Radico Khaitan (NSE:RADICO) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Radico Khaitan Limited Q2 FY 'twenty seven Earnings Conference Call hosted by ICICI Securities Limited. 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. I now hand the conference over to mister Ashutosh from ICICI Securities Limited. Thank you, and over to you, sir. Thank you, Anam. Hello, and good afternoon, everyone present on the call. On behalf of ICIC Securities, I welcome you on Radico Khaitan Limited's q two FY twenty seven earnings call.

0:53 I would like to thank the management for giving this opportunity of hosting the call. From the management, we have Mr. Abhishek Khaitan, MD Mr. Dilip Bantia, CFO Mr. Sanjeev Bhanga, President, International Business Mr. Sudhir Upadhya, Chief Sales Officer and Mr. Satish Somani, Deputy CFO. I will now hand the call over to Mr. Abhishek for any opening remarks. Thank you and over to you sir. Good afternoon ladies and gentlemen and thank you for joining us on Radico Khaitan's Q2 FY twenty twenty seven earnings conference call. The second quarter of FY twenty twenty seven has been the strongest in our history with record volumes, revenue and profitability.

1:43 During the quarter, RMSL volumes stood at over 10,000,000 cases, revenue at INR1746 crores and EBITDA at INR356 crores with an EBITDA margin of 20.4%. 0.5 in, the consistency of this delivery gives us great confidence in the year ahead. Premiumization remains at the of this performance. Our prestige and above portfolio grew 36% in volume during the quarter, well ahead of the industry and continues to enrich our mix with every passing quarter. In vodka, the structural shift we have spoken about is gathering pace with the category share of INSL reaching 6.3% in Q2.

2:35 Flavors are driving this change and Magic Moment is shaping it. In August, we launched Magic Moment's bringing a nostalgic flavor cherished in every Indian household into a contemporary format, supported by a digital first campaign. Consumer response has been encouraging and tertiary uptake across the Magic Moments family remains healthy. In Whiskey, After Dark's Modern New Look is resonating well in the largest segment of the market and we are extending it to more states. ATM Premium Black continues to gain momentum and market share, while Royal Ransom Board continues to perform well across Civil and CSP channels.

3:21 Our Luxury portfolio including Rampur Indian Single Malt, Gesselmeer Indian Craft Gin and Girasat Indian Single Malt continue to receive an exceptional response from connoisseurs in India and abroad and we are steadily taking Girasat to new states. Brand advocacy remains central to this effort. During the quarter, we continued to partnership and premium shops in shop formats at retail. The policy environment across key states continues to be progressive and supportive and we see this as a meaningful tailwind for organized premium led players like Radico in the years ahead. Internationally, we also became the first Indian spirits company to be present across four major UK airports, a proud moment for the Indian whiskey in the home of scotch.

4:18 And we continue to progress towards our target of 100 travel retail outlets in the times to come. At the same time, the global environment has turned increasingly volatile. We are seeing continued volatility in the raw material and packaging costs. We are managing this through sharper procurement, value engineering, our integrated manufacturing platform and a richer product mix. These levers give us the resilience to stay the course. Looking ahead, we have upgraded our prestige and above volume growth to 30% in FY twenty twenty seven and we remain confident of sustaining an EBITDA margin of around 20% for the year.

5:07 Before I close, an important update on our leadership. Effective today, Phillip Bansia joins the Board as Executive Director and CFO, bringing his deep financial, capital allocation and Alphabet's industry experience to the Board. Saket Somani has been elevated to Deputy CFO with an expanded mandate across strategy, financial planning, investor relations and digital transformation. These elevations reflect our belief in nurturing talent from within. As we enter the festive season, I would like to wish you all and your families a very happy and prosperous Diwali. With that, I would now like to hand over the call to our Executive Director and CFO, Dilip Bantia, for a detailed review of our financial and operational performance.

6:03 Thank you. Thank you, Abhishek. Thank you everyone for joining us on this call today. Before I begin, I would like to thank the Board for its confidence in me. The momentum we built in the first quarter was sustained through Q2 with strong volume growth, higher profitability and improved returns. Our performance reflects the resilience of our business model driven by premiumization, operating leverage and persistent focus on disciplined execution, even as the input cost environment has turned more volatile. During quarter two of FY twenty twenty seven, we delivered a strong all round performance with total IMSL volume of over 10,000,000 cases, reflecting a 7% year on year growth.

7:00 The prestige and above category continued its strong upward trajectory, recording a highest ever volume of 5,280,000 cases at 36% volume growth. This performance was supported by a strong brand momentum and premiumization led mix improvement. Regular volume degrowth was due to a higher base in quarter two of last year after the change in route to the market in the state of Andhra Pradesh and the impact of policy changes in Maharashtra and Karnataka. On profitability front, gross margin during the quarter is 48%, representing four forty basis point expansion on year on year basis and 109 basis point compression on quarter on quarter basis.

7:52 This improvement on year on year basis is due to the ongoing premiumization, product mix, premiumization added five ten basis points and the price increases added 85 basis points. This was offset to a certain extent by the recent volatility in packaging material, which resulted into approximately crores of financial impact. The gross margin was impacted sequentially due to some cyclical brand mix change and inflation in grain prices. Despite an uncertain macro environment, we are confident of our margin trajectory in financial year 2027. To mitigate the impact of increasing grain prices to a large extent, we have built a higher level of stocks, which has supported us through quarter two of FY twenty twenty seven.

8:49 EBITDA margin for the quarter stood at 20.4%, expanding by four sixty two basis on a year on year basis. The strong improvement reflects the success of premiumization strategy, better operating efficiency, continued cost discipline. It also highlights the benefit of our consistent investment in building a strong premium and luxury brand portfolio over the years. Building on our strong financial performance, both ROE and ROCE improved during the quarter, supported by higher operating profit and better asset utilization. As the premium and luxury portfolio continue to expand, we expect our capital efficiency and return ratio to improve further.

9:41 During the quarter, we made a deliberate investment in working capital to support the strong growth in our premium portfolio, new launches and secured key raw material and packaging material amid the price volatility. This is temporary, and we expect to normalize during the second half of this year. We remain disciplined in our approach to capital allocation with CapEx directed towards maintenance, operational efficiencies and essential capacity optimization. Looking ahead, our priorities remain very clear, driving profitable growth, maintaining a strong balance sheet, improving capital efficiency and creating a long term shareholder value.

10:28 With this, we'll now open the line for question and answer. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Sohman from CLSA. Please go ahead. Yes. Hi. Good afternoon, and thanks for the opportunity.

11:18 So two questions. Firstly, on this DRI investigation across the industry, can you explain a little bit more what the key issue here is and how the various players potentially are impacted? And secondly, on the raw material impact now, we've seen obviously a significant increase in grain prices as well as packaging materials. So from a pricing perspective, what proportion of our portfolio would you say has pricing freedom? And typically, what will be the price lag or the lag between pricing and input cost increases? Thanks. So thanks, Aditi. Actually, as far as the matter relating to the industry scrutiny on this thing, we are very, very compliant company.

12:13 We have always complied with the regulatory issues. The Scotches, which we were importing earlier, last ten, twenty years are in the same SSN code as 2208. And after July 15 also, we are importing the VMSs in the same code. So we have not changed any of our course, neither the connotation or the narrative of the material coming here. This is an industry issue, which DRI is studying, and I... We don't know how far it goes on others, but we are confident that what we are doing is as per the current laws. Thank you. And to your second question, regarding the packaging material and raw material scenario, see we have actually, as we in the beginning and opening remark, MD also said that we continue to maintain our EBITDA margin guidance of 20% for this full year.

13:18 So we are actually this quarter also, there has been a negative impact of INR27 crore, which is approximately INR156 to INR160 basis points on gross margin basis. However, we with the kind of listing, we have been able to mitigate and when we see that in the new crop season, which is starting from November onwards, the prices should stabilize. And at the same time, FTI allocation to this year's ethanol policy is also very, very elevated at 72 lakh metric tonnes, which will also stabilize this thing. So from November onwards, we see this to play a very benign kind of role.

14:04 At the same time, on packaging material, there has been an impact on account of the West Asia War. And in particular, basically on the bottle prices and the pack prices like that and some laminate prices. It is very, very unpredictable. But looking into the current uncertain and volatile scenario, we continue to work on our premiumization, improve on our product mix and continue to have that, that we can deliver a 20% guidance which we have given. So I think we are confident about our business and portfolio. Very clear. And thanks a lot for that. So just to summarize, so with this whole DRI issue, no impact on Radico likely. And second, on the input costs as well, I think no change to the 20% margin guidance for the current year.

14:59 That's correct. Thank you. Thank you. The next question comes from the line of Avnish Roy from Nuwama. Please go ahead. Yes. Thanks. Congrats. Very strong set of numbers. My first question is on The U. K. FTA. So are you seeing any increase in competition till now? And because costing is affordable for all players, is there more intensity within existing players? So how are you reading that part? Second is a question to your international head. In terms of the four airports in U. K. And further expansion, what kind of opportunity long term you see in that market because of the FTA and now better presence on ground also?

15:51 To answer your first question, this is U. K. FDA we are seeing about close to 8% to 10 reduction in the BIO. And if you see our portfolio, whether it's a ramp or Viraptor, it's a single mall and it is already priced higher than the existing VIO. So I think it's more of a consumer preference. And as far as the other portfolio whether it is After Dark or Magic Moment etcetera that is way below the DIO cost. So as such we don't see so much of challenge in our portfolio at all. Well, the GTR, as you know, we were we've just got listed in four UK airports, that's Heathrow, Gatwick, Birmingham and Manchester.

16:45 The response has been very positive. And global travel retail remains a very important channel for us, especially for our luxury portfolio, both in terms of showcasing the products to a global audience as well as consumption for them, whether it is for their own consumption or for gifting purposes as well. We are currently in around 70 duty free locations and our objective is to get to 100 in quick time. So we will continue to focus on this channel and try to expand it in quick time. Sir, my second question is on the guidance.

17:30 So 0.5, two upgrades, overall macro versus three months back, six months back, entire country, entire world, more challenging. What is the specific reason, two, three, if you can tell us? Is it because shift towards vodka is higher than your initial expectation? Or is it states like Karnataka or any specific state you can highlight? We don't know. The beer companies said that Karnataka, they are growing 60%, for example. So is it specific state which is working much better? Or is it just playing market share gain? Sir, you're not audible? Yeah. Yeah. So I I want to understand.

18:16 Yeah. Yeah. To answer your first question is, if you see there is a structural shift, which is taken towards the white spirit, which is vodka. And globally also if you see about 28% of the liquor market is vodka globally. In India, it was very small. In 2025, it was 3.7%, 26% it became 4.5% and this quarter it is 6.3%. So we are seeing a lot of shift especially with the Gen Cs and the younger generation and the women coming in, their liking is towards the wider spread because it is more easily mixable and plus it is much light and flavored vodka. So I think that shift is helping us number one. Number two, to answer your question Karnataka has led the way and they have really seen after the reduction in the duties and free pricing to give you an example say Radico in the current quarter we have grown more than 100% of our premium volumes there. So Karnataka is helping us plus we are getting overall growth from everywhere.

19:24 That is why if you see the P and A growth of RADICO is 36% in the current quarter. Sure. One follow-up question I had on your P and A volume growth and your vodka growth. If I dissect the numbers, it seems your non vodka P and A has grown around 23. Ballpark, it could be 1% or 2% here and there. Are you happy with this performance of non vodka P and A? And Karnataka, of course, has done quite well, which means that non Karnataka would have grown, say, much lower than that. Is it is Maharashtra dragging it down? Are you happy with this, say, 23% kind of growth performance in non vodka P and A? I think we are more than happy because the industry itself has grown only 5.8% to 6% in P and A. However, 20% non vodka growth, think it's a commendable achievement.

20:20 And WhatsApp we have grown by about 49%. So I think overall the P and A we are very, very happy with the portfolio. As far as Maharashtra goes, Maharashtra our P and A we have come back into growth in the current quarter. What is the reason for that? Maharashtra Maharashtra coming coming back to to growth. Yes, our P and A. So from our side, because as I said, the flavor shift is happening towards the vodka. And now I think vodka is about close to eight point percent of Maharashtra industry. 6.6%, okay. Maharashtra. Percent. Actually Maharashtra, the vodka has become 11% of the industry. So where we are market leader, so our P and A has grown very fast in the current quarter there.

21:09 And Abhi, to your other point about Karnataka, while Karnataka has grown very, very strongly, but our saliency from Karnataka is still 6%. So while that has contributed, the other states are growing much faster and are contributing lot more meaningfully. So last quick question. So on Tamil Nadu, your media interview, you gave some insights. The beer company also said Tamil Nadu seems to be opening up well on the right track. So if you could discuss medium, long term opportunity, assuming some basic stuff here. And on Telangana, again, everyone says the next quarter the hike is happening. What is the current understanding on Telangana price hike?

21:57 To answer your first question about Tamil Nadu, so Tamil Nadu is the largest market in the country. And as far as Radico goes, our moffus is the largest selling premium brandy there and it's the second largest market for vodka. So what has happened in September, which is a very, very positive and a pleasant thing for the industry is orders have started coming on plus fee basis. So even for us, our volumes are up 20% and also they are introducing a new thing that anything above INR1000 would be paid digitally. So I think that is going to and new brands we are allowing them to come. So I think Tamil Nadu can be a very interesting and a good opportunity for the industry especially for Radico.

22:45 And as far as Telangana goes, we have represented to the government, but it all depends on the government about the pricing issue. So thanks. That's all from my side. Thank you. Thank you. The next question comes from the line of Harit Kapoor from Investec. Please go ahead. Yeah. Hi. Good evening. So just, you know, one question on exports. I know P and A has done exceptionally well in the first half. Just wanted to get your sense on what's been the kind of exports growth for the first half of the year given the issues geopolitically? And how do you see this panning out over the next, say, two, three, four quarters? Do you see a easier situation, a slightly harder situation? Just trying to understand that whether this piece has not grown at the pace you would have liked and hence there are likely opportunities going forward over the next few quarters for growth to revive? That's my first question.

23:47 In terms of exports, yes, the geopolitical situation in West Asia did have an impact initially when the whole thing started in February and March. And for first couple of months, there was a problem, but then it's bounced back now and our shipments are going regularly into the Western Asia market The as only issue is logistics. The freight rates have gone up tremendously, but otherwise we're seeing a growth in all our export markets. So there's no letdown on our export business. So as of now, the issue is more a margin issue because of freight rates rather than a growth issue, which is... Which has rebounded already.

24:38 Yeah. That's that's correct. The freight issue. So part of the freight, we are absorbing part of the freight is being absorbed by the customer over there. And in some cases, there has been a little bit of increase in the consumer prices. Got it. Got it. And second question, sorry, Vishenji. Just wanted to get a sense from you, this is a this doesn't look like a one year or eighteen month phenomenon on vodka. These are typically trends, as you mentioned, globally, the shares are high end this category. And obviously, you may not see 40%, 50% growth rates. But do you expect this to become like a multiyear driver for you over the next maybe three, four, five years? Like you may not see 40%, 50% growth, but the growth rates will be significantly elevated compared to other spirits subcategories.

25:34 Is that the way that you are seeing the market? I just wanted to get your read on how you're thinking about this. Right now, so if you see total vodka market share is 6.3% in the current quarter and I think globally it is 28%. Even a 1% shift adds close to about 4,000,000 to 4,500,000 cases of vodka. So what we see plus the normal industry growth, so we see that in the next three to five years, the vodka should outpace any of the categories, especially the flavored vodka. Got it. And last question was, you could just give an update on yes, go ahead, sorry. In the last five years, if you see, the WhatsApp has grown by 20% year on year. So I think it's a trend which is there to stay now.

26:31 Understood, understood. And this last bit was the if you could maybe just you made several kind of launches in the last, say, twelve months or so. If you could highlight which of those you think has seen a greater response. I know After Dark and Black have done well, those are slightly earlier than twelve months back. But the recent ones in the super premium and in the super premium space, If you could just call out maybe one or two that you are more satisfied with in terms of traction, that would be helpful. That's my last question. So I think among the new launches, which we are very we are most excited about, I think the Viraxas Indian single malt because we didn't have a malt in the affordable luxury that is about INR3.5 to INR4000 a bottle. So I think that is seeing a tremendous response from every state.

27:29 So that we are very happy about. Second, we had launched Jammun. Jammun has become a trade. Now even Ampana what we have launched last month, the kind of tertiary and the kind of interest we are seeing is quite high on that. And after that, it is still not rolled out in its new avatar in many of the states. So it has just started rolling out. So I think that also should see a good traction. And eight pm Black is back in growth after we changed the packaging and the entire look of it and the communication. Great. Thanks. I wish you all the best, and and just a point of congratulations to Saketan as well for the elevation.

28:23 The next question comes from the line of Dheeraj Mistry from Jefferies. Congrats on good set of numbers. So my first question, historically, what we have seen that second half is much better than the first half. I... Where in first half year, then 36% volume growth and looking at your guidance, definitely, it has been upgraded. But ask rate becomes 24, 25. And if I look at the base also, it's not that high also. So what's the reason for this conservative guidance? Are you expecting any moderation in demand momentum or how do we think about it? Yeah, I think guidance is something where you are sure of and as far as the momentum goes, think we are seeing great momentum especially with the festive season on.

29:21 So I think the momentum is as strong as it was in the first half. Okay. Okay. Sir, all going forward beyond FY 'twenty seven, would you like to write something in terms of volume for FY 'twenty eight, 'twenty nine or medium term basis for So as far as FY 2028 and 2029 is concerned, we have already revised our guidance twice this year. So we want to consolidate that growth and there is no reason to believe that the momentum should come down, but we just don't want to describe a number to it at the moment. But the growth strong growth will continue.

30:10 Got it. Got it. Sir, on Luxury portfolio, how's the growth in this quarter? And are we on track to meet our guidance for FY 2027? We had done a turnover of INR $4.75 crore last year and we are well in force of meeting our guidance of 25%, gross to 25% in terms of value growth. Okay. Okay. There is no change in that guidance? No. Okay. Sir, lastly on margins, right, what will be the margin of IMFL business and non IMFL business during the quarter? So IMFL business is margins are because of the luxury and the vodka being major share and all that, it is approximately 24% plus.

31:08 And non IMFL business is around 9.5 to 10% for this quarter. For the quarter. Okay. You. That's it from my side. Thank you. The next question comes from the line of Rahul Agarwal from Itikai Asset. Please go ahead. Yeah. Hi, sir. Good evening. You you commented on the non vodka, you know, P and A growth. Just wanted some more color on how do you look into whiskey and, you know, brandy portfolio growth over a bit more medium term, let's say, two years. If you have to break this, let's say, 30% volume growth, which you've said for fiscal 'twenty seven, what would be vodka versus whiskey versus brandy?

31:54 And more medium term, what is the outlook here? I'm not asking for guidance, but just broad ranges will help. As we have updated our guidance to 30% as an overall portfolio of P and A, so we believe that vodka, as we already said, will grow much faster than other category as the industry is also growing. But on the whiskey and brandy also, it is upward of 20%, which we expect as a portfolio. There, ATM premium black after dark on the risky side, we'll take it and Royal Ransomware. And the other side is like on Brandy, the needle is morphed. Got it, sir. Got it. And secondly, on the margin side, like clearly, this year is obviously a given that you are looking at maintaining this 20% range. But incrementally, if you have to look at additional levers, one is obviously the growth looks high, which is why you will have operating leverage benefits and plus the entire UK FTA benefit has to play out. Could you highlight just a couple of top two, three points where margins could actually expand further in 2028, '29? Like what could be the lever?

33:07 Like we said earlier, the faster growing categories for us are vodka and luxury spirit, which have higher margins. So while this year, we have talked about 20% margin guidance, but the margin doesn't plateau at that level. It's just that given the current volatility in the global macro led raw material and packaging materials, we are not putting a number to it, but we have always said that the margin expansion will continue and maybe down the line one quarter or towards the end of the year, we will look at what the guidance for the next year is, but margin shall continue to expand. Got it, Saket. And lastly, Abhijesh, just one question here. We're getting into UP elections next year.

33:53 Typically, when this happens, how does the business behave? Should we be careful about should we be more concerned about or the business grows normally as normal routine? Can you just comment on that please? You. The liquor revenue in Uttar Pradesh is very high, goes to about INR 60,000 crores to INR 65,000 crores. It's a very big business. So I think and the system is very well set. So I think the elections also, I think it's not a case of worry at all. Okay. But typically, the business grows even during election, doesn't it slow down? It does not slow down during election. Got you. Okay. Got it, sir. Got it.

34:42 Thank you, and all the best for answering the question. Thank you. The next question comes from the line of Nitin from HDFC Securities. Please go ahead. Hi. Thank you for taking my question. My first question pertains to vodka where, like, I... We believe the growth has been healthy, and there'll be increase in the competitive intensity. Just wanted to check on like what is the resilience of flavored vodka for us and if you can highlight any future strategy around vodka? Our flavored vodka would be about close to 75%. And as we said, we have been innovators in making this category grow.

35:29 And we launched our flavors of India where we started with mango, jamun, now ampanna. So there'll be one, two more exciting flavors, which will be added on. And I think the more the people come in, there's more noise for the vodka category, which will make the vodka category itself exciting. So I think that is very good for the vodka category because when you talk about the widespread that is how the category grows. Sure. Thank you. And just wanted to check like is there any example from the international market like any further premiumization can happen in vodka? Anything beyond flavor we can do in vodka? In terms of the international markets, we already have our flavored vodkas over there as well.

36:26 But internationally, the flavored vodka is only about 25%. 75% is plain. So it's very different than the Indian scenario. However, we're seeing a lot of traction for these flavors of India in the international markets also. It's early days, but wherever there is an opportunity, we'll push that. Yeah. Thank you. But my question was pertaining to any leads from the international market, like international 28% of the volume come sitting in vodka. So sort of any innovation or any idea we can get from the international market which can work in India or just flavored vodka is a strategy for near term?

37:14 See, there's a reason for why internationally it's 28%. India is also moving towards that, which is basically changing of the consumption occasions. Now Indians are also consuming spirits in different shapes and form, whether cocktails, casual drinking, daytime drinking. So India is also moving towards that. And when that sort of trend happens, it moves towards lighter form of spirits, more versatile form of spirit. It's just that Indian palate is more suited towards flavors and internationally, it hasn't been the case. So I think we are reading the market. Currently, it looks flavor is the way forward. Sure. This is really helpful. It explains the question.

38:01 My last question pertains to After Dark with the new packaging and now authenticity with the Master Blender. I want to know the how is the brand doing and like in how many states we have the relaunched After active in at present? Thank you. So see, after that last year has grown by around 60%. Last year number has been closed on that. And after that also it has been very, very progressive wherever it has been launched. Now after the new pack change, we had entered in the 10 state as of now and we are getting the positive traction of the brand. The fact of the matter is that this is a huge segment altogether and there's a huge headroom which is lying there.

38:46 So we are hopeful that it will further grow. So we have a positive side from the side of consumers and the customer. Thank you. The next question comes from the line of from Choice Institutional Equities. Please go ahead. Yeah. Thank you for the opportunity, and congrats on another great set of numbers for the quarter. What I wanted to understand is that we've been growing from strength to strength. What challenges do we see in the current environment, specifically on regards to competition? And apart from innovation, how do we sort of see our strategy evolving going forward, if one specifically on marketing spends and advertising spends?

39:41 So, Steve, as far as we are considered, we are well placed in almost all of these segments. So when we talk about malls, we are talking about Rambo, we are talking about Girafas and then Singles and Sandoz Jesselme. So effectively in all these segments we have present there. So we have we keep on growing on that part because each of the segment is delivering result to us and there is a huge headroom which is lying on. Vodka, as it has been mentioned by the statements also, will be continuing with the growth because of the innovation of the flavor in which we are doing. Sir, what is our sales across vodka, gin and whiskey?

40:30 If you can throw some color, if not the exact numbers for especially for vodka. Vodka is 30% of our volume. Whiskey is about forty-forty five and rest is brandy and rum and gin is still very small because it's only at the extreme top end. Got it, sir. Sir, last question, what stage do we see as tailwinds and what stage do we see as headwinds for the next six months to one year? See headwinds, let's first talk about the tailwinds, it's basically the progressive policies of different states, any opening up in states like Tamil Nadu, etcetera.

41:17 Then the entire overall consumer shift towards more and more premium, considering alcohol as a lifestyle category. Then Vodka, of course, is a big growth trajectory going forward. And in terms of headwinds, I think this macro environment is what is making the cost scenario a little volatile. But see, as when you grow your premium product at 30%, 35%, then it becomes relatively less meaningful on the margin side. But yes, that is certainly at the moment one thing to watch out for. Got it, sir. Thank you and all the best and congrats to the new appointments. Thank you. Thank you. Thank you. The next question is from the line of Harshita from ICICI Securities.

42:07 Please go ahead. Yeah. Hi. Thanks for the opportunity, and congratulations on good set. A couple of questions. So firstly, on pricing, P and A realization was up about 2% this quarter, and you had mentioned 75 basis points of price benefit in Q1. So for this quarter, how much of this realization growth is actual price increase versus mix? And going ahead, are there any state price revisions already approved for this regard you should factor in? So as we said in our opening remarks that the pricing has improved by 85 basis points on overall basis in this quarter. Whatever price increase we have got in seven, eight states, right?

42:56 And quarter on quarter basis, the realization improved by 2.2%. On a year on year basis, the improvement is much higher, around 12%. And is mainly because we have grown 36% on our P and A category, and there is a de growth of around 15% on our regular category. Otherwise, in a normal state of affair, this difference of the product mix and all that going to remain between 5% to 6%, which we expect in a normal circumstances. And a price increase of 100 basis points to 125 basis points annually, the net impact. Sure. Understood, sir. And secondly, on cost management, you had called out roughly INR 30 crores of packing material impact in Q1. So what is the number in Q2?

43:49 And can you talk about the value engineering you have done since things like shift to hipster packs, light weighting of glass, etcetera? So just wanted to understand how much of gross margin resilience this quarter is from those interventions versus the mix? And also what is the extra share of volumes today versus say a year ago? The gross margin, as I said, first quarter was INR 30 crores, which was on account of the various packaging material. In quarter two, it is including the raw material and packaging material around crores, which is roughly 1.6% on a net sales basis. And as far as the value engineering is concerned, it is an ongoing exercise in the company.

44:39 And wherever we find the opportunity to improve on our packaging or other things, then with a better parameters and all that, we look for it. So I can't say at this point of time, but yes, as the R and D keeps on happening on that, so whatever is being done and it is being tested, then we try to implement it. Sure. There is one last question. So on regular segment, H1 is down 1.5% and Q3 last year also had Andhra base effect. So is the decline in the base issue that fades from Q4? Or is a deliberate pullback from low margin states that continues into next year? And what should we assume for regular segment volumes going ahead?

45:29 At this point of time, the base impact from Maharashtra and all that will be almost nullified from H2. However, keeping in view of the raw material prices and all that, we also keep taking the views on the various listing. But you can take it as a plateau or the benign kind of growth from here onwards or 1% or 2% kind of growth on regular category. Understood. Thanks for that and all the best. Thank you. Thank you. The next question comes from the line of Aditya from Invesco. Please go ahead. Hi. Thanks a lot for taking my question. Congratulations on a good set of results. My question is actually along the lines of the previous participant. So I just wanted to understand that if we keep the product mix aside and the inflation that we have seen in the input prices across the board in the recent six months, I would say, So the regulators and the individual states will take some time before they analyze and approve price hikes on the portfolio, right? Or is that and that should come in the coming months or coming quarters?

46:46 Want to understand how this works. So actually, as an industry body, this becomes an ongoing exercise and this takes momentum before the new excise policy comes into effect. Most of the policies come in the month of February and all that. There we as a industry body, we consider all raw material and packaging material, inflation and put up to the moment excise department. And let's then we see that how much is the price increase comes, but it is a normal practice. And at this point of time, it will start from November onward in various excise by the industry representatives.

47:33 Thank you. So is it fair to say that as of now, this inflation has been absorbed by the industry and maybe some relief is expected whenever this the next revision happens by most states? That's right. Okay. Thank you. The rest of my questions have been answered. Thank you very much. And all the Thank you. The next question comes from the line of Pankaj Kumar from. Please go ahead. Yes, sir. Thanks for taking my question and conversations on a very good set of number. Most of the questions answered. Sir, one question on the luxury side, we are targeting 25% kind of growth in the current financial year. And if you look at overall P and A category, we have received more than 30% growth, and we are expecting to continue in the second half as well.

48:27 So I mean, what is your take on the long term growth in the luxury category? Will it outpace the P and A or and what are our strategy to grow it? And also on this, please, brand split of specialty, how it is doing in the luxury category? As far as luxury is concerned, the base for the industry is very, very small at the moment. And we believe the kind of consumption discretionary consumption that's happening in India, the higher end lifestyle product, experiential products are doing extremely well. And we have seen how Indian single malt, gin and other categories that have performed over the last few years. So we believe that the strong momentum at the top end will continue.

49:20 And as far as period of catchment is concerned, I would request Mr. Mathias to just say. Yes. So I think the matter is subdued is in the court, and I don't want to comment on that at this point of time. We will approve disclose it at appropriate time. Okay, sir. Thank you. The next question comes from the line of Anurag Jain, an individual investor. Please go ahead. Good afternoon, sir. My question is on the benefit from savings on cost and core due to the duty reduction from 150% to 75%. Is there some new nuance now of it was just earlier?

50:08 I'm asking this because the new report related to statutory investigation seem to imply that BP reduction is not applicable to bulk cost and cost and is applicable only for the bottle in origin segment. I think the point is this is being studied by there is a Ministry of Commerce, which has done the FDA. And this is being studied by the government department, and DRI is taking input from all stakeholders, all the companies who are importing bulk scotches and all that and their inputs are also coming from the Scotland. I think appropriate time, they will clarify it. At this point of time, we can't speculate what will happen, what will not happen.

50:58 All right, sir. Thank you. And my next question is, recently on social media, there was an interesting data point. May I go ahead? Yes, yes, please. Recently on social media, there was a data point on the Indian liquor industry that the 5,000 state consumed liquor in value terms much more than the rest of the country. So is this something which applies to target market of Radico also? And how is Radico placed in these five Southern states? No, that is not correct. In the IMFL industry, South India accounts for about 60% of the industry because country liquor as a category or the local spirits are not there. While in North India and rest of the country, country liquor, IML, whatever you call it, that's a big segment.

51:59 But it's not so usually skewed towards South India as a whole. All right. So what would be the correct picture for these, if we look at the spirit industry altogether? So spirit industry altogether would be equally split between 400,000,000 cases of IMFL, around four hundred million three fifty million to 400,000,000 country liquor or local regional spirit and around a similar size in the beer space. All right. So market would not really skewed so much in terms towards South India then, if we look at in totality?

52:48 See, it would be not correct to look at it from an absolute number perspective. You have to look at each segment perspective. Our play is on the premium end, and that's what we look at mostly, especially in South India, there are a lot of categories at the lower end below the regular categories that we talk about, where we are not even present. So if we strip that out, the distribution would be fairly even across India. Currently, if you can give at a high level for our target segment, North, South, East and West, how what would be the split like for the target market of Radico?

53:33 How would be the four reasons this split like? See, again, we would have to probably take that offline because it's split between whiskey, vodka, brandy and different categories like for vodka. Other than South, the rest of line is very strong. In case of whiskey, again, it's fairly diversified, in certain South Indian states, it's not that strong. So it's fairly complex that way. Ladies and gentlemen, we will take this as the last question for today. I now hand over to the management for closing comments. Over to you, sir.

54:21 Thank you. To conclude, our performance this quarter reflects the continued success of our premiumization strategy backed by disciplined financial management and consistent execution. Looking ahead, expanding margin, improving return ratios and healthy operating cash generation reinforce the resilience of our business and give us confidence in sustaining the profitable growth. With a robust balance sheet and a growing premium portfolio, we are well positioned to capitalize on the industry opportunities and create long term value for all of our stakeholders. Thank you for joining us today and for your continued support. We wish you all a very happy festive season ahead. Thank you so much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.