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Submission of Revised Transcript • Date: June 7, 2024 • Correction: Typographical error in financial figure related to a deposit.
Financial Performance Highlights • Joint Managing Director: Shekhar Swarup • Challenges: Low margins due to raw material supply changes (discontinuation of rice from FCI). • Optimism: Transition to maize for ethanol production expected to improve margins. • CEO: Paramjit Gill • Growth: Strong performance in Prestige & Above segment with significant sales volume and profitability increases. • Future Plans: New brand launches and market expansion.
Financial Metrics • Net Revenue: 15% year-on-year increase to INR 2,415 crores for FY'24. • EBITDA Margin: 7.6%. • Net Debt: Slight increase to INR 241 crores due to expansion. • Future Expectations: Anticipated improvements from new operational plants in Bengal and Jharkhand.
Product Segment Performance • Prestige & Above: Currently loss-making but expected profitability in initial markets within two years. • Regular and Others: Performing well, with plans for launches in Uttar Pradesh by Q2/Q3.
Manufacturing and Raw Material Challenges • Shift to maize for ethanol production due to rising rice prices affecting margins. • Recent softening of raw material prices expected to enhance profitability.
Pricing Strategy • Anticipated price increase of INR 8-10 per liter due to raw material cost reductions. • Target EBITDA margin of INR 7 per liter.
Brand Expansion and Marketing • Plans to introduce new brands in both Prestige & Above and Regular & Others categories. • Commitment to enhancing brand awareness through digital marketing.
Business Model and Strategy • Focus on using cash flow from Regular & Others and Bulk businesses to invest in Prestige & Above segment. • Emphasis on establishing a solid foundation across various categories for future growth.
Manufacturing Insights • Majority of ethanol production from the East; transition to maize expected to lower costs and improve margins. • Rice procurement prices have decreased significantly, with a strategic focus on maize for sustainability.
Financial Performance • Q4 and FY24 Overview • Total net revenue for FY'24: INR 2,415 crores (15% YoY increase). • EBITDA margin: 7.6%. • Net debt increased to INR 241 crores due to expanded operations.
Challenges and Optimism • Raw Material Sourcing Issues • Shift from rice to maize for ethanol production due to FCI halting rice supplies. • Anticipated stabilization of margins with maize transition.
• Growth in Prestige & Above Segment • Sales volume increased by 170% in Q4 and 84% for the year. • Management optimistic about future profitability and growth.
Operational Developments • New Initiatives • Commercial production started at a new bottling unit in Uttar Pradesh. • Plans to launch Regular and Other brands in UP by Q2/Q3 2024.
• Beer Segment Plans • Outsourcing sales expected to start in FY'26. • Potential investments in production facilities based on sales scale.
Market Dynamics • Raw Material Price Trends • Softening prices in West Bengal and Rajasthan expected to enhance profitability. • Incremental price increase of INR 4-5 per liter anticipated.
• EBITDA Margins • Target average EBITDA margin: INR 7 per liter. • Recent decline in Bulk Alcohol segment's EBITDA per liter attributed to rising raw material costs.
Strategic Focus • Brand Expansion and Innovation • Plans to introduce new brands in both Prestige & Above and Regular & Others segments. • Emphasis on brand awareness initiatives.
• Long-term Vision • Strategy to use cash flow from established segments to invest in emerging categories. • Focus on building a strong consumer franchise without raising equity.
Conclusion • Sustainable Operations • Transition to maize for ethanol production viewed as a sustainable and efficient strategy. • Ongoing monitoring of rice procurement prices to manage supply chain costs.
Financial Performance Overview • Discussed Q3 FY24 and nine months ending December 31, 2023. • Full-capacity operation primarily using rice and maize for ethanol production. • High broken rice prices due to milling issues despite lower raw material price expectations.
Strategic Shifts • Transitioning towards maize-based ethanol production, especially in East India (20% increase in maize cultivation). • Pausing further investments in ethanol capacities in Odisha; continuing reduced capacity project in Uttar Pradesh.
Consumer Division Growth • 40% increase in volume sales for premium brands. • 4% quarter-on-quarter revenue growth in consumer business. • Successful market expansion and new product launches anticipated to drive further growth.
Tax and Stake Developments • New income tax regime reduced tax rate from 34.94% to 25.17%, providing a tax benefit of approximately 30 crores. • 38.08% stake in Bored Beverages Limited with a post-acquisition loss of 15.60 lakh.
Raw Material Sourcing and Margins • Shift from rice to maize for ethanol production; expected margin recovery in Q1. • Targeting gross margins of 30-35% for new IMFL products.
Capital Expenditure and Future Investments • Maintaining annual CAPEX of 20-25 crores while expanding into new geographies. • Recent acquisition of a ready-to-drink business to be integrated into existing operations.
Financial Metrics • Net debt of 252 crores as of December 30, 2023. • Power and fuel expenses of 64 crores for Q3; CAPEX for first nine months of FY24 at 125 crores.
Competitive Landscape and Market Strategy • Emphasis on innovation in packaging and product offerings. • Projected EBITDA margins of 6% to 8% for upcoming quarters, contingent on raw material prices.
Fuel Hedging Strategy • 30-35% of Eastern India fuel requirements secured through long-term agreements with Coal India.
Consumer Business Focus • Current operations: 34% consumer business, 66% manufacturing. • Future investments aimed at enhancing consumer segment profitability.
Product Launches and Market Expansion • Launch of high-end spirits under India Craft Spirit Company. • Plans to expand IMFL portfolio, particularly in Uttar Pradesh and Rajasthan.
Market Dynamics and Regulatory Environment • Cautious approach to investments in Haryana and West Bengal due to political factors. • Government-fixed margins for wholesalers and retailers discussed, highlighting market dynamics in different states.
Conclusion • Management remains optimistic about future growth and profitability across segments, with strategic initiatives in place to enhance performance.
Q2 FY '24 Earnings Conference Call Summary - Globus Spirits Limited
Challenges and Adaptations • Raw Material Disruption: 18-day supply disruption from FCI affected production. • Adaptation: Shifted to maize for ethanol production. • Future Outlook: Anticipates improved margins with the kharif crop and plans to store raw materials to reduce volatility.
Financial Performance • EBITDA Margin: Reported at 7%, impacted by FCI stoppage. • Cost Management: Successful cost pass-throughs and reduced debt.
Growth in Premium Segment • Volume Increase: 143% year-on-year growth in the premium segment. • Expansion Plans: Focus on distribution and new product launches.
Ethanol Pricing and Procurement • Current Prices: INR 64 for rice ethanol, INR 66 for maize. • Profitability Impact: Estimated loss of INR 5 to INR 7 per liter due to procurement challenges.
Market Performance • Key Markets: Strong growth in West Bengal, Delhi, and Haryana; improvements needed in UP and Punjab. • Expansion Plans: Launching in Rajasthan and Jharkhand within six months.
Raw Material Costs and Utilization • Projected Decrease: 8% decrease in grain prices expected in December. • Utilization Rates: Expected 80-85% in Q3, aiming for 95% in Q4.
Packaging and Cost Management • Packaging Costs: Increase in glass bottle prices offset by reductions in other materials. • Cost Structure: Packaging costs included in materials consumed.
International Expansion and Subsidiary Operations • UK FTA Benefits: Expected to reduce costs for blending scotches, aiding industry growth. • Bored Beverages: Focus on three states initially, with plans for future expansion.
Seasonal Revenue Trends • Q2 Revenue: Typically lower due to excise year structure; Q1 and Q3 generally stronger. • Franchise Bottling: Minor revenue segment, performance tied to brand success.
Closing Remarks • Future Outlook: Emphasis on strategic market expansion and managing commodity price impacts. • Well Wishes: Concluded with Diwali greetings.
Q1 FY '24 Earnings Conference Call Summary for Globus Spirits Limited
Business Focus • Emphasis on building a stable business through robust distillation assets. • Expansion of consumer segment with a 14% quarter-on-quarter increase in sales. • 23% year-on-year growth in the premium segment.
Product Launches and Brand Expansion • Introduction of new products, including premium vodka and craft spirits. • Expansion of brand presence across various states.
Financial Performance • Anticipated revenue and margin impacts in Q2 due to plant closures. • Optimism about growth targets, especially in the premium segment (aiming for 20% of consumer revenue).
Ethanol and ENA Business • Flexibility to switch between ENA and ethanol production based on raw material availability. • High grain prices affecting margins, but recovery expected in Q3 with upcoming rice harvest.
Consumer Segment Strategy • Integrated operations in select states to stabilize margins. • Current operations in Rajasthan, Haryana, West Bengal, with plans to expand into Jharkhand and Uttar Pradesh.
Gross Profit Margins • Decline attributed to increased costs of raw materials and packing materials. • Significant year-on-year drop in IMIL volumes, particularly in Haryana.
Market Expansion and Investment • Strategic investments in multiple states to mitigate regulatory risks. • Plans for further construction in Odisha and Uttar Pradesh.
Raw Material Sourcing • Acknowledgment of volatility in margins due to switching from FCI rice to open market purchases. • Flexibility in using maize as an alternative raw material.
Future Growth Expectations • Target to double IMFL business volumes over the year. • Slightly higher growth anticipated in Value and Value Plus segments.
Production Losses and Financial Impact • Estimated loss of INR 30-40 crores in top-line revenue due to production disruptions. • Potential offset by strong performance in IMIL and IMFL businesses in the latter half of the year.
Strategic Goals • Aim for a balanced revenue mix between manufacturing and consumer segments. • Focus on geographies with favorable market conditions for prestige segment growth.
Conclusion • Management remains optimistic about recovery in margins and overall growth despite current challenges.
Q4 FY '23 Earnings Conference Call Summary for Globus Spirits Limited
Key Developments • Operational Expansion: • New 140 KL ENA and ethanol plant commissioned in Jharkhand. • Expanded capacity in West Bengal, total capacity now 765 KL/day, with plans to reach 905 KL by late Q1 FY '24.
• Consumer Segment Performance: • Sales dip in Value and Value Plus segments. • Premium segment revenue increased by 700% year-on-year. • Focus on expanding premium offerings and improving product mix.
Financial Highlights • EBITDA Margins: • Q4 EBITDA margins around 16%, supported by favorable ENA pricing and reduced fuel costs.
• Dividend Recommendation: • Board recommended a 60% dividend for FY '23.
Market Insights • Challenges in Consumer Business: • Disruptions in Value segments, particularly in West Bengal. • Strong growth in Rajasthan with a 33% overall market share.
• Future Growth Expectations: • Anticipated high single-digit volume growth. • Plans to enter Punjab with a Premium Plus offering in June.
Operational Updates • Coal Supply and Ethanol Growth: • Improvements in coal supply noted; secured contracts for monsoon. • No specific ethanol volume guidance provided.
• Bottling Plant in Uttar Pradesh: • Expected operational by end of Q3 to enhance profitability and market presence.
Strategic Focus • IMFL Business: • Anticipated triple-digit growth, breakeven expected in 2-3 years. • Ongoing marketing initiatives and cautious geographic expansion.
• Capital Expenditure Plans: • Focus on IMFL and ethanol capacity generation. • No further capital expenditure planned until market evolves towards E20 ethanol blending.
Product Performance • Super-Premium Brand Terai: • Contributes 20-25% to profitability with a gross margin of 71%.
• Future Product Offerings: • Plans to enter lower-end consumer segment in Jharkhand and Orissa. • Regulatory approval for new launches expected in 20 to 60 days.
Conclusion • Overall Outlook: • Management expressed optimism about future growth and market positioning, focusing on sustainable growth and profitability across operations.
Submission Details • Date of submission: February 20, 2023 • Earnings call date: February 15, 2023 • Submitted to: National Stock Exchange of India and BSE Limited
Key Highlights • Financial Performance • Q3 EBITDA margins: 14% • Expected margins: 13% to 15% • 7% year-on-year increase in consumer segment sales (4.05 million cases) • Average realizations rose from Rs.510 to Rs.537 per case
• Operational Updates • New ethanol plant in Jharkhand: 90% capacity utilization • Ongoing expansions in West Bengal and Jharkhand, completion expected by early Q1 FY2024 • 5% reduction in energy consumption at West Bengal plant
• Product and Market Strategy • Targeting a 20% revenue share from prestige and above brands • Significant growth in value and value plus segments (22% revenue growth) • Plans for new product launches and portfolio expansion
Management Insights • Income Tax Search • Clarified as routine with no significant operational impact
• Cost and Margin Challenges • Grain prices and cost inflation affecting gross margins • Increased power and fuel costs due to new Jharkhand plant • Aging equipment at Samalka facility impacting yields
• Future Outlook • Cautious optimism about future growth and profitability • Expected EBITDA margin of 15% in Q4 • Projected doubling of top and bottom lines in the next financial year
Investor Questions • Concerns Raised • Impact of rising coal prices on margins • Local partnerships for bottling plants • Flexibility in production between ENA and ethanol
• Responses from Management • Coal prices remain a primary factor affecting margins • Preference for in-house operations unless compelling reasons arise • Production cost of ethanol is approximately 5% cheaper than ENA
Conclusion • Management expressed gratitude for participation and invited further questions, emphasizing ongoing strategies for growth and addressing operational challenges.