Globus Spirits (NSE:GLOBUSSPR) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Q2 and H1 FY 'twenty seven Earnings Conference Call of Globus Spirits Limited hosted by MUFG As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. I now hand the conference over to Mr. Sumit Katan from MUFG In Time. Thank you, and over to you, sir. Thank you. Good evening, everyone. I welcome you all to the earnings conference call to discuss q two and h one FY twenty seven results of Globus Spirits Limited.

0:47 To discuss the result, we have from the management, mister Shekhar Swaroop, CEO and joint managing director, mister, CEO consumer division, and mister, 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 statement 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. Good afternoon, everyone. Thank you for joining us for our Q2 and H1 FY 'twenty seven earnings call.

1:33 At the outset, I wish everyone a very happy and joyous festive season. Parag and Nilanjan are with me today, and I will cover the overall direction of the business. Parag will then discuss Consumer, followed by Nilanjan on financials. The first half has seen continuous continued progress in our consumer business and strengthening of our financial position. The P and A business has moved close to EBITDA breakeven benefiting from growing scale, while regular and others continues to grow year on year supported by great performance in Uttar Pradesh. Manufacturing revenue in Q2 was INR $4.55 crores with volumes of 55,260,000 liters and EBITDA of crores.

2:23 EBITDA per liter came at INR4.6 a liter, reflecting higher grain and fuel costs. Q2 is typically a period of higher raw material and fuel costs ahead of the new crop season as well as scheduled plant maintenance. We therefore evaluate manufacturing performance across a twelve month period. For H1, EBITDA was $5.59 per liter, while trailing twelve month figures stood at approximately 6.6 per liter. Operating flexibility extends both... Extends across both product and feedstocks, E and A and ethanol and maize and rice, allowing us to optimize contribution as market conditions change.

3:12 Looking ahead to the ethanol supplier twenty six-twenty seven, which is scheduled to begin later in November, Reduced availability of sugar based ethanol is expected to create greater procurement opportunities for grain based producers. We expect we expect this to support higher capacity utilizations at Globus and better absorption of overheads. On feedstocks, greater FCI availability is expected to moderate pressures on both rice and maize prices. We also expect enhanced broken rice availability following the reduction in permissible broken grain content in raw rice from 25% to 20 from 25% to 10% being implemented progressively from the current marketing season 2627.

4:08 Together with our feedstock and product flexibility, long term offtake agreements with OMCs, and the contribution from value added byproducts such as DDGS and corn oil, these developments support our confidence in maintaining the rupees 5 to 7 per liter annual EBITDA targets, whilst recognizing that actual allocations, offtake and input prices will determine the outcome. Turning to capital allocation, we completed our INR 200 crore rupee QIP during the quarter. We welcome our new institutional shareholders and particularly value the continued support of existing investors who participated in the fundraise. The QIP enabled us to strengthen our balance sheet further through debt reduction, providing additional room for the consumer business to grow.

5:01 Nilanjan will cover the detailed financial impact. Our focus remains unchanged, convert consumer growth now into improving profitability, manage manufacturing economics across the cycles and deploy capital with discipline. With that, I hand over to Param. Thank you, Sheikha, and good afternoon, everybody. I will begin with 13 and above, where increasing scale is translating into improved operating economics. P and A revenue grew 54% year on year to INR59.9 crores, while volumes increased 64% to 460,000 cases.

5:47 Sequentially, revenue grew 9% and volumes 10%. EBITDA loss narrowed down to INR0.2 crores, bringing the segment very close to breakeven. For H1, P and A revenue was approximately INR114.9 crores with volumes of approximately 880,000 cases. Importantly, improved economies of scale helped mitigate cost pressures during the quarter. Gross margins remained broadly unchanged sequentially despite input cost inflation, while higher volumes supported better absorption and improved EBITDA better cost absorption and improved EBITDA.

6:35 We now have five profitable states across our 12 market P and A footprint, while net sales revenue trends have stabilized sequentially. Our focus is to deepen established markets and expand selectively where we see a clear path to profitable scale. Our next phase of expansion includes five additional duty free channels and entry into two new states during FY twenty seven. Work towards CFG entry is also progressing with entry targeted during q q three subject to approvals. We have also introduced to us our new Indian blended luxury whiskey.

7:24 This has been initially launched in Haryana, Chandigarh and Goa. We intend to build this distribution supported by consumer trials in the initial markets. Turning to regular and others, revenue grew 14% year on year to INR 242.8 crores, while volumes increased 16% to 4,240,000 cases. EBITDA grew 4% to 38.6. For h one, revenue stood at approximately $4.99.2 crores and EBITDA at 82.6 crores. Putra Pradesh continues to expand our growth base while Rajasthan remains a strong and established market.

8:13 In Rajasthan, price increases have helped offset input cost inflation during this year. However, lower sequential volumes reduced contribution and fixed cost absorption resulting in some margin moderation compared with Q1. As Uttar Pradesh grows, R and O is also becoming less concentrated in Rajasthan. Each state has different realization and economics, so the blended margin will reflect this evolving composition. UOP margins will strengthen as we continue building our business and volumes there. Our focus remains on profitable growth within each market.

8:59 We will continue to deepen markets where we have traction, invest behind brands demonstrating consumer acceptance and keep the path to profitable scale central to our decisions. With that, I will hand over to Nilanjan. Thank you. Thank you. I'll briefly cover the financial performance and the changes to our balance sheet following the QIP. For Q2 FY 'twenty seven, revenue stood at INR $7.58 crore, registering a year on year growth of 15%. For HY FY 'twenty seven, revenue reached at INR $15.41 crores, reflecting at 11% growth over the corresponding period of the previous financial year. On the EBIT profitability front, EBITDA for Q2 FY 'twenty seven stood at INR63.8 crores, representing a year on year growth of two percent.

9:49 For H1 FY 'twenty seven, EBITDA increased by 17% year on year to INR143.3 crores. While quarterly EBITDA growth was relatively moderate, the overall H1 performance reflects a healthy improvement in operating profitability. Q2 FY twenty twenty seven tax de grew versus Q2 FY twenty twenty six on account of additional depreciation from UP as well as a onetime deferred tax benefit that was taken in Q2 FY twenty twenty six. Turning to cash flow generation. Cash flow from operating activities for H1 FY twenty twenty seven stood at INR 139 crores compared to INR $2.70 crores in H1 FY twenty twenty six. The moderation in operating cash flow was primarily attributable to an increase in credit receivables driven by higher volume business volumes during the period.

10:36 The principal balance sheet development this quarter was the deployment of our INR 200 crore QIP process. By September end, INR 155 crore had been utilized towards repayment of long term debt contributing to an overall INR200 crore reduction in the debt between March and September. Our reported debt to EBITDA ratio improved from 2.63x at March 8 to approximately 2x at September end. Alongside the refinancing completed earlier, the debt repayment has reduced outstanding borrowings and future financing commitments. We estimate interest savings of approximately INR 6 crores in H2 FY twenty twenty seven, equivalent to INR 11 crores to INR 12 crores on an annualized profile basis. The combined effect is a more comfortable debt profile, lower financing costs and greater flexibility to meet working capital requirements and support our consumer growth plans. Our focus remains on disciplined deployment of capital, efficient working capital management and continued strengthening of the balance sheet. Thank you. We now open the call for questions.

11:45 Thank you. We will now begin with the question and answer session. Our first question comes from the line of Bhargav Puttadev with Ambit Asset Management. Please go ahead.

12:37 Yeah. Good evening, team, and thank you very much for the opportunity. Sir, if you look at your IMFL business, it's been sort of now growing at a fairly strong pace. So just wanted to know in terms of if we take a two to three year view, in your opinion, which are the key states which can sort of further accelerate the growth or possibly take you towards your INR $4.50 crores to INR 500 crores revenue target, if you can highlight that? And then I'll ask the second question. Param, would you like to take that? Thanks, Raja, for encouraging up comments on the call. So at this point of time, obviously, in our current scenario, we are fairly dependent on West Bengal, Delhi West Bengal as well as...

13:38 I mean, UP West Bengal, Delhi and Jharkhand as key states. And going forward, we are adding a few key states with the risk of being the first one. We see at least seven to eight key states which will all support broad based growth and reduce our dependency on three to four states. We earlier had dependency on one. We made it two, four. Now we are at about four to five state dependency. The whole plan is to make this very broad based, Bhargav. So you expect us to have at least seven to eight fairly profitable state businesses growing a broad based growth. And not only that, we expect that we will have three to four well firing brands also on the brand parameter allowing us to support the front base growth.

14:36 Great. Great. And my second question is that, obviously, there's been a recent change in terms of the prices from base based ethanol being reduced by three per liter. So obviously, in your opening remarks, you did mention that Globus has the flexibility to go to rise as well as broken rise. So do you think that this despite the 2 rupee card, you still can maintain your 5 to 7 rupee? If you can spend some time on that math, that would be very helpful, and that would be my last question. So, Barga, principally, what I have found is changes in ethanol price impact raw material prices directly.

15:24 You know, when you look at... We have three three raw material options, FCI, broken rice, as well as maize. This year, the big change over last year on the raw material mix is that there is clarity on how much FCI rice is going to be allocated for ethanol, and we have that clarity right in the beginning of the year. Second, we have a much larger availability of broken rice given the change in quality norms of FCI. Based on these two factors, I believe May's prices are going to remain lower in the new year, which is, you know, yet to start.

16:12 Combined with our ENA flexibility, we are not seeing too much pressure on the five to seven repeat guidance. Understood. So you are fairly confident on on that number that on an annualized basis, that number can be... Because at times, we have also seen that, obviously, the EBITDA per liter could sort of go down drastically, but this time around you seem to be fairly confident on that. The last few quarters, I think now it's been six to eight quarters. The company has been in that zone. Of course, this quarter we had about 4.7, 4.6. But, you know, five to seven is the guidance, and I'm quite confident about it.

17:03 Yeah. Great, sir. Thank you very much, and all the very best. The next question comes from the line of Himanshu Shah with Dollet Capital. Just in continuation of previous question, one is what has led to the sharp drop in EBITDA for Eater this particular quarter, any specific reason? I covered that, Himanshu, in my opening remarks as well. It's the sort of quarterly changes in commodity prices. If you look at a longer trend, Q2 is usually the time that we have the greatest amount of inflation in raw material and fuel, which starts tapering off in the middle of Q3 and stays pretty depressed for the rest of the year.

18:05 So it's a play out of that. It's not a concern in the overall business health. Okay. What would have been the inflation in the raw material prices, grain prices and the broken rice of May during the quarter either or... I think September end, we should have finished should have ended September at about INR $27.28 per kilo of rice and about 22 it's about INR $23.24 for maize. Of course, these are sort of end Q2 prices, not the average of Q2. I don't have the average figures with me at the moment. And this will be higher by how much, sir, on a Y o Y or Q o Q basis?

18:58 So Q1, April, May, June, so that's the sort of crop season, right, in Bihar and the East. So Q1, you would have ended at about 21, INR 22 of maize and about INR $24.25 of rice. Okay. Got it. The second question is of the manufacturing volumes annually around INR 21 crores, 22 crores that we must be doing. What would be the share of maize based ethanol in that bulk alcohol sales on an annualized basis? So it varies quarter to quarter. I don't have that figure with me. Annualized ballpark range, sir?

19:46 Nilanjan, do you have share of ethanol... Maize ethanol in the total sale of ethanol... Total sale of manufacturing? Yes. Total sale of manufacturing for h one on maize is almost 60% on the ethanol part. And how much would be ethanol for the total sales? Ethanol for h one? Yes, H1 will also be fine. 60. 60. I think sorry, just wanted to jump in here, Himanshu. I think what we're trying to figure out is this impact of the change in price of maize ethanol. I'm afraid comparing historical maze volumes to what it might be in the future is not representative because we will be changing the product mix from time to time depending on what is most profitable.

20:41 There is a chance, a pretty good one, that maize ethanol is not going to be very profitable in the next year or not as profitable as FCI and broken drives. So H1 might have been 60% of total ethanol, which is made. I won't be surprised if this number is 30% going forward. I I don't know whether it will be 30% or it will be 60% as of now. It depends on how the raw material scenario shapes up. In either scenario, whether we sell 60% maize or we sell 30% maize or some other combination, we believe that the combination of E and E and ethanol, combination of FCI, damaged grain and maize will give us INR 5 to 7 margin per meter.

21:44 Okay, sir. And lastly, in our R and O volumes, what would be the share of UP in H1 of this year versus last year? On absolute basis, if you can let me know how much UP would have contributed? Or is it fair to assume the growth entirely in R and O volume is largely driven by UP? R and O Rajasthan has been growing at the rates it was in the past, which is small single digit sort of volume growth. A lot of the balance growth, in fact, entirely the balance growth has come from UP. Okay. And sir, R and O volume has R and O margins have also declined on a Y o Y basis by almost 160 basis points. This would also be on account of increase in RM pricing, try to assume that?

22:39 And PM, right? I mean the two things that have played out so actually, the one thing that's played out this year, which is unique and not prevalent in the last or the preceding years is the packing material inflation due to the whole oil scenario in the world. A lot of our raw materials are dependent on petroleum prices. So that has impacted margins to some extent. Of course, the price increase in Rajasthan helped that helped mitigate that almost entirely. So the balance fluctuation in margin that we are seeing quarter to quarter is raw material price movement. Got it. Thank you and all the best.

23:24 That's it from my side. Thank you. The next question comes from the line of with Maximum Capital. Please go ahead. Good evening, sir. Most of the questions have been answered, but you know, like, two things that I wanted to know. First of all, on the r and o, we have seen some depression in the margin, and you alluded that to RM, sorry, packaging material increase, etcetera. But going forward, like, you know, what could be the sort of margins that we should work with given that mix of UP is going to increase significantly, I think, in the coming years?

24:14 So how should we look at the overall margins in the r and o segment? So we've always maintained sort of guidance on r and o margins of between 1618% at EBITDA levels. So we are, you know, very much within that zone. I don't see I don't see any material sort of change to report in that guidance, 16% to 18% is going to be our our range for R and O margins. Okay. And and secondly, sir, on the manufacturing segment, just to harp on further, so, you know, while, you know, you can switch, let's say, from ethanol to DNA to avoid that 3 rupees cut.

25:06 But at the same time, you know, the other players may also want to do it. And as such, there may be a glut, for example, in the ENA itself. So that could cause a lowering of prices of ENA, for example. So how confident are we given that sort of a circular loop argument? Right? Your end product prices cannot that circular loop argument is, you know, is is not... It's not a perfectly circular loop for a couple of reasons. One is that, no, we we do not intend to shift, you know, in mass from ethanol to ENA. We intend to to shift the raw material or rather the product mix within ethanol between FCI, DFG, and means.

25:56 We believe there is going to be a much higher supply of damaged grains of broken rice in the year to come because of the change in quality norms that I alluded to earlier. And therefore, broken rice prices are likely to remain a little bit depressed. And, of course, FCI supplying its raw material at a fixed price provides, in a sense, a stop loss. Right? And and, you know, prices will not be allowed to move up further because there is this FCI rice supply option that's available. So it's not just a shift to E and E, which which gives me this confidence.

26:41 It's also a shift between raw materials. And the other is the shift to E and A, whereas, yes, other people would be thinking the same things. E and A is not a product that is easy to move from state to state. Are state taxes that need to be paid, import duties and export duties as they're called by different terms in different states. And, you know, given the way we've strategically located our distilleries in in Rajasthan, Haryana, UP, Bengal, Ghanpur, and Bihar, you know, I mean, aside from Bihar, where there is no local demand, but the other states, there is a local demand for us to lean on while shifting capacities between ethanol and E and E.

27:28 In addition to this, there is a very important aspect that is we're expecting higher capacity utilizations going forward because of a lower sugar ethanol demand next year. So higher capacity utilizations is also going to help offset fixed costs further and therefore give us higher margin. So, you know, we've been consistently between 8085%, and I believe in the year to come, that number is going to be meaningfully higher. Okay. And just finally, on this 100 crore QIP money, so I understand that it has been currently used to pay down the debt.

28:15 But at the end of the day, you know, what is the plan in, let's say, the next remaining six months and next year, how exactly are we going to use this 200 crore equity money that we have raised to sort of further our business plan? Right. Sure. So this was part of our QIP statements as well. We've discussed this in the past quarter. Happy to go through it again. INR 200 crores was the raise. 150 or approximately 150 crores has been used to pay down debt, and the balance amount is currently liquid. This paydown of debt releases a fair amount of cash from the operations, from free cash flows, which can be used to further grow our IMFL business.

29:14 And the and the liquid... The liquidity that's available today can get used for some additional bottling and a more whiskey related expansion. So all of this is to create some financial flexibility in the company to be able to take, you know, to be able to take that's in the IMFL business to grow that business further. Understood. Thank you, and all the best. Thank you. Thank you. The next question comes from the line of Nitinavasti with Inquired. Please go ahead.

30:02 Sir. Two questions. Firstly, I wanted to understand what is the amount of orders we received for ethanol in the final tender of the last year, ESY twenty six. And have we delivered all of that quantity, or we'll be delivering it in the current month with the extension of the government coming in? So I... Sorry, mister. I don't have with me the final allocation numbers of last year. And there was a there was a secondary allocation that was made midyear as well, which which sort of needs to be added to it. I'm happy to share it with you. This is in any case available to OMC as well. So I can share that with you subsequently.

30:52 So no, we have not completed all our orders. The understanding with the OMCs is that these orders will be completed by around November 30. By which time we are hoping that the new tender will also have been concluded. Fair enough, sir. Understood. Got that. Sir, second, I had a question on particularly the margins within the regular and other segment. We are expanding rapidly in Uttar Pradesh, whereas we are stable in the other markets that we are operating in Rajasthan, namely. Now because of that, how much is the impact on EBITDA that a person sees on the consolidated front?

31:45 Are we barely intended to be with the Pradesh, or are we far away from that? And that's why the margins that one sees in consumer and regular today do not reflect the true picture of the organization. If, do you wanna take that? Hello? Are you there? Hello? Yeah. Maybe Param's line dropped or something. I can I can take that? I'm here. Okay. Go ahead. Yeah. Yeah. So so, Nathan, we are overall expecting the margins to be in the same range of 15 to 18%. Obviously, as we continue to strengthen our presence in UP, it will start improving our gross margins further because as the volumes and the base grows, many of the costs like logistics and other overheads start getting neutralized.

32:51 But even in the short term, we are holding on to our range of 15%, 16%, 18% regardless of how fast UP moves. So it's not a it's not a sort of a flag that deviates us from our path. Obviously, the opportunity is huge as we continue to check along there. Understood. However, with the large investment we have made, we would still be having a large differential with our mature market of Rajasthan. That's what would be the understanding. Right? Large is not necessarily the term. There is obviously as we are investing, we are investing more heavily into UP at this point of time, like, is normal for for a state where business is initiated and then built upon, but then that is also the natural path to growth in geographies, isn't it? So the I completely I completely agree. That's what I was talking about. Of... The range of margin is still within the same range.

34:01 So the play is within the range. It's not a a play where we see ourselves really falling out of the rain just to build a state today. It can be UPN tomorrow. Again, as we enter Western Wall in times to come, there'll be more geographies. So the intent is not to deviate in a meaningful way from our existing margin trends. Understood, sir. Understood. So, Nitin, I mean, Rajasthan is definitely a little bit higher on that range, and UP is a little bit lower on that range. But that's the spread here. I mean, there's there's there's no significant concern on on the UP profitability. No. No. I understand that. There was another question on whether there'll be profitability and how much the profitability will be. It was just a time to reach optimal profitability was the question which was there.

34:52 I understand all the things from that. Yeah. U... UP will still be on the journey to reach its optimal profitability because we see it getting better and better as we continue to improve our health care. Understood. Understood. One more question, sir, finally. We are entering a phase which is very different from where you have been as a company operating within the ethanol space. We are entering a phase wherein, this year, definitely next year, maybe, sugar is not being going to be allowed in the mix. Now that gives them a very big opportunity for everybody who's in the grain universe. Number two, we also have seen, at least the trade data is very significantly reflecting of this, that domestic consumption of ethanol for the chemical industry shifting to the domestic players and the imports from, countries like US have completely dropped.

35:57 Now that is again something that you guys can cater to. Not everybody within the industry can cater to it. Number three is the impact of the first two things I spoke upon on the ENA prices. Now this situation is something which has not, emerged or happened in the past. On ground, big figures in play, Can you elaborate on this? So we are expecting a demand of about 900 crore liters for green based ethanol from from from OMCs for green based ethanol. There is about a 100 to a 150 core liters, which the chemical industry uses, and there's about 300 to 400 crore liters that the beverage industry uses.

36:53 There is likely to be a significant growth in the beverage number for this... In the coming year as well or in the current financial year rather as UP shifts more of its country liquor from molasses based to green based. That said, Nathan, there is there is a lot of capacity in place in India, as you have correctly identified. The opportunity for for distilleries is not homogeneous. There are just... There are two groups or maybe three groups of distilleries.

37:39 There are players who have long term offtake agreements with OMCs, and then there are players who don't have long term offtake agreements. And the third group is players who are combination of ENA and SMEs, which is a fewer number of players and a smaller amount of capacity. Aside from our Bihar unit, Globus Spirits has long term offtake agreements at all of its facilities, Bihar and... Pardon me. Aside from Bihar, Rajasthan, and Uttar Pradesh, where in any case, where in Rajasthan and Uttar Pradesh, there is no ethanol capacity. Capacity.

38:28 All other units have long term offtake agreements. Given that in these units, which are Bengal, Jaikran, Haryana, we are foreseeing a significantly higher capacity utilization in the coming year. In addition, the road is largely internal consumption. There is very, very little sales, so I'm going to disregard that unit as part of this discussion. Uttar Pradesh, which is currently not operating at 100% capacity utilization or 85% plus capacity utilization, is going to start increasing its capacity utilization. In fact, you know, already in in the last three or four months, we've seen much higher capacity utilizations than the previous before, largely because of the changing policies in UP towards moving away from sugar based molasses to grain based sugar based... Molasses based country liquor to grain based country liquor.

39:35 All in all, I do not believe that there is a case for increasing our guidance on the rupee per liter margins that we have because of the large amount of capacity that exists in India. But I am very confident that we'll be able to maintain the guidance or achieve the guidance we have maintained. Understood, sir. Also, I was not looking for a guidance here on the quarterly I'm sorry. Forgot. Let me just complete this point if possible. Go go ahead, Nitin, please. Yeah. Yeah. Just... We... I was looking at... Because of all these developments, volume uptake of the company. We we are gonna have significant volumes.

40:28 So that's where I was coming. Of on EBITDA spread is something else, but the whole thesis was building whether we would say record volumes from Globus in the coming years. Yeah. I'm... I... I'm expecting in the next sort of ethanol year, which starts what? It's supposed to start November 1, but I guess it'll start a little bit later. Yeah. Yeah. Yeah. But I guess it'll start a little bit later, but whatever. So November to October, we we can expect much higher volumes. Understood, sir. Thank you. Thank you. The next question comes from the line of Ashmita with Electrum PMS. Please go ahead. Ashmita, your line has been unmuted. Please go ahead with your question.

41:24 Hello? Am I audible? Yes. You're audible now. Please go ahead. Yeah. Thank you for the opportunity, and I just had few questions. Just wanted to know if all the potential impact for the current... The main price increase has been factored in, or do we see any more further price inflation in the coming quarters? So so q three, typically, every year, of mid q three onwards, sort of Diwali onwards is when harvest really kicks in and the material starts coming into the markets, see it, you know, the the evidence of that is the air quality worsening that happens across North India, which is the stubble burning that takes place across Punjab and Haryana.

42:21 So, you know, we're gonna start seeing that harvest coming in a little bit later, a few days away. That's typically the trend that plays out there. Yeah. Sure. Also, just one more point. If we see that, you know, because of this 3 rupees per liter, the development which has happened and if more players shift to FCI rice and the broken rice, do we see more price increase in the rice? No. In fact, I I believe that price of rice is going to be subdued in the coming year for the reasons that there is a... There is FCI available, and there is a change of quality of FCI rice, which is going to release more broken rice in the market. So previously, raw rice was purchased with 25% brokens.

43:16 And this year onwards, FCI is going to purchase rice with 10% brokens. And just one last point. Do... What what would be the update on the e and a export business, and for for how much volume have we exported in q two, and how do we see it in q three? So I don't have the exact number of how much we exported, and it's not a... It's... We don't track it as a separate business as it's part of the sort of manufacturing basket, and it's one of the tools we have to, you know, improve our margins, improve our volumes.

44:02 My sense would be that h one, there would be about 5,000,000 liters or so would have been the exports just to give some sense to the numbers. So that's h one. Yes. Yes. So, you know, I don't really track it as a separate business, either is it housed with separate teams. It's part of the manufacturing basket. Sure, sir. That would be it from my side. Thank you so much. Thank you. The next question comes from the line of Ashish with InvestQ PMS. Just one aspect I wanted to sum up. From the overall discussion that we're doing in this call, It makes kind of a picture where we are already passed last year on INR 6 a liter kind of a largely higher side of the profitability for the manufacturing segment.

45:06 And we've been spending on the prestige and above. So does it mean that we have more hurdles next year or maybe the next twelve months in terms of profitability of the overall because I can't see levels of the profitability improving from here. It can have overall. So does it get compensated by the growth on the revenues or maybe the volumes or all that? So I just wanted overall picture of the business as you see over the next maybe four quarters or within the next twelve months coming. Yes. I can answer that for the next few quarters as well as for the next few years. The manufacturing business is steady at 5 to 7 rupees a meter.

45:56 Obviously, H1 is a little bit lower on that. We expect copper... Maize prices, rice prices to start cooling off post the valley. So, you know, hopeful for higher realizations in h two or higher EBITDA from this business in h two. But more importantly, from a more longer term point of view, the manufacturing business is really the base where we utilize our capacities and make incremental cash flow. The long term guidance on that remains at INR 5 to 7 a liter. And whilst we invest that cash flow in growing our consumer businesses, both R and O and P and A, we're at sort of a pivotal point of breaking even in the P and A business, and that business is is going to add to a considerable amount of profitability in the years to come.

46:56 Whilst also the incremental growth in the R and O business and already the high profitability of that business will continue to grow profits for the company. The manufacturing business is sort of steady at that range, five to seven with a 20 to 25 core... Per liter kind of capacity, kind of sales annually, that's how I see the business shaping up in the next few quarters and the next few years. Mr. Ashish, does that answer your question? Yes, yes. So I was just trying to understand that the profitability of the prestige and above segment, that I mean, still would be maybe eighteen months, twenty four months away from achieving some sort of reasonable profitability, right, I mean, in terms of numbers.

48:11 Is that a fair understanding? So really starts really comes down to how much we continue to invest in growth, right? I think in the consumer in the P and A business, growth is a function of spending. Right. Currently currently, we are completely focused on building scale in the business in terms of new products, new geographies, growing existing products as well in terms of, you know, whether it's advertising or any other type of activities at the retail level. So it's really a function of of of growth. I mean, at this point, do I want more profitability or do I want more growth? I would I would pick growth.

49:02 And, you know, the journey is is is long in terms of how much headroom we have to grow in this space. So, you know, I would, for sure, pick growth at this point given the the strength in the balance sheet, the the very part... Very healthy cash flows that the company has. You know, let's let's grow the business. There is opportunity to grow. Let's grow the brands. There's some tailwinds behind some of the brands. And then when one needs to sort of starts... Start taking, you know, chips off the table, start cashing in, you can start, you know, pulling back on some of the expenses, and profitability is a very simple thing to achieve at that point.

49:54 So, you know, it's growth that's coming in from deploying the profits that are being generated. So Param mentioned that five of 12 states are already profitable. So the other seven states are being invested in from the profits of those five states. And if if one was to just simply chase profit, then, you know, one wouldn't go into these states, and these five or six states that we have will be able to already build profitability. So, you know, it's a conscious decision to chase growth given the strength of the balance sheet and the strength of our cash flows. The The next question comes from the line of Imran with Longbow India.

50:57 Please go ahead. Hi, good evening. Thank you for the opportunity. Go by multiple. Yes, sir. Please go ahead. Very nice to see the business growing. So congratulations on the part, especially the consumer business. So before I ask the question, can I can I maybe request sir to, you know, quickly look for the power and fuel cost for this quarter and the last quarter? And maybe whenever he has, he can give it to us in between the, you know, the conversation. My question is my question is largely on the consumer business. Right? And especially in the IMI category. So we have Rajasthan, UP, Delhi, Haryana, West Bengal, either the target markets. Rajasthan, we are the leaders.

51:43 Right? And then... Sorry. So... And then, you know, I want to know in Rajasthan, over the last three, four years, the growth has largely been coming from price increases, or there has been any any volume growth as well? So Rajasthan has growing at about mid single digits, low to mid single digits volume growth. And then we get about 4% to 6% price increases annually. And therefore, you get a high single digit kind of revenue growth from Rajasthan. Right. And and and that's largely because the the market is well entrenched.

52:30 40% or so of the total Rajasthan r and o market is sort of reserved for the state owned companies. There's there's a Rajasthan state sugar mills that's a competitor or a market player there. And the balance 60% also is available to private entities. And within that 60%, we have about a 50% market share. So given how entrenched we are, there is limited Zoom to grow market share unless the state market share reduces. Right. And that is not something that we've been seeing over the years.

53:16 So so that's not happening. Coming in... The growth that's been coming in in the last few quarters, sir, has been on the back of our launches in Uttar Pradesh. Uttar Pradesh has a significantly higher headroom for growth as compared to Rajasthan. If if my if my memory serves correct, I think UP is about three times plus the size of Rajasthan in terms of of the R and O market size. Sheikhar Sheikhar, sorry to disturb you here. See, we'll go to UP. I'm I'm trying to understand your states one by one here. So Okay. To understand clear. So we have not seen any market share reduction in the in the state company. So that that remains constant. So neither they're losing, neither they're nor they're gaining. Right? And the other players who the other players who are, you know, competing with you in Rajasthan, have you seen any one of them gaining or losing market share? Anything that you want to highlight?

54:14 No. No. No. Not meaning. Pretty stable scenario or function now. Yeah. Right. And any risks or, you know, that you would would like to highlight in Rajasthan to the consumer business, or you think it's not worth mentioning? Any risk that you see going forward or maybe now to the Rajasthan business? I mean, we we need to work on shoring up our brands, which is something... Which is a constant exercise. We... And and for that, we have new brand launches that take place even in Rajasthan, and we follow sort of consumer trends. We get exposure to sort of emerging consumer trends based on some of our launches in P And A and the innovations we do there, and we are able to sort of bring them in or engineer them even for the r and o business.

55:04 Right. So the risk is... The risk really is for us to be on the ball with regard to new products and changing consumer preferences. And up until now, I think you've done an okay job with that. And... Yeah. So, I mean, beyond that, I don't really see a meaningful risk in Rajasthan. Alright. And and, you know, Shekhar, the... What kind of capacity utilization we enjoy at Rajasthan plant? Because, you know, at some point of time... Because there is a... Even though there's a single digit growth every year on the volume side, so so at some point of time, you have to add some capacities there so to, you know, maintain your market share or even gain market share. And I think the additional government doesn't allow any further increase in the capacity, if I'm not wrong, because they are importing from, you know, outside state.

55:59 And under similar lines, are you also taking advantage of that? Because, you know, because we have plants in the neighboring states, so we can also supply e and a. So two questions in in one part. Yeah. Sure. So... No. You're absolutely right. That is that is a ceiling that is very much prevalent. We've got headroom for, in my view, about another 400 to 500,000 cases a month easy. So there is there is some sale that we do. And, you know, if you were not to sell that, we convert it to about 500,000 cases of finished product every month. So there is a headroom, but, you know, it's...

56:47 There is a ceiling, sorry, but there is there is headroom that is available still. You know? And and I think it's a good problem to have where we don't... Where we sort of, you know... Where we have a larger need for alcohol than we're able to produce because the company has, you know, a significant amount of alcohol in its system. So we'll just move capacity from one state... Move alcohol rather from one state to another. I wouldn't, at this stage, you know, for for the foreseeable future, even put down the possibility of expanding capacity in in Rajasthan. Our capital is a 100% focused on growing the consumer business.

57:36 Right. Right. And, Shikhar, now coming to UP, I don't know how much time we have, so maybe I'll try my luck here. Coming to UP, you know, I think you have mentioned in the past calls that the market is about 100,000,000 cases. Right? So about... So if if we multiply it by four fifty or 500 per case, the market comes out to be only 4,000 to 5,000 crores market. Right? And then you initially said you want to target 5% of the market. So that's that's barely 200, you know, on a on a base of close to 3,000 overall revenue you do. Don't you think the ambitions are a little below where you can go maybe in much, you know, target a much higher market share or I think if you look at UP growth, and I can... We can look at those numbers. I don't, you know, in the interest of time, wanna get into the numbers so much. But, you know, the way to look at the revenue of the company is to separate manufacturing and consumer and look at the growth that we are able to generate in Uttar Pradesh as a share of the consumer business, not as a share of the overall revenue.

58:47 So, you know, I mean, the the manufacturing business is best understood as a rupee per liter converter, and the rest of it is largely crop revenue to the farmer that's been passed through to to either the ONCs or to other customers. And our share... Our net value add in that business is 5 to 7 rupees a liter. Even if the realization of the of the product was to go up by 10 rupees or to go down by 10 rupee, our our net realization, our net value add would still be 5 to 7 rupees. Yeah. And hence hence, I would not look at the revenue of the company as a sort of homogeneous number.

59:38 Right. So... And and when it comes to the scale of UP and how much we can grow there, I think I don't know is one piece. Right? Whether it's 200 or 300, I'm... I don't have that figure with me. But I don't know is one piece. It's it's about growing the consumer business as a whole, and and UP is an exceedingly important part of that stock. Right. Right. And I saw the the, you know, the the latest Delhi excise numbers because they are published in July, I guess. And you have got the, you know, allocation almost double of what you used to have. Right? So congratulations on that part. Within the similar lines, could you talk about UP, IMI market, how large it is? My estimate is that it is anywhere between $1.50 to 200 crores, but can you put some more light on that?

1:00:34 Sorry. Are you talking about the UP market or the Delhi market? Delhi market. Okay. It has been undergoing some sort of structural shift. You know, that is given how how porous the Delhi borders are or or how many state borders Delhi has, we see a lot of product moving from one state to another. And as a result, the industry of Delhi has compressed. So... But as we've got an allocation of a larger amount, you were right, but we're seeing that the industry's sale volume is much lower, significantly lower than what they had envisaged.

1:01:21 So given that Delhi is currently not a business which is moving poor, not interesting, So we are sort of reevaluating our plans for Delhi currently. Haryana and West Bengal, they are also not contributing any Haryana contributes. West Bengal is zero currently. We will be reentering Bengal in the next in the next financial year. Haryana is contributing, but not growing as meaningfully as a UP. Got it. And and, you know, can you maybe give ENA realizations or market price, if if possible? What what is the Oh, sir. As I mentioned earlier, you know, the the the price of the product is not so meaningful.

1:02:15 You know, if I if I sell product at 50 rupees or if I sell it at 70 rupees, my net realization... My my net margin is still going to be 5 to 7 rupees a liter. It is it is a result of raw material price movements that moves the finished price of the product. Our our net value add will remain at that 5 to 7 rupee range. So that's why I don't want to get into too much of what is the price of ENA or the price of ethanol because it's really not a meaningful figure to track quarter to quarter. And and, Shekhar, you know, I have been juggling with this question for the last three, four years. You know, when when when I look at the IMFL... IMFL business of our company, And I'll give you an example. Maybe, you know, you're selling Mountain of, let's say, a quarter for for about $1.50 odd rupees.

1:03:16 Right? And then there are alternatives available, which are legacy products in the market, IB or McDonald's or whatsoever, right, in the same category. I I have heard your argument that the the quality is superior, you mentioned. But despite that, you know, you know, you can use some tricks to to to, you know, get the consumer try your product by, you know, let's say, hypothetically making your availability and other people not selling in the same store. Right? But at the end of the day, you know, consumer is actually using the other product from from last many, many years, and he sort of like the taste brand, everything. So... And and the moment you, you know, take out your trade incentives, etcetera, then again, he switches to the, you know, the product that he used to have.

1:04:08 So how can you, you know, you solve this problem? Sir, I think, you know, maybe we are over in this problem. I mean, sorry. Just a sec, Param. I mean, I mean, by this analogy, there should never really be any new companies entering any consumer space. Because once a company is established, there can be no space for anyone else. So I don't I don't... I think we're over indexing this issue a little bit. Sorry. And, you know, I'm happy to, you know, set up a call and get into the... What we do in order to acquire market share and how we believe for our products that's going to be sticky.

1:04:55 But in the interest of time, I wanna just move on to some of the other questions. I hope you won't mind, and we'll set up a call to address this one. Sure. No problem. And, Nilandit, sir, could you could you please give the power and fuel cost if it is there? This quarter, it was 6.3 per kg, which last quarter, it's an inflation of 10 to 11%. The overall cost are in crore rupees for the whole quarter? It's around about INR 60 crore, 43 crore. INR 60 crore. Thank you. Thanks. Thank you. The next question comes from the line of, an individual investor. Please go ahead.

1:05:44 Hi. Good evening. I hope I'm audible. Yes. Yes, ma'am. Thank you so much. I have a question on a and p budget. I would like to understand, is there an A and P budget for the next half of the year considering as my understanding that the times coming forward are going to be friendly to our portfolio. So I'd like to understand overall about the budget And if you can shed some light on it with examples, that would be really helpful. So, Param, can I ask you to take that, please? Yeah. Yeah. Yes. Of course, ma'am. We have a a a and b budget as almost all the brands are expected to have. And you have rightly pointed out the A and P budget has obviously got many elements and also has spread towards different geographies and different brands as well as different parts of the calendar year.

1:06:43 And obviously, as we head into the festive season, the E and P is indexed higher at all the categories which have a higher relation to festivities and upward mobility towards purchases. Yes, without E and P, one wouldn't really survive in a branded industry. So thank you. That's that's helpful. And one more question. I'll just quickly set up the context for that question and then ask the question quickly, if that's alright. Sure. Keep it short. Yeah. So I... Yeah. Thank you so much. So I did a bit of a ground research, and I found that our brands are either placed in the shelf either on the top, which is hard for customers to reach, or at the very bottom where, you know, like, a lot of customers don't really look.

1:07:36 So is there some kind of metric or or something that you track which basically tells you about the shelf space that we are taking and our brands are taking and how it is impacting our margins? Yeah. So... Yes. Yes. I think all... We definitely do track how our shelf presence is. Having said that, we must understand that unlike in the FMCG industry where there are millions of outlets, we have a restriction of 35,000 to 80,000 outlets across the country jostling for all the brands that are available. So the first and foremost, what is important for a company with our portfolio is that is our visibility punching above our size.

1:08:23 That's the first point. If it is punching above our size, then obviously, immediately along with that comes with how much of the shelf space can be secured, which is in the diamond zone of visibility and also in a walkaway outlet, which are in the reach areas. Not always are we able to secure the best spot at every outlet. And so is the case with all the brands regardless of whether they are category leading or they are evolving because everybody is fighting for the same space everywhere. So the intent is that when you visit an outlet, the first thing we look for is in terms of visibility, are we punching above our weight?

1:09:09 If our market share in that city is 3%, 45%, then are we punching above our weight in terms of many plants around in the shop? And that's the first parameter which we look for. And then of course, how much of our brands are in the diamond zone of high visibility. Yeah. Oh, that's that's really helpful to know. So do you do this analysis state wise or outlet wise? Like Ma'am, we don't. We... No. Nobody is able to do it outlet wise, though all of our Yeah. All of our executives have apps that do it, but very broadly, it is tagged. Every outlet is not tagged with its own history.

1:09:55 But yes, we have internal audit teams. We have customer marketing teams who keep on tracking all the elements that we put invested into the outlet and rate visibility in terms of our own internal parameters, how the visibility is. This is done with category a outlets separately, and then it is done by team member. How is the team member reacting to this key ingredient which is expected of him? Well, thank you. Thank you for answering. That's helpful. That's it from my side. Thank you. Thank you. Ladies and gentlemen, in the interest of time, that was the last question for today. I now hand the conference over to the management for their closing comments.

1:10:46 Thank you, everyone, for joining the call. Please feel free to reach out to us if you have any questions about the business. Wish you all a very happy Diwali and a festive season ahead. Thank you. On behalf of Globus Spirits Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.