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Globus Spirits Ltd
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Ladies and gentlemen, good day, and welcome to the Globus Spirits Limited Q1 FY '22 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Shekhar Swarup, Joint Managing Director of Globus Spirits Limited. Thank you, and over to you, Mr. Shekhar Swarup.
Thanks. Good morning, everyone, and welcome to our Q1 FY '22 call. I hope that you and your family members are safe. While the last financial year was perhaps the most challenging for all of us in the country, the start of this year too has seen the country grappling with the second wave of COVID-19. While health care systems and other industries continue to face the brunt of the second wave, economic activity in our sectors did not seem as disrupted as it was in the first wave. The months of April and May saw a blip in our sales, and we are happy to report that by the end of the quarter, we were firing in all cylinders again, and sales figures began posting strong growth numbers. With our diversified business model, our overall capacity utilization remained at 98%, even in this challenging quarter. As we have been pointing out, the value segment has seen itself mow from the back of changing demand due to increase in income in the rural and semi-urban markets. As a strong player in this segment, market leader in some states, we have been able to post strong growth numbers across our markets. Our efforts in creating better offerings for the consumer in this segment, along with strengthening capability at our back end and front lines, is playing out to our advantage, and we remain hopeful of translating this into market share gains -- further market share gains in the coming years. I would now like to take you through our segment-wise performance, starting with our consumer business. The company, as I mentioned, is in a unique position with our product portfolio in 2 significant segments. That is the higher end premium segment and the value segment. With this, we are able to achieve high profitability consumer business at a scale. The segment has done well, and the share of the consumer business increased to 42% of our total revenues in Q1 FY '22. The hourglass-shaped market that I have been alluding to in our previous calls, consumption growth at the premium end and at the value end, continue to drive our strategy for operating in key markets. On the Manufacturing segment, we are focusing our attention on expanding or setting up capacity in deficit states. A deficit state is one that depends on bringing its alcohol from other surplus states of India for the use of liquor as well as ethanol. This strategy allows us to maximize capacity utilization at higher prices than other distilleries located in surplus states from the very first day that factory operation start. And also allows us to seed our brands in that state, thereby helping us expand our value consumer footprint in the country. Structural changes in the industry continue to provide tailwinds. The target of 20% blending has been expedited by 5 years to 2025. On the back of this thrust, surplus capacities of alcohol,have dried up, giving us greater control on our margins across the states that we operate in. It is also -- it also validates our expansion plans in areas that continue to remain deficit for beverage and ethanol for petrol blending. As mentioned in our previous call, our capacity expansion in West Bengal facility by 140 KL per day will increase our total capacity in that state to 250 KL per day, this will be the largest green distillery in India once expansion is complete. The expansion is on schedule and we expect to start production in the month of September of this year. This will be the single, as I mentioned, largest distillery after completion. In addition, the new facility in Jharkhand will have a capacity of 140 KL per day. Construction work is in progress. As mentioned in the previous call, we expect to start production in FY '23 and will add to our distillery and consumer business. In addition, we are evaluating another 140 KL project site of which is to be confirmed. Construction of this project will begin in the current financial year. And by the time this CapEx expansion wave is complete, our total capacity will grow to 920 KL per day. I now request Param to take you through an update of our consumer business.
Thank you, Shekhar, and a very warm good morning, everyone. As we know, the second wave of the pandemic hit the country from April '21 onwards. And hence, our Q1 for FY '22 remained a subdued quarter for our industry. However, I'm happy to share that in comparison to the same quarter last year, our consumer segment has seen a growth in volumes by 65%, while our revenue grew by 91%. However, while the overall value segment sales were impacted marginally, the product mix continued to improve, leading to accretive margins. As Shekhar earlier mentioned, we have started Q2 of this financial year with our operations functioning normally, and we hope to exploit our journey as we go forward. Our key state of Rajasthan continued to gain market share despite the challenges faced due to the second wave of COVID-19. Haryana as well as West Bengal states sales continued at a similar terms of the previous quarter. Month-on-month sales have improved from mid-June with the easing of the lockdown restrictions. We are happy to update that we have been gearing ourselves to service this dynamic demand of consumers by keep moving between price points. We have successfully started energizing our current portfolio across the chain by not only improving its overall delivery to the consumer, but also expanding as well as upgrading the range of our offerings to cater to the evolving tastes and preferences. We are also taking into account the seasonal as well as the [ global ] led change in consumer behavior to capture these opportunities as well. Global Spirits will continue to participate as a [indiscernible] liquor in the premium alcohol segment, given the potential in the industry and the economic benefits that accrue to players in this segment. The merger of Unibev Limited, which is expected to be completed in this quarter, will help us in leapfrogging the rationalization of our operations, and we should begin performing well in this segment too.While overall, our volumes in the premium business give you by about 2% [ entirely ], the secondary performance came in at a degrowth of about 7%. I'm happy to share that Oakton premium whiskey almost managed to hold on to its previous year's volumes. Our focus on building a strong portfolio continues, and our strategy of targeting geographies is beginning to bear fruit. Undoubtedly, this is the perennial period for the most established of players. And as they say, never waste a crisis. We are using this time to calibrate our efforts to focus on a few states that meet our 5-point criteria that we had laid out last time, mainly profitability of the relevant segments, size and savings of the segments in which we operate, [ coming inside ] affordability to service the market as a small player, size of the investments required as well as the time required to make a [ particular state business off the door ]. Our business plan also envisaging participation in a couple of additional profitable segments in key markets in the coming year.I will now hand over to Dr. Roy to continue with the performance update. Thank you.
Thank you, sir. Good morning, everyone. Let me now take you through the operational and financial performance of the company. We are happy to report that our higher-margin consumer business has seen an increase in share of the total revenue. The contribution of the consumer business has increased from 35% in Q1 of FY '21 to 42% in Q1 of FY '22. In the consumer segment, we have seen a strong growth, not only in the revenue, but also the contribution of the consumer segment. The overall business in Q1 FY '22, revenues from consumer business in Q1 FY '22 came in at INR 1,545 million as against INR 807 million in Q1 FY '21, a robust growth of 91% year-to-year. The manufacturing business on the other hand, while growing has seen its contribution from 65% in Q1 of FY '21 to 58% Q1 FY '22. In the Manufacturing segment, our revenue came in at INR 1,541 million for the first quarter of FY '22 as against INR 1,107 billion in Q1 FY '21 with a growth of 45% year-on-year. In terms of volume, the consumer segment saw sales of 3.34 million cases, a growth of 65% year-to-year despite marginal impact of the second wave of the pandemic. In quarter 1 FY '22 in states of Haryana and West Bengal there were lockdowns which impacted the sales of consumer products. At the end of June '21, all our facilities at markets have resumed normally levels of operation. We did not see any other major disruptions across Rajasthan, Haryana, Bihar and West Bengal. All things considered, our overall capacity utilization for Q1 FY '22 remain close to 98%. This was driven by improvement in product mix and realization.Our cash flow generation in FY '21 was strong and we generated INR 148 crores of net cash flow from operations, whereas for Q1 FY '22, the cash flow generation was INR 66 crores. Our finance cost has reduced by 23% year-on-year from INR 5.1 crores in Q1 FY '21 to INR 3.9 crores in Q1 FY '22 on the back of reduced bad debt as mentioned above, and reduced average cost of debt to 7.8%, which we are hoping to reduce further in quarters to come. As a result of the improvement in the financial risk profile of the company marked by healthy operations in margins and comfortable capital structure and debt covered as indicators, the credit rating for our long-term and short-term bank facilities stand, we reaffirm that KL is stable with enhanced trade limits as of January '21.We saw our EBITDA margins expanded by almost 930 bps year-on-year to 26.7% in Q1 FY '22 from 17.4% in Q1 FY '21, driven by higher share of high-margin consumer business, better realizations from byproducts and softened import prices. Now coming to the working capital cycle. Overall working capital cycle has seen an improvement. However, there has been an increase in accounts receivable on account of strong growth in higher price of consumer value segment for this, the duty payable is funded by the company.The accounts receivable saw a further increase due to higher sales of ethanol, where we have to allow credit to [ AMCs ] unlike ENA, which is typically purchased on advanced limit. Despite the increase in working capital, our return ratios have seen a significant expansion. ROE and ROC have gone up from single digits in FY '19 to 35% and 42% in Q1 of FY '22, respectively. We have calibrated our operations to ensure that any disruptions are not only temporary, but can only -- can also resume quickly, and as a result, we believe we are in a strong position. This concludes by reports on the operational and financial highlights. I would now request the moderator to open the floor down for questions. Thank you.
[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.
Yes. My first question is on your initial remarks because of the ethanol mixing date getting advanced, you said liquor manufacturing margins are improving. So could you give us which state you're seeing more mismatch of the supply and demand? Normally, liquor manufacturing would be a cost-plus model, right, for the brand owners. So how do you get benefit in that scenario because cost plus model, does it change because of the supply-demand mismatch?
Abneesh, I think there may be a misunderstanding there. The ethanol story has impacted capacity utilization across the country and lifting of or diversion of ENA capacities to ethanol. As a result, improving our capacity utilization as well as margins on ENA.
So -- but doesn't it impact the liquor also because the supply is getting shifted towards other industry, the liquor industry will have a shortage, right?
So the liquor -- so in our business model because we are integrated, it does not see that for us, it's grain, which is the import and not ENA. But generally speaking, for the industry, yes, it has impacted ENA prices.
Second is on the sentiment because now vaccinations are really picking up very fast and especially in the big cities, it's going quite well. So in terms of sentiments for your sector, how do you see versus the wave 1 next few months?
So the wave that came earlier in the last quarter, the impact on our business activities was limited to at best 15 days or around 15 days in some states and other states, it was even less. So for -- I think either for the reason that alcohol is being seen as an essential product even in times of pandemic, considering the revenue source it brings to states. I don't think alcohol sales are going to form part of any subsequent lockdowns. As far as retail sales are concerned, our markets are growing, they're not back to normal. They are very much growing. So if that is a measure of sentiment, then sentiment is very high.
[Operator Instructions] The next question is from the line of Ravi Naredi from Naredi Investment.
Sir, it is indeed a very good result you have posted. Sir, I drive your attention to INR 110 crore GST is an detected matter. Will you want to tell something?
I'm sorry, what's the question?
INR 110 crores GST is detected by Government of Rajasthan few times there.
With regard to Globus Spirits, there has been no such tax evasion by Globus spirits.
The name of Globus Spirits was there just -- that's why I'm asking you.
There is no tax evasion by Globus Spirits, if there is a media report, I cannot comment on that.
Okay, okay. And sir, what is the main reason behind the improvement of margin. Will you tell something? And these margins are sustainable?
The reason for improvement on margins is due to a strong demand for ethanol and ENA in the country, and due to a higher share of our consumer business. Ethanol and ENA demand is expected to remain strong, going forward, and our consumer business is growing on the back of market share gains as well as a growing industry. So for that reason, I believe these margins should remain sustainable.
The next question is from the line of [ Naresh Vaswani from Sameeksha Capital ].
Yes. First question on the realization front. So in the bulk, we have seen in quarter-on-quarter, there is a drop, while in the consumer, the realizations have increased sharply. So if you can please explain both these pieces. And also, what were the EBITDA margins in the consumer business in Q1?
The drop in realization is due to a changing mix in our portfolio. Our higher states, higher consumer states of Rajasthan, especially we have a very, very high percentage of capacity that's going for consumer products. So our bulk sales are -- have reduced considerably over there. As is the case with West Bengal, we are seeing a growth in our consumer business, and therefore, bulk sales are reducing. As a result, our bulk sales are now largely limited to Haryana. I mean not limited. There is a significant bulk even in Bengal. But because Rajasthan, there is very little, the overall average selling price of ENA reduces. So I hope that reason is clear. With regard to margin on consumer business. We are not reporting margins separately for each business. Suffice it to say that the consumer business operates at a much higher margins as compared to our bulk business. And with a 40% or so share of consumer business in our revenue, the average margins are as per what we've reported in the last quarter.
Okay. And there was this disclosure regarding the share transfer, which has happened. Can you explain some background to that?
The background as far as the company is aware, has been disclosed to the exchanges. This is regarding dues of an entity, which is not associated with Globus Spirits, they are -- it is a promotor entity, but they are not associated with Globus Spirits in any way, and all the disclosures have been made to that effect.
Okay. And final question. In the previous call, you have mentioned regarding the advantage we have is our CapEx cost is much lower than the peers. So I wanted to understand if you can help me with some specifics, how are we able to do this? I mean because 5% or 10% is understandable, but 30% to 40% is a bit too high. So how are we able to do that?
Well, sir, these are very specific matters pertaining to our engineering and how we operate these plants. And I'm afraid I won't be able to get into details about that. But we have track record of demonstrating this CapEx. We've done it in Bengal and Bihar when the greenfield projects were set up, and we are now at the cusp of completing an expansion at Bengal at these reduced levels of CapEx. So I'm not able to get into details on this call, but it's something that we stand by.
Okay. And what -- how much broken rice do we require for a liter of bulk production, if you can help me with that. And our procurement price for broken rice, is it substantially lower than the MSP?
There is no MSP for Broken rice. Broken rice is a waste product of rice mills. Our -- we produce -- again, I'm not able to give you specific numbers because these are very critical to our business model, but our requirement -- our production of alcohol from broken rice is well in excess of 47 liters per quintal of 470 liters per tonne. But the exact number, I'm not able to give you. With that, sir, I must request the operator to take up the next question as we have a 2 question limit.
The next question is from the line of Sunil Jain from Nirmal Bang Securities.
Yes. My question relates to more on a realization per case for IMIL. So that has shown good improvement over last quarter. So any specific reason for that?
Sure. Param, may I ask you to take this, please?
So Mr. Jaideep (sic) [ Jain ] the consumers are offering [ straddles ] across more than 1 price point. And obviously, the endeavor is to try and maximize our consumer business at the best possible price point. And as we keep improving [indiscernible], we expect the consumer to continue migrating upwards to better price points, giving us better realization and giving the consumer a better experience. And that journey at this point of time is yielding the ratios of the volumes and revenue at higher price point is on the up. And that is a simple straight forward explanation for how the overall improvement has come.
Yes. That is great. So is this increasing prices are also contributing to improvement of margin? And is it sustainable?
So our belief is that the consumers will continue to evolve in times to come over many years. And the purchasing power of consumers will continue to improve, and he will exercise more and more choices. And it is up to every individual organization to continue improving their offerings and have the highest occupancy in the mind of the consumer space, and that is exactly what we are doing. And we believe it is there to stay.
Yes, that is good, sir. Sir, second question, more related to your project. This Jharkhand when is this likely to start? Means earlier, you were talking about...
We've just started construction in the last couple of months. It takes us around 12 months to set up a greenfield project of this nature. Bengal through the entire waves is taking -- is going to end up taking about 13 months or so. And 2, 3 months were lost due to various COVID waves that have happened during construction. So 12 months is a good estimate for a greenfield project.
The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.
Yes. Congrats for good set of numbers. Sir, couple of questions from my end. First, on the consumer business. We have seen that this quarter, the volumes were around 3.3 million cases despite the fact that we lost around -- there was disruption for around 15 to 20 days during the quarter. And if we consider Q4, the volumes were around 3.7 million cases. So considering the normalization of the business environment, should we expect volume of around close to 4 million cases in the quarters ahead for consumer business?
So a little bit from me on this. Typically, Q1 of every year is a little bit softer than Q4. Generally -- of course, the last year was a bit of an aberration in terms of COVID waves, et cetera, because Q1 saw very extended lockdowns. But typically, 60% of the industry volume is in Q3 plus Q4 and 40% is in Q1 plus Q2. But Param, if you could shed a little more light on this.
Yes. So obviously, it is all subjective to markets continuing to behave normally. We definitely are expecting the current quarter to be on a strong footing difficult to -- for us to project numbers and get quoted on it as you would appreciate because these are -- within uncertain times, we are approaching. But as of now, as I said, we have started this quarter well. We are well into the middle of this quarter. And as of now, we have a very strong sense of belief that we are on a good track and a good wicket. So we are expecting a robust quarter I'm suffice to say, giving an exact number sharing, I think would be challenging.
No, no, no problem. Actually, there is no problem, sir. Sir my second question is related to the narrow list on the margin front, as you said that the things are improving and the realization are expected to remain stable. So current operating margins of 26.5% if we consider from -- at Q4, it was around 4.7%. So should we expect some margins to be stable at current level or there would be some volatility considering the mix?
Yes, yes. So the independent margins, whereas we don't disclose the margins of manufacturing and consumer separately. But the -- what I mentioned even on the last call was that the independent margins of each segment of Q4 -- sorry, the manufacturing margins of Q4 is what we expect to be the normal level the consumer margins is obviously based on the share of revenue from each of our segments. As Param mentioned earlier, as our higher-value segments grow their pace of growth will be greater than the pace of growth of the lower end of our consumer segment. So there will be some expansion, too. In the near term, we expect margin expansion in the manufacturing business, but I believe that the Q4 -- somewhere between Q4 and Q1 levels is the normal sort of number for the company going forward into the medium or long term?
The next question is from the line of Himanshu Shah from Dolat Capital.
Congratulations for a good set of numbers. Sir, just a couple of bookkeeping questions. The other expenses has declined sequentially quarter-on-quarter by almost 10% or slightly higher than 10% from INR 83 crores to INR 73 crores, whereas the capacity utilization has been broadly similar. So anything specific over here?
Yes, sorry, this is an issue that we were discussing in our Audit Committee as well. It's to do with classification of a certain item, which is excise duty on inventory. So changes in inventory of finished goods coming to other expenses and excise duty on that is considerable. So that gets -- that makes that number a little volatile. I think going forward, we will be amending this entry to another line item so that it looks a little more sort of consistent.
Okay. So has the excise duty gone up or gone down during the quarter, sir, on the inventory point?
It's the same. It's the same. it's due to change in inventory and the excise duty on that inventory.
Okay. Okay. Okay. Sir, secondly, on the raw...
From a business standpoint, there is no sort of material impact because of this number. Going forward, Other expenses as a ratio of revenue should track around the current level. And this line item will most likely -- we're in discussion with experts on this issue. But this line item would most likely get reclassified as some other line item in the P&L account.
Sure, sir. Sir, secondly, on the raw material front, can you provide some color on a Y-o-Y basis and on a quarter-on-quarter basis, what would be the change in raw material per unit price in terms of either percentage or on an absolute basis?
So we operate in diverse parts of the country, Rajasthan, Haryana, Bengal there are -- each state has different agricultural profile and industry -- agro-based industry. So it's a little bit difficult to give you that number. But suffice it to say that over last year, there has been an increase in raw material prices, but that we've been able to offset through better ENA prices as well as better prices of byproducts. And as far as margins on this is concerned, we believe that between Q4, Q1, these are the sustainable margins on our manufacturing business.
Okay, sir. And sir, lastly, in our consumer business, we used to give the state-wise breakup. Henceforth, this quarter, we haven't given that breakup. Is it fair to assume that this won't be provided henceforth?
No, we are not averse to providing those breakups state-wise, and we can continue to do that. But I think the way to look at the consumer business is more from the split between value segment and the premium segment, premium segment is a smaller part of overall revenues, but we believe that it's the business that's going to grow because we are not limited to our home states in the premium business, and we have a larger canvas for that. But if you like, we can have these numbers sent to you separately.
Sure, sir. Sure. And sir, just last question with respect to this...
[Operator Instructions] The next question is from the line of [ Vivek Gautam from GS Investment ].
Yes, sir, congratulations on good set of numbers, sir. And basically, I'm not a very old entrant of the company shareholder. So my question is how effective with this broken rice as raw material versus molasses because we don't have a sugar mill. We used to have sugar mill, I think we sold it off to Dhampur a long time back. So is it that negative for us or much more better option?
No, we've never had a segment sugar mill, sir, Globus spirits only operates grain distilleries. For us, grain is the focus going forward. Currently, we purchase broken rice, we have purchased mills and millets in the past. Our plants are sort of fungible between these different raw materials. Broken rice is abundantly available across the country. And we believe it is the raw material for us for the future. As currently -- as the agricultural pattern stands, it's the raw material for us for the future. In our states, there is no molasses available or hardly any molasses available. There is very little to no molasses-based or sugar-based alcohol production. So it is not fair -- it doesn't make any sense to compare our production with molasses-based production, because it's not fungible. In our states, you can't set up an molasses-based distillery at all.
Okay, sir. And basically, yours is one of the oldest business families of Muzaffarnagar and particularly, just wanted to understand Mr. Ajay Swarup, what has been this differentiating sector and starting out with 1 distillery has moved down to so many other distilleries in different states in Haryana, Rajasthan, Bengal, now Jharkhand, that's very commendable. And how do you tackle this perception problem of the sector in terms of that alcohol and petroleum are the cash cows for the state governments and they keep raising demand on taxes and other things sir. And what have been your basically vision of Mr. Ajay Swarup family and what's the CAGR and growth rate expected in the future, sir?
No, that's a -- those are very big questions. And why don't we have a sit down and discuss Mr. Ajay Swarup's philosophy. But with regard to taxation, the state government is the -- you're absolutely right, is the greatest stakeholder in terms of revenue share on alcohol sales. For the consumer business, we believe that it is, in fact, a strength. We look at it as a strength. The government is equally incentivized as we are to increase revenues, and we've seen that happening over the years -- increase volume, I mean. And the other factor is that because of the share amount of duty and taxes on alcohol, there is very strict surveillance on illicit alcohol, which allows for the industry to be truly recorded and organized, and therefore, allowing players like us to operate and build businesses, and create sort of the capital from it.
The next question is from the line of Devesh Kayal from Omkara Capital.
Sir, how much ethanol supply has been contracted with OMC for the December 2020, November '21 supply year?
I don't have the number available with me off hand, but as a share of our capacity about -- it should be around 150,000 liters per day kind of number. I don't have the total number with me off hand.
Okay. And can you give a breakup of the sales volume of $30 million -- 30 million liter we did this quarter into ENA and ethanol?
Yes. So like I said, our total capacity is about 500 KL and roughly 150 KL of this is ethanol.
So sales volume will also the impact of pressure, right?
Yes, more or less. I mean, there may be a little bit variations, but typically 150 out of 500 KL per day will go for ethanol.
Okay. And what's our receivables as on 30th June?
Dr. Roy, could you please talk about our receivable position.
What is that?
Receivables position as on 30th June?
I'm not able to follow the question.
Trade receivables. What is our trade receivables as on June 30th.
Trade receivables.
Trade receivables. Just a second, I'm just...
Yes. So we'll come back to that. We'll -- as soon as Dr. Roy has that we will has that, we will announce it. Let's move ahead to the next question, please.
The next question is from the line of [ Shitish Shira from CES Investments ].
Yes. Sorry for the delay. Yes, congratulations on the fantastic results. I have 2 questions on Unibev. So one is in terms of how the product pipeline is shaping up? We have 3...
Just a minute the person was asking about trade receivables earlier. It is INR 111 lakhs.
INR 111 lakhs?
INR 1,116 lakhs, is INR 111 crores.
Yes, yes. Thank you, sir. Please continue with your question.
Yes. Yes. So on Unibev, we have the 3 offerings. So what are the offerings plan going forward? And where do we plan to play in terms of sales. And how do we sort of plan to go for the expansion? Will it be a more calibrated one? Or do we go aggressive upfront? Because there are a few brands which sort of dominate the Indian market. So how does Globus plan to create this niche in the Indian spirits market overall?
Yes. So thanks. Param, could you please?
Yes. Yes. Sure. Sure. Thank you, sir, for the query. So the product we are expecting our product applying to get enriched by at least 2 more brands within the current financial year. Obviously, launching of new brands in these segments depends on the ending and the beginning of the excise cycle in many states. So the launch, obviously, will depend on the states that we operate in and whether that state permits middle of the excise year launch or one has to wait for the excise year to come to a conclusion. And then the next excise year allows a new brand launch. Coming to the geographies and the sort of query around how aggressive we are taking assets as we go higher. So as earlier outlined, we have earmarked limited geographies, which have the potential of passing through all the 5 filters that we have called out. And we intend to with good progressive time get more and more aggressive in each of these overseas. So our aggression and investment in these geographies will continue to improve without unnecessarily expanding into more and more years overseas. But suffice it to say that these geographies contribute a very meaningful space as a total percentage [indiscernible] on the premium segments of the Indian alcohol industry.
The next question is from the line of Rushabh Doshi from Proinvest Nirmiti Investment Advisors.
Yes. Mr. Shekhar Swarup, congratulations on the operational performance despite trying times. So I had 2 questions like we have a couple of new investors. So we are not well versed with the history of the company. But could you just tell us your relationship with Anoop Bishnoi? And my second question is what are the challenges you think for KLM scaling up Unibev because not many small players are able to compete with the big players in the premium segment.
Yes. Thanks. So Mr. Anoop Bishnoi and his family are classified as promoters of Globus Spirits, and that is the relationship that the company has with them. With regard to Unibev and how we plan to grow Param, could you, please?
I think I did elaborate the whole frame context, we have remodeled Unibev it was revolving around the geographies, which allow new entrants to new a meaningful mark for themselves. Have a decent turnaround of investment being converted into profitability in terms of time and investments required now a new player to enter the market without unnecessary premium cost to entry. And basis this concern, we are obviously entering these geographies and intention is to keep getting stronger, not only in terms of investments, but also in terms of expectations of performance as well as to expand our offerings into the segment because additional offerings will not have an additional cost of route to market to that extent as the initial offerings will have because once we create a runway of capabilities for these states, obviously, the newer offerings and the further building of the portfolio would be able to use the same runway to make a mark for those brands. Does that sort of answer your query?
Yes.
Thank you.
The next question is from the line of Shirish Pardeshi from Centrum Capital.
Congratulations. My -- I have 2 questions. When I'm observing your presentation on Slide 15, you have given a franchise bottling brands and the realization growth which is there, which has happened about 27%. So my question is, this growth in the bottling fee, which has happened, is effective of which month it has happened or this is full quarter we have got the realization?
So yes, that's -- so how it works is that in some of our relationships, we have minimum guarantees that are offered to us for our access to our capacities. In the last 1 year, there's obviously been a huge impact on IMFL volumes. So the -- that number is computed by dividing revenue with the volume that was produced. So whereas there has been a marginal increase in bottling charges, but large impact of that -- of the increase you see is due to lower volumes, but the fixed revenue base.
No. The reason, I mean, we wanted -- I wanted the clarification whether this is going to prevail for next 3 quarters or it is very well?
No, it depends on volumes now. So how the volumes of the brands we bottle shape up. So we don't really have to fall on that. We are merely a service provider in that segment. So it really depends on how those volumes of those brands shape up. So I don't have visibility on that. And for that reason, we insist on minimum guarantees for some of our relationships.
Could you please comment on the volume part in Haryana and West Bengal and Rajasthan for the franchise bottling? You said decline.
Yes. So the volume bottled has declined -- volume, bottled volume produced has declined. I don't have the actual bottling figures, but our minimum guarantees are basis our minimum guarantees, we bottle about 2.5 to 3 lakh cases per month. We are to bottled 2.5 to 3 lakh cases per month.
Including both?
Including both, yes.
Okay. So that means Haryana, West Bengal and Rajasthan put together is the number what you said 3 lakh is per month.
Yes. The other thing is that -- since you're so interested in this franchise bottling, the other thing that's happened in this year is that in Rajasthan, we have ended our bottling relationships with ABD because our own consumer products have grown, so we needed more capacity. It's possible that ABD's bottling charges were also lower as compared to our other units. And hence, there is a further increase on per case revenues.
I got that. I was basically looking to arrive at the realization. So anyway, I'll take it off-line. My second and last question is on the capacity, I guess you're adding another 400-odd KLPD in next 1, 1.5 years. And you did mention that you are running full in the capacity utilization. So I just wanted to check this new capacity which you are adding will be primarily developing your own brands? Or it will also have a mix of...
So our strategy -- so there are 2 types of capacity coming up. There is capacity in a new state, for example, Jharkhand and potentially 1 other. And there is brownfield capacity of expansion, which is happening in Bengal. The capacity expansions, in fact, in either case, whenever capacity expansion comes up, it's going to get fully utilized for bulk sales or by our manufacturing segment by a distillery segment of sales. And gradually, in a new state, we will seed our brands for future growth. So in Jharkhand, we will potentially launch our brands 3, 6 months before the distillery starts operations because the bottling plant takes much less time to set up and seed the market there, hopefully, in a few years, we'll be able to get to high capacity utilization from internal consumption. So to start with, all of it is going to be ENA or ethanol.
The next question is from the line of Saurabh Ginodia from SMIFS Capital.
Yes. Mr. Swarup I have a little longer-term question on the distillery capacity here you're obviously expanding our distillate capacity from 500 KLPD to roughly 920 KLPD, but as a management team, first, what is your thought process with this part with respect to consolidation and utilize the existing capacity or you plan to embark on the next leg of distillery expansion to benefit from this ethanol quality? Basically, what is the aspiration on the 5-year view for increasing the distillery capacity for the company?
Okay. So we are setting up capacities in deficit States. So what that means is from a business point of view, from the time the capacity is commissioned, we will be in a position to operate it at well over 90% capacity utilization. Our current capacity utilizations are close to 100%. And I don't see a situation where, of course, events like pandemic and lockdowns are aside, I don't see a situation where we will not be operating at 90% capacity utilization in any of our facilities even when we have expanded. Now with regard to your question about more capacities. So the company's capital allocation strategy is, first and foremost, our focus is to grow our consumer business. Be that as it may, the consumer business does not require so much capital to grow currently. And as a result, the balance capital is being utilized first to pay off debt. Of course, the first priority is to pay off debt. The next is to invest in our consumer business whilst also being mindful of the fact that consumer business cannot take too much. And therefore, we have a third source of capital allocation, which is our manufacturing footprint. As far as expansions are concerned, there is the Bengal expansion, and there is potentially a Bihar expansion that is possible, but further capacity -- further investment in capacity will only come from new states. Over the last 5 or 7 years, we have always had a system. We have a system of a couple of states of between 2 and 3 states always be prepared to receive investment. So as you can appreciate, in India, land acquisition, conversion of land use, environment clearances and other licenses. This is a process that takes time. So what we try to do is have 2 or 3 states, which are these different stages of that process. So that when capital is ready to be deployed, we have options of 2 or 3 states that we can deploy that money in. As of today, we have announced expansion in Jharkhand, which is a new state, Bengal, which is nearly complete, which is an expansion. And a third state last time I had announced was an expansion Bihar, which is currently under review because 1 of those projects, which are a new state is moving quickly, and it's possible that instead of Bihar, we prioritize on that state because it will give us a consumer footprint as well. That is not a delay to our construction plans because in any case, we had planned to start construction later in this financial year. So maybe by the next quarter, we will have a decision on that. But as of now, these are the 3 expansions that are underway, taking our capacity to 920 KL per day. Thereafter, once this is complete, as I mentioned, there are other states that are different stages of this process of acquisition and licenses. But currently, the Board has not approved any further CapEx plan. And in the quarters to come, we will be putting up more projects to the Board. And depending on capital available and requirement from consumer business, we will then decide how much to allocate for new capacities and how much to consumer. So I hope that makes sense.
And sir, my second and the last question would be with respect to the market share in your key states of Rajasthan, Delhi and Haryana, if you can give some color over the last 6, 8 months, our market share gain happened for us? On the consumer business.
Sure. So quarterly, there is a fair amount of push and pull that takes place, but I'll ask Param to give you more light on this.
So you -- as we've been calling out, we are continuing to inch our market shares across the areas either aggressively or in a very modified manner. Rajasthan, obviously, our collective market share in the segments that we are operating at this point of time, hover in the range of 30-odd percent. And some mini segments in this are well over it and some segments are just trying to catch in Haryana, we are just about entering the double-digit gain of market share. And in West Bengal, we are still very nascent, but we are really aggressively working at possibility, and we are a very small player in West Bengal, but that gives us [ at least a place ] in arena to try and catch there the space. And obviously, as we keep going forward, we will keep unfolding our plans for the consumer business, and these plans will continue to get more and more exciting as we walk into the future.
The next question is from the line of [indiscernible]. [Operator Instructions]
Operator, maybe if we can have the last 2 questions, please.
We'll move to the next question. It is from the line of [ R. K. Khandelwal ], an individual investor.
First of all, congratulations for the good set of numbers. I have 2 questions. First question in respect of the merger of subsidiaries. You have all provided INR 31.08 crores was in the last quarter. But this quarter, you have not provide anything though you have mentioned, the total loss of INR 34.85 crores. Is there any specific reason for that? And secondly, what is the reason of that heavy losses and in future whether merger of subsidiary will have benefit for us?
Yes. So the last quarter on stand-alone, INR 31 crores exceptional item is what you're commenting on. That was accounting entry taken based on good accounting practices. That is a cumulative loss, not a quarterly loss since the inception of the company. Our run rate on losses is between INR 2 crores and INR 3 crores. Currently, we expect that to come down to less than INR 1 crore in the next quarter. So I hope that answers your question.
No, no. What was the reason is what was the business of subsidiaries which suffered losses?
It's -- we are investing in the business. We're investing in new brands. There are teams in place that are marketing expenses in place. So those are the reasons for losses.
So do we expect in the after merging, there is a profit on that?
After merging the accounts will be merged with Globus Spirits, but we will continue to invest in this business by way of expanding distribution as well as marketing expenses.
Okay, sir. Then my second question is related to the GST liability. You have mentioned in the balance sheet that some cases going on in Delhi, I thought where approximately INR 20 crores you have paid by way of GST. My question is that this particular GST relates to which particular state, Delhi, Rajasthan, Haryana or of which items, whether this type of liability may arise in future also, if you can throw some light on this?
Yes, sure. So this is a very -- I mean there is -- there was -- how do I say it, there hasn't been a demand on the company for GST for any item. This is a voluntary deposit that has been made under protest. We are currently awaiting a demand from GST pertaining to this amount. And that is exactly what is our case in Delhi High Court that a demand needs to be raised so that we understand what are the claims against the company. We have been told that these -- this amount pertains to our Animal Feed division. But again, we have not received any demands in any state. This is a voluntary deposit made by the company under protest.
Is there any chances of future liability of this type?
I'm not understanding what you mean by this type. I mean as far as our tax compliances go, we are up-to-date on all tax compliances, but I'm not so sure exactly what you mean by your question.
No, I mean, for example, currently, you are paying regular taxes. There is no issue on that. But in future also whether the department cages this type of liability which you have just deposited.
Yes, I have no control on what the department [indiscernible] sir, but as far as we are concerned, we are up-to-date on all liabilities and dues.Okay. With that may I request that we bring this call to a close. There are many questions. And unfortunately, we've run out of time today, but please feel free to reach out to us, to our IR agency Stellar or to us directly. All our contacts are on our website and on the results and we'd be happy to get back to you with responses. Thank you all for attending and taking time out and wish you all the very best.
Thank you. On behalf of Globus Spirits Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.