. Thanks for the question. So we aside from maintenance CapEx, which we have a guidance of about INR 50 crores, 60 crores a year, we don't have any plans for CapEx in increasing E and AS and all. So we want run at these utilization levels. Our guidance is around 85%. This quarter has been significantly higher than our guidance. Our capacities are at about three thirty four million liters aside from incremental changes by maybe 1% or so due to certain new technologies that might come up over time, I do not see any significant change in capacity as part of our FY 'twenty nine strategy at least.

27:31 The next question comes from the line of Himanshu Shah with Dollar Capital. Go ahead. Thanks for the opportunity. Am I audible? Yes, Himanshu. You. So can you just disclose the deck number as of June 26? How does it compare versus March 26? You want the debt number? Yes. The debt is the same level at INR $6.50 crore. March was at INR $6.60 crore. Okay. And this is net debt, right, sir? Net debt, net debt, yes. Okay. Secondly, on the manufacturing side, spread has came down a bit. Is it more due to the mix of the business?

28:18 Or is it due to the increase in raw material prices? Sorry, what has come down a bit? Your line broke. EBITDA per liter that came down from the one in the manufacturing business. So is it due to the change in mix of P and A versus ethanol? Or is it due to the increase in raw material price? And where do you really see the spread moving forward in the next couple of quarters or for rest of FY 'fifty seven? Margins on margin per liter is about INR 5 to 7. We are firmly within that in Q1. Going forward, I'm expecting similar range bound performance in this business. Certain parts of the business, certain customers are obviously more profitable, other customers are less profitable.

29:09 So with this 89 percent, 90% type of capacity utilization at INR6.5 or so per meter margin. I think that's a pretty solid performance in this quarter. I'm not concerned about margin changes within the INR 5 to INR 7 range, Himanshu. And going forward, I maintain that our margins will remain in that range. Yes, sir. Can you just provide some color how broken price and base prices are hovering? Where do we see these prices in the quarter there? Are we seeing some hinging because of lower cost or something? So Q2 is we've always seen every year Q2 is a slightly more inflationary quarter with regard to agric commodities, both fuel and raw material.

30:09 So no surprises there this year either. With regard to the effect of the monsoons, I'm not seeing any dramatic impact on the maize crop that is scheduled for this time, right? We've managed to secure our inventories there, which gives us a good cover going into Q3 and Q4. We also have obviously the cover from FCI for a certain part of our purchase mix. I'm not seeing any red flags at Manju this year compared to how things have gone last year or the year before.

31:02 It's Q2 is inflationary, but it's already budgeted for. Okay. On our regular business, our margins have been quite healthy. I suspect we would have some benefit of pricing in Rajasthan, plus we would also be having some carryforward inventory of fat bottles and the raw material for fat bottles. From here on, should we see a higher inflation and therefore margin impact in our regular than others business because of the inflation impact, quarterly prices that should have taken place? So I think the big impact on margin profile for iron ore is actually going to be the mix from rupee.

31:50 In terms of impact of pet bottles, etcetera, it's not much. We keep a pretty slim inventory. It's a pretty large operation in Rajasthan. So we're not able to keep meaningful inventories to take positions in PET prices or take positions for PET prices. So the more meaningful number here, the more meaningful trend that's emerging is that UP is growing exceedingly fast. And compared to Rajasthan, just the way the market is structured, UP is a lower price point or lower slightly lower margin profile than Rajasthan. So it doesn't structurally affect the business.

32:39 The guidance for R and O has been around 15% to 17% EBITDA margins. So rather than if you see the last couple of years, you've been sort of 17%, sometimes 18%. That's going to come down to maybe 15%, 16 levels. So it doesn't structurally impact the business, but it is slightly lower margins in rupee. More than the mix change, state mix change, but you are not seeing any significant impact from raw material price. If we are able to... What happened has happened in Q1, I'm not seeing any further impact coming there. We haven't got any real red flags as of now further. Obviously, there could be a little bit of an impact of a spillover in the first quarter of the previous year's inventory. But as Shekhar called out, we really do not carry significant inventories.

33:34 But it's a wait and watch situation every day. Let's see how this plays out. But I think our executive growth will sort of position us much better to sort of withstand this challenge as compared to some of the other peers. And can you just take one note on the iOvercell business, sir? Yes. Please go ahead. So how has been our repeat consumer behavior Because while this quarter has been healthy on the volume growth front, I believe it has not been driven by brothers and company. But Mountain Oak, I believe, has been struggling a bit from an overall growth perspective.

34:19 And even earlier, we used to have governors reserve, which I think so now we have scaled down significantly. So the challenge that I personally see in our branded MFL business is one brand is coming up, other brand is going down. And second brand is coming up, third brand is going down. So if you can provide some color on this? Yes. So Himanshu, what happens is there as we are increasing our geography, you know, different brands are driving growth in new geographies for the simple reason that the category sits in a different way in those geographies. The way the category sits in UP is not the way the category P and L sits in Delhi. And similarly, Western Wall, Assam, Jharkhand are very different.

35:14 So a significant portion is being dependent to which market is a high vodka market, which market is a high semi premium market and which market is a high deluxe whiskey market. So that is the bigger driver. Time to time, there will be brands which will see an opportunity and drive growth much ahead of the curve. But there is nothing to call out that any brand of ours regardless whether it's Brothers or Mountain Oak or Smosky in a situation where we can say another brand is growing and this brand now, we don't know what the line of sight is. I think that's a misconceived perception. Because we are entering geographies basis, a lot of analysis of our right to win and the portfolio that we have, the markets are so different in terms of which segment constitutes a high salience in that market.

36:12 And that is the primary reason for this. And that's going be continuing to come our way for the next couple of years till we continue to add markets in terms of geography as well as growth. So that is the primary reason why you will see these fluctuations happening. So it's not at all a concern as we see it. Thank you. Himanshu, for any more questions, I would request you to rejoin the queue. Participants in the interest of time and fairness to others, please restrict yourselves to two questions. For any more questions, you may rejoin the queue. The next question comes from the line of Hardik Jatalya with Arteco PMS. Go ahead. Thank you for the opportunity. Hope I'm audible.

37:00 Please go ahead. Yes. Sir, firstly, on the R and O business, let's say, so UP volumes have grown on a lower base. We have grown well. But we believe that the 200,000,000 cases, that's our exit run rate for the quarter. So incrementally, let's say, what sort of growth should we pencil in? Let's say, should we be thinking that you will be adding roughly 100,000 cases every month? What sort of ramp up are you seeing considering the market is a bigger one, firstly, on that? And incrementally, we believe that for the UP, we'll be warehousing different brands as well. So we'll be always having an element of trading EBITDA. So once the state establishes, you have already mentioned that the margins to be remaining in a band of 15% to 17% for iron ore as a whole. So we see the absolute EBITDA growing and margins slightly normalizing. Is this the right understanding firstly?

37:48 Param, do you want to talk about GP growth? Yes. So in terms of see, we have given our 29 guidelines of where we see ourselves in UP. And it is very difficult for us to continue sort of projecting how each quarter growth will happen because at the end of it, we are fighting for our place in the market. And on one side and the other side, it's just a very huge market, almost 95 odd lakh cases a month. So we are also dreaming to go stay very aggressive in UP. We will see high growth coming out of our UP R and O. To say to quantify whether it will be $100,000 every quarter or not, I don't think we are into that situation where we can start calling these things out.

38:45 So you have to stay with that UP will continue to resonate strongly. And it is our next big bankable opportunity in R and O. And the team is doing everything we can to drive home that growth at the fastest possible pace. Fair. Secondly, on the PMA side, let's say, you mentioned, obviously, we have got multiple states. But if we just have to split the growth between our mature states and the newer states, then how should we be looking at, like just recent repeats and the depth of our brands? How would you say it gets very difficult to start giving these breakdowns for the simple reason that you see the new states may literally take a few quarters to start scaling up.

39:41 I think the benchmark that we use is that as we have called out earlier that in the third complete year, we want a state after launch to become to land in a situation where it becomes a profitable growth state. And we've called out that our first phase dates are already crossed that threshold. It's very difficult because what's happened is emerging markets will eventually keep moving into core markets and new emerging markets will keep on adding up. So your base will keep on getting so distorted every two, three quarters that any number that you start putting it as a benchmark will raise more queries than answers because sales move from emerging to core as soon as they perform.

40:27 So there is no permanent the core will keep on increasing. As we talked today, we already have five core states and the sixth one is knocking on the door. And these will keep on increasing the intensities to, in a couple of years, actually reach 10 core states and that's what we need to be focusing on because the yardstick must be consistent to review it over time. Core and emerging yardsticks are not consistent to be reviewed over time on the same base. Thank you. The next question comes from the line of Hitendra Pradhan with Maximal Capital. Please go ahead. The next question comes from the line of Sukrit Patil with EyeSight Fintrade.

41:27 Morning. Good afternoon, the team. I have two questions. First question, Mr. Swaroop is, this quarter's margin improvement is very, very good. And but we see but we can also see grain and packaging costs continuing to rise. From your point of view, how do you see Globus balancing the growth in sales volumes with the risk of input inflation putting pressures on the profitability. It would be useful to hear how you plan to protect the margins if costs keep on climbing through FY through the next financial year? Yes, sure. So firstly, I've given a range bound guidance on manufacturing margins at about INR 5 to INR 7 per liter.

42:24 We're not seeing any challenge in achieving this for this year. And what gives me confidence is that, firstly, we have a significant part of our purchase mix. We've got a secured raw material supplier, which is FCI. They give us material at a fixed price through the year at different points, different parts of the country based on where our capacities are. Secondly, we are able to take a to a limited quantity, not our entire purchase mix, but in a limited way, take a position on Mays and therefore, lock in the price of Mays for the period, has received the most amount of inflation in Mays.

43:16 And finally, we left a broken rise, which is subjected to some inflationary pressures. We don't have a way of hedging that. Fourthly, we've got the E and A business, which is a flexi price business. We can every month, we are able to pass on costs. So it's more of a fixed margin business as it were. So we're able to pass on movements in costs there. Given these four things, it gives me confidence that the year we are able to operate between INR 5 to INR 7 a retail. My second question is... The other thing, sorry, I wanted to mention is that the inflationary with the agri commodities, right, which is what most of our purchases for the manufacturing business, It's not a purchase cost on price quarter on quarter and they keep rising.

44:16 It's seasonal and it's based on harvest. So Q2 and part of Q3, we see some inflation. Q3 and Q4, because crops start coming in, we see prices reverse. So this is an ebb and flow that we've been operating in for some time. And with this multiproduct, multi feedstock, corn hedging strategy, we are now able to maintain a INR 5 to 7 per liter consistently. My second question to Mr. Giranjan is, operating expenses have risen quite a bit and expansion plans do naturally require more capital. Just want to understand just want to understand on how you will be approaching this balance, keeping keeping cost under control, managing funding need, and ensuring the dividend for the share... Shareholder.

45:16 If expenses continue to rise faster than revenue, how do you see the company maintaining both growth investment and shareholder return? Just want to understand your kind of rationale. Thank you. So capital discipline is a very important part of our growth strategy. The entire P and A business has been self funded from cash flow, cash generation from the manufacturing business as well as the R and O business. And that remains our priority for investment. Once our CapEx plans finished sometime last year after commissioning UP, we do not have any more capacity expansion plan.

46:01 So all the cash generation does get fed into growing P and A. And the P and A investments essentially come you see it through as other expenses, right, whether it's manpower, it's marketing expenses, so on and so forth. The P and A business is not going to continue to grow in a manner where expenses are growing faster than revenue from approximately 60% or so negative margin a couple of years ago, we are now at nearly at breakeven. In fact, we should be getting to profitability sooner rather than later. Our focus is, however, this business utilizing our cash flows to grow this business as well as maintaining a reasonably healthy impact down as the years go by.

47:01 Over time, there could be opportunities to accelerate P and A growth so far in the last couple of years based on this sort of regular cash infusion coming in from free cash, we've been able to grow the P and A business to where it is today. The P and A business, of course, now has a lot more heft than it did a few years ago. And I do believe that based on this strategy of quarterly cash generation and then growing P and A business, there are some opportunities that we are missing out on. So we look forward to trying to find solutions for those whilst also maintaining a healthy balance sheet.

47:52 Thank you. The next question comes from the line of Tarang Agrawal with Old Bridge. Please go ahead. Hi, good afternoon team. A couple of questions. On the Arun, sorry. Your line is not very clear. Just give me a second, please. Give me a sec. Am I audible? Yes. Thank you. Okay. Good afternoon. Just a couple of questions from me. How big is the West Bengal IMIL market? Time I checked, it was about six to eight lakh cases a month, but I might be the wrong. I haven't seen I IMI and Shekhar is about 26, 27 lakh cases a month. Yeah.

48:48 IMIL is about just above INR 2,500,000, yes. Got it. Got it. And second... It's a sizable market, yes. A sizable market. Sorry, come again. It's a sizable market. Yes. So it's almost as big as Rajasthan? It's a I mean, slightly smaller than Rajasthan and Haryana individually. Okay. Got it. The second question was, as you continue growing your IMFL business, Just wanted to get a sense today, the last update that I had was you're present in seven states.

49:35 Is that correct? Or the number of emerging states has actually increased? So as of now, our total presence is 103,000, 4,000. So we are now touching 11 overall eleven eleven states we are already totally present in now, including luxury. And are the ones which we are driving to work towards core out of these at this point of time. And obviously, Delhi, UP, four are already core out of these six. Two are on the verge.

50:23 The total presence will keep on increasing because luxury will expand in slightly faster clip in terms of geography. And core as of now, we want to just stabilize the other couple of states and then move to open up the next one. The next question comes from the line of Sandeep with Maniwartam. I hope I'm audible. Yes, please. Could you please provide a breakdown of your UV plant production? How much is consumed internally, captive convention and how much is external convention?

51:08 Along with that, did you also please give a update on how is your distributor network evolving usage for R and D division? And what are your key priorities for scaling this business? Sure. Just one added point on the previous question. Tarang, if you could look at Slide 11 on our corporate presentation, investor presentation, it has a good breakup of our geographical presence and strategies. Thank you for your question, sir. UP, about 25% of our capacity is utilized captively. The rest is currently bulk sale. But this number changes right now quite a bit month on month because that facility is both a molasses as well as a grain facility.

52:08 So we do end up storing producing one material, storing it in bulk and shifting to the other. So there is a certain amount of capacity optimization that needs to happen there. The next is UP has actually become a very important international sales force for us, given the very positive policy of the UP government to encourage international sales, we have managed to pivot that unit to be our sort of flagship international sales source. So it's currently the optimization of internal versus external is still underway.

52:58 It's about 25% internal, but we need to optimize that in the quarters to come. With regard to distributor network, we it's sort of mandate it's a private network. There's no corporation like in other in some other markets. It's mandated by the excise policy, and we follow the processes and rules of excise to distribute our brands. So if you allow me, can I ask another question? Yes, please. One of our key competitors in UP market, which operates in which holds around 40% market share, but continues to deliver a single digit EBITDA margin. So what gives you confidence to achieve a double digit EBITDA margin?

53:52 I'm not able to comment on other companies and how they and their profitability. But we've been operating in R and O in other states for some time. We've been operating in UP R and O for some time as well. Of course, we are seeing these much healthier growth rates this quarter onwards in the back of some very interesting and innovative products that the This company has launched over is what we are seeing, sir. I'm not able to comment on other company's margins. So basically, what gives you confidence that you are able to achieve a double digit margins, EBITDA margins in R and S segment? We are seeing that profitability already. I mean and we are achieving it. So I don't know how else to answer your question.

54:51 Can I ask another question? Sameer, yes, go ahead, please. There has been an rainfall that is getting East And North India this year. So what will be the impact on raw material prices? Like I mentioned, next quarter on Q2, Q2 is inflationary. But especially in the East part of the country, we're able to create a hedge for our raw materials. So I don't see any significant change this year over the last year. Our guidance on an all India basis for the manufacturing business is INR 5 to INR 7, and we continue to maintain that guidance for all the quarters of this year. So no, I don't see any material impact on that guidance as of now.

55:47 And how is your inventory segmented in distribution, UP distributor market? I'm not sure I understand the question. What do you mean? How is the inventory segmented? Inventory part of your distribution network BPC. How much is the inventory? Sold product is sold as per the rules of excise. There is a combination of warehouses, which we manage as well as warehouses that are managed by others. So the warehouses that we manage, the inventory is obviously in our books. And the warehouses that are managed by others, it is ex factory sale.

56:37 There is no it's not a meaningful inventory number. It's a few days' worth of inventory. Yes. It is under a week most of the time, just to sharpen it. In R and O segment, the inventory is very low in number of days because it's quick in, quick out, and it's a good cash flow business because most of the business is either cash or token couple of days credit. So it's not a high credit business, the R and O. Okay. Thank you so much for answering my other questions. Thank you. The next question comes from the line of Nishanth Ghat with Equity Works Limited. Go ahead. Good afternoon. Am I audible, sir?

57:23 Yes, sir. Yes. So I have two questions. I'll make it short. So Shekhar, I just wanted to know what's the current capacity utilization of the UP plant? And Param, can you please give some color on your previous plan? You mentioned that you have done a strategic wind down of your legacy portfolio in West Bengal and Haryana in the R and O segment, right? So West Bengal, we know that there is still that manufacturing license issue over there. But in Haryana, when can we expect a good volume driver from Haryana to our R and D segment?

58:10 And can you give some more color on the Assam and Jharkhand market, which you recently entered? How are things progressing over there? That's from my side. Sure. I'll take the first one, Param. UP, I don't have the exact UP utilization number for Q1, but there's no red flag there. It's running very well. It should be well over 80%, 85%. Can I? I don't have the exact number. Shaker, it's more than 90%. So UP is lower. Yes. So coming to the R and O, Haryana. See, Haryana, we have called out the state.

58:56 Obviously, somehow there has been a bit of a yo yo in terms of the environment. And we have obviously stayed slow in terms of investing in the R and O segment in Ariana and kept our momentum just continuing. What we have started doing is the consumer has been evolving and we are among the early ones who have taken advantage of this and have either ramped up our portfolio, rearranged our portfolio based on as newer and newer profiles of taste packaging are evolving. And that's what I mean when I say that we are doing away with some of the legacy portfolios that we are carrying on. In some cases, it's the renovation, in some cases, it's an upgradation.

59:49 And then, of course, there are new launches that are being supported. So, Haryana, at this point of time, I still see modest growth in the next two, three quarters from where we look at it. Our main focus is to keep building UPS the most aggressive growth and to as fast as possible get back into Western Wall R and O. Those are our two main focus and Hana will continue to be a modest growth stage. In Delhi, of course, we have got the tender and we are just starting to we just entered Delhi back after a lull and that's more of a tender driven market, which is depending on the tender volumes.

1:00:38 We just have to service that market. So that's how it pans out. Coming to P and A, Assam and Gharkan both are at this point of time giving us a lot of positive energy. The consumer as well as the trade partners have welcomed us with open arms. There is a high level of acceptance in both the states. So we are expecting good tidings ahead on both the states. Yes. Thank you for giving more information on that. I also like the new I heard that Snoski as a brand is gaining very good traction in UP, especially with the new variants that you have been launching. I saw it in the Instagram.

1:01:24 I don't know if you updated on the investor presentation, but I saw you did two new launches on the traditional flavorings, right, the chili mango and the Jammu flavors. So just wanted to get a more sense from you that how are like how do you plan to build this P and A portfolio even stronger because the brands are getting enough traction, I think. So we obviously are not depending on one brand. Smosky is one of the power brands in the portfolio. Our focus as of now is to drive Mountain Oak Brothers and Company as well as Smosky all equally aggressively.

1:02:14 Obviously, depending on the state and the opportunity and the innovation factor, there are quick wins and then there are the hard fought wins And that's the relevance that you are pointing out on Smoltzky. We rest assured that full support is going across. We do not see ourselves as a one brand P and A success. We see ourselves as having a portfolio of three, four solid brands in P and A and a similar number of powerful brands in luxury segment also. So the effort is on a very broad based growth where we are not dependent on one state, one brand for our future sustainable profitable objectives.

1:03:05 Thank you. Ladies and gentlemen, in the interest of time that was the last question for today. I would now like to hand the conference over to the management for the closing remarks. Hi. Thank you, everybody, for joining the call. If there are some questions left out, please do e mail us, and we will get back to you at the earliest. Thank you again, and have a good day. Thank you, sir. And gentlemen, on behalf of Globus Spirits Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.