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Globus Spirits Ltd
Earnings Call Analysis
Summary
Q2-2024
Q2 was softer due to seasonal trends, with Q1 and Q3 typically stronger given the excise year start and festive seasons, respectively. Q4 often sees softening as partners prepare for renewals or new policies. Franchise bottling, a minor revenue component with volatile volumes dependent on owned brand fortunes, doesn't majorly impact overall revenue due to direct cost alignment. The management doesn't foresee significant volume changes but acknowledges the need for owned brand growth for increased volumes.
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Ladies and gentlemen, good day, and welcome to the Global Spirits Limited Q2 FY '24 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.
I now hand the conference over to Mr. Shekhar Swarup, Joint Managing Director, Global Spirits Limited. Thank you, and over to you, sir.
Hi, good afternoon, everyone. Welcome to our quarter 2 and H1 FY '24 earnings call. The quarter gone by to unique challenge for our business with the sudden stoppage of supply of raw materials from FCI. However, due to the way our plants have been designed, we were quickly able to restart production after supplier assumed the disruption was for only 18 days in the quarter gone by where the [indiscernible] plants were closed. .
Western male plant during this period also pivoted to using main for ethanol and successfully produced this for the very first time between August till even now in November. Our plants are designed in such a way that they can have flexible inputs and outputs to make most of the market demand and supply scenario and also manage shocks that come up from time to time.
The FCI ban also came at in an untimely manner when broken by and May's prices were at historical highs and in fact, further have increased after beyond Q2. Our customers, OMCs and beverage manufacturers who have revised prices. However, there has been a compression in margin due to very high raw material prices. It's worth pointing out here that OMCs have increased prices 5x in the last 2 ethanol purchase years. So that's a testament to their ability to react to the supply scenario in the raw material or broken price or means.
Going forward, we now expect to see increasing margins on the back of the eminent carries crop the full impact of that will be seen in Q4. But as we go into December, we will start seeing impact of the drop in cometary prices. Broken gas prices will remain lower than the trailing 12-month period due to production of a good production of rice [indiscernible] area under cultivation is good in most of the regions that we have plants, and there is a ban on exported broken rice as well. So provided this ban continues, we will -- we should see a strengthening in margins in the quarters to come.
Given the volatility that now exist in raw material prices, it's now become worthwhile for the company to store raw material in season for use in off-season. So this is something that we will be initiating over the course of the next few quarters.
On fuel, cost has been largely stable this year. And with our recent linkage auctions, about 1/3 of Chakan in Bengal fuel demand has been secured. In Haryana, we have begun the process of upgrading our boiler technology, which will be completed by end of Q4. And these initiatives will further help keep fuel costs low. By and large, we expect fuel prices to remain stable in the quarters to come.
The installed capacity for the company at the end of last quarter was 885 KL per day, with the expansion at [indiscernible] are now completed. We are, however, awaiting regulatory approvals to commence operation of 120 KL at these 2 capacities. The way these expansions have been added will result in with a reduction of cost of production of the entire capacity of these units by around 5% by utilizing the same total energy that was used for the pre-extended capacity. And this is a result of the energy efficiency projects that were taken up in the last 12 months.
In the last few quarters, Param and I have spoken to you about all the work that's been happening in the prestige and above plants. The performance in the quarter on buyer shows that 3 of our states have begun to fire and settle. With many new and innovative product offerings and an expanding distribution presence, we are very excited about the prospects of this segment.
I request Param now to talk a little bit more about this. .
Thank you, Sherkhar. Good afternoon, everyone. The premium segment is showing very strong quarter. [indiscernible] on Q2 FY '24 was INR 0.08 million, up by 131% year-on-year and 68% quarter-on-quarter basis. Prestige level brands contributed to 6.1% of the total consumer revenues in Q2 FY '24. Our brands are now presenting UP West in Rollam and Baja. We have successfully established a strong route to market in Delhi, [indiscernible] and [indiscernible]. While [indiscernible] now are expected to get strengthened in [indiscernible] of this year. In addition, we plan to [indiscernible] in Q3 and the taken market in Q4 of this year.
In direct [indiscernible] segment, [indiscernible] business revenues in Q3 FY '24 or up by 24% on a year-on-year basis and flat on caner-on-quarter basis despite the seasonal induction in value and value plans. Our new offer in [indiscernible], which was launched in Q4 FY '23, posing expanded combustion towards it.
It continues to gain momentum across [indiscernible] and the new market. Our flagship product to the right cost than is going strong, and we have decided providing the solution to provide further in existing markets as well as new geographies.
[indiscernible] are being expanded in Iran, single and Bali. New brands in the premium one and the superpremium mortise or proposed to be launched in Q1 of '25 and Q4 of '24, respectively, due to also the exciting launch of the plant over the next 12 to 18 months.
We will reorganize our highest poise offerings into an umbrella brand called the India Costa company, thereby relating 4 generations of our promoter industry in the alcohol industry [indiscernible].
Now coming to the value and value segments. Our growth vector continues be growth of 20% year-on-year to 3.54 in on cases, led by improved sales and in the value of [indiscernible] segments. Value ones [indiscernible] realization business a growth of 9% year-on-year to INR 550 the case. Those of which was launched in 2023 has closed 5% market share in the risk or already and is gaining strength to possible. What is progressing to expand is futher cross-sells.
On lactates of paranoid offerings, global market share in [indiscernible] of 35% in Q2 of FY '24 from 34% in Q2 of FY '23. And overall, ending 51% market share in the lending cases.
I will now request [indiscernible] to take the lead. Thank you very much.
Good afternoon, everyone. I've illustrated in the investor presentation. The Q2 EBITDA margins were at 7%. The fall was majorly due to the FCA stoppage as explained by Shekhar. There are some positives, which I would like to highlight. We have been successful in passing on the cost inflation in ENA, which has helped us to protect our margins. Also, the power posies on a downtrend, which will help aid margins.
Q-on-Q, core price was 1.8%. From here on, fuel prices are expected to be similar to H1 FY '24 as the increase in core production by government by 33%. The company in the last quarter has been able to reduce debt by INR 37 crores. With this, I request the moderator to open the call for questions
[Operator Instructions] The first question is from the line of Mr. Parag Agarwal from Old Bridge Asset Management. .
A couple of questions from my side. One, if you could give us what the IMFL loss was the EBITDA burn for this quarter?
So Nilanjan, can you please. INR 65 crores. INR 6.5 crores.
So I mean, we've been seeing this trend for the last few quarters. So would it be fair to presume that that's the number that you're running with, at least probably for this year?
The loss number?
Yes. .
Yes. I think the loss is going to be in this 20% to 25% range annually, I think we'll start seeing some improvement in quarterly losses as we end the year, as you can see, our volumes have gone up quite a bit this quarter in Q2. We are seeing a good growth ahead as well. So the quarterly run rate of loss will start to come down, but 2025, it is the number for now.
Okay. Second, I mean the OMCs have already invited a pretty substantial tender for ethanol procurement. But details on pricing continue to remain a really easy. So if you could just give us some clarification in terms of what's happening there?
Yes. So we received, like I mentioned earlier, a few price increases this year. Currently, the price of ethanol is 64 for 66 for me. As of now, the tender has been published with the same prices as last year. However, they have not extending the price. It's just the status quo remains.
Moreover, supplies in the new year have not yet started. They will probably start in the first week of December. So between now and then, we expect an announcement on price. Do that as it may, on rice, ethanol and not expecting very significant change than what there is the price that we all really insist, mainly due to the imminent crop, I think, with the ban on export of broken rice and the new crop, we're going to see a pretty good supply of raw material in the next few months.
On Mays, on the other hand, there is a big push for promoting [indiscernible] cultivation in India for the purpose of ethanol production. So I am expecting some sort of price action on mais ethanol. So let's just see how that comes out.
In the long term, mais is going to be a very important crop for the ethanol industry. And we're already working with the farming community in our -- around our factories where ethanol is going to form a large share of capacity to encourage and promote the growth cultivation of mais in those areas.
Okay. Just a couple of more. If you could just give us a flavor in terms of what could have been a per liter impact on your profitability because of precluding your procurement of FCI rice and all the all -- the challenges that ensued for 18 days because we can see a sharp decline in your [indiscernible]
Yes. So 18 days, there was no production in [indiscernible]. So that is 1 impact. The second impact is once we started production, it took the price of raw material at that time was extremely high. So the profitability on broken rice was much lower than the profitability on FCI rise. The government quickly then revised the prices of ethanol made from broken FCI rice.
But despite that, it does not make up their profitability on the FCI rice supply. So there were 2 reasons. One was the 18 days and the other was [indiscernible] now we don't have that profitable root or the most profitable root anymore, we have to play between ways and open rise. So from that period onwards, I think sort of back of the envelope right now, the impact would have been around INR 5 to INR 7 a liter for all the supplies we made thereafter.
That's -- just last 2, what is the power and fuel cost for this quarter? And Nilanjan, if you could give us the net debt as on 30th September 2023.
So power and fuel costs saw a high of about INR 2.5 per GCV earlier on and has seen a low of INR 1.6, INR 1.7 per GCV. But these are the peaks and the bottoms that I'm comparing. Quality, it's gone up a little bit, but it's around 1.8%, 1.9%. So in my view, between INR 1.8 to INR 2 per GCV is what we expect our fuel cost to be given the kind of coal production that's taking place in the country currently.
What was the absolute figure for Q3? Q2, sorry.
Actually, further in what terms, please?
The absolute power and fuel spend for the [indiscernible]
Okay. So Nilanjan, you have that?
Yes, I have it. The absolute power -- can you hear me? The absolute power we'll spend INR 59 crores.
Okay. And net debt as on 30th September?
Net debt net of cash and cash equivalents is INR 235 crores.
[Operator Instructions] Ounr next question from the line of Mr. Dhruv Kashyap from MART.
Yes. So thanks for the opportunity for asking a couple of questions. I think the source Shakers sort of directed to you in terms of, let's call it, sort of the vision or the core philosophy of Globus itself.
So if you were to look at the landscape of the Alcobev companies around us both in India and abroad, both in the listed and in the unlisted space. So whether you pick up amrut or you pick up a Paul Johns or you talk about [indiscernible] or I mean we could -- or what sort of magic moments did for [indiscernible] Fortune. Generally, you'll see the most common thread is that each of these companies are sort of significant brand owners or are defined by a 13 brand or have gone on to make new categories or get defined by these categories.
So just wanted to understand from you that while Globus obviously is also having an IMFL play and increasingly building one to [indiscernible] is sort of your flagship product. So can you give some color on what's your philosophy is sort of 35,000 feet above question because the real value unlocking of value creation really happens when you were a sort of significant brand owner and not really a commodified trade?
Right. So thanks to that. Our vision is very clearly to invest behind our IMFL business. Our first goal is to get to 20% of our consumer business share coming from our IMFL that task is only made harder with the growth of our value, values segments, which has grown quite well this year. But the good news is that the IMFL business or the Premium Plus business is also -- is moving much faster. So hopefully, soon, we'll be able to get to that 20% number.
We are doing this whilst building capabilities to distribute these products, we have the capabilities to make them, of course, but we had to create capabilities to distribute them. Our distribution of value, values products is completely different from what needs to be created for the premium products in terms of on-premise, even though off-premise are completely different in most states for the 2 categories.
So whilst we are creating capabilities, we also have the job or rather -- the job of innovating in different types of products. So it's very difficult for us to build distribution based on innovative products. So just for an example, we've launched in process of launching a very interesting new flavor [indiscernible], which has never been done by anyone else before. Many of these innovations may not work out the way we want.
Doing this new [indiscernible] be, what magic moments was for Radico. Sure, we don't like that, but we have to keep trying different innovations -- and at some point, 1 or 2 of them will become as transformative as Magic Moments was for radical.
And whilst we do innovation for transformative properties, we also need to have products which the market really expects or accept. And that's why we have products like Mountain Oak, we have products like Upton and we have products like Governors Reserve and a few others that are in the pipeline.
So that becomes a [indiscernible] buffer, which allows us to get product on shelves. And once product is on shelves when the innovations come in for transformative gains. That's the way we've been working this business so far. As I mentioned earlier and as Param here as well, in 3 of our states, we've now got a pretty strong set of capabilities to distribute products, and those are the 3 states which take our most innovative offerings first before we strengthen -- while we strengthen the other states. So that's the way I look at this, and I hope I was able to answer your question.
I'd like to -- I'll just add a line. Whether the oil down or runway and age, they're all been in IMS are not before each of the individual brands came into and reach a situation where we can talk about them.
So it is a known by the brand much later. The first point of oblate and then 1 brand, 2 brands or many brands start carving a different dispute selves. So extremely a good thing to put the brands come into the categories of the bit and I think coming curative offering. And then each offering signs a different acceleration and tariffs and hopefully, a couple of them reach a stage where [indiscernible] in the future.
A your line wasn't very clear. So I'll just ask my second question. And if it's a repeat, you can just tell me -- so I just wanted to understand the IMFL product matrix and the state metrics a little better. So picking up from what Shaker said about the 3 innovative states and then the rest.
So correct me if I'm wrong that -- so in terms of your -- let's talk the product matrix. So there's a Governor's Reserve, there's an upturn, there's a mountain nook in vodka, the [indiscernible], you mentioned about a new exciting flavor. Similarly, there would be the [indiscernible]. And I'm sure you're doing some work on, let's say, Aram or a malt whiskey. So that's really the product metric.
And similarly, there'll probably be a state metric, which last I had understood was resting, Delhi Haryana. So can you just give some color on the product and state metrics as to where we are and where we intend to get to?
Yes. Param, do you want to take that if the line is clear.
Param's line has been disconnected. I'm trying to get it back.
No problem. Let me start with that, Dr. So Westfall, Jenny, Arana, Pan on our 5 existing markets. Amongst these Westwing wall, Delhi and Haryana are becoming a little more stronger as compared to the -- as compared to UP and Punjab. Those are -- we have some work to do intend to strengthening our capabilities.
Yes, no problem. I'm going ahead with this for now, but if I need you to come in last. Governors reserve auction have been the Governor's Reserve as 2 different variants of blue and red and oak. So these 3 products have been -- how do I say, the more expected product offerings. There are some innovations we've done in these to stand out in the marketplace, but these are more bread and butter type of product offerings.
The innovative ones thereafter are Snosky, Mountain Oak, [indiscernible], obviously, and like you mentioned and on our investor presentation as well, we've spoken about a new premium more-risk as well as. These are, again, innovative offerings, which will start with 1 of the strong states and then bring into the others. Is that the kind of metrics that you were asking for?
Correct. So that's the product. And the state, you mentioned 5, 3 strong ones into UP and Punjab and then to explore any other states that fit into your matrix later.
So we've got 2 other states that are to be launched soon. Rajasthan and Takano in the next 6 months or so, we'll have launches in these 2 states as well.
Perfect. One more question was on -- so the raw material part that you had mentioned, so there's largely 2 parts, right, the power and, let's call it, the grain cost. So the power costs, you've given a good sense. On the grain, you mentioned that you expect it to come down by about 8% in the second half when the crop it. Are you seeing any of that happening as we speak? Or are you saying that's more a December to sort of March kind of phenomenon?
Yes, it is more in December to March. Some amount of weakening has happened, but I think that's not based on crop, that's probably based on very micro term demand supply mechanics, but the crop impact will start coming in only in December.
Great. And operator, can I squeeze in one last question? Or should I come back in the queue?
Why don't you go ahead.
Okay. Great. So Shake, my last question was if you could help me with a similar metric on the IML part of the business where we need to spend time on belaboring the product part because that's clear. But in terms of the states metric. Is it fair to say that, like you said, Harkand and Rajasthan to be added in IMFL, including the 5 you mentioned? So in these 7 of IMFL, is it common to the IMI or they are separate or new states?
So -- I mean, in some cases, they are common -- so Rajasthan is obviously the most important one. Westin wall Delhi. We will -- we are considering a launch in 1 new state. And as soon as things are a little more finalized, I'll talk more about it but it's largely Haryana, Deli, Rajasthan [indiscernible]
But just to conclude that. So in terms of, let's say, if you're setting up in Orissa or UP or in the other common IMFL states like Punjab. Is there any attempt to play outside of these 4 IMIL states you mentioned? Or is that it?
So just there will be just 1 more state as we see right now. whereas Hakan may have an IMIL opportunity, we don't consider it to -- it's -- we don't -- as of now, we don't want to get into it. It's too small business for us to look at. There are other more important things for us to do right now. So just 1 more new state and you talk a little bit about it maybe in the next quarter.
And 1 last comment that I have seen a lot of your personnel introductions and I must mentioned and put this on record that I think you're adding a lot of he and gravitas to your personnel well ahead of time. And that's always a great sign of great things to come for the company. Thanks, and all the way better.
[Operator Instructions] Your next question is from the line of Mr. Saket Kapur from Kapur Anko.
Yes. In your detailed presentation, you did outline about the impact of FCI disruption. About the higher grain prices to the tune of INR 17 crores. And West Bengal and the Chakan plant, the remaining shutdown for 43 days to INR 25 crores.
So going ahead, what should be factored in, in terms of reversal of the once your utilization levels improve for quarter 3? And also, sir, you have guided for utilization levels to reach 95% for Q4. So how should Q3 shape up in terms of utilization levels?
So yes, there were a lot of questions. Let me start with utilization, and you can -- if I miss out a question, please point it out. So Q3, we see utilization to be around 80% to 85%, largely because we are awaiting consent to operate for the expanded capacity in Binol and Hakan.
If we get it in December, then it will help us increase that number. But so far, we haven't got it. So 80% to 85% is what I expect in Q3, and Q4 should be all banks basing in terms of capacity utilization.
I think you asked about profitability. I've mentioned that last quarter was disrupted because of the reason we put in our presentation. And now there is no disruption in raw material, it's a question of price of raw material and the price of ethanol. Price of ethanol, I'm not expecting a very significant change, but I am expecting a good reduction in raw material costs going forward.
Sir, but that is post the carries season, sir. So going ahead, this cost benefit will come in the later half of 2024, not for this quarter.
This will start impacting the company in December of the current year.
That is correct, sir. And sir, out of the total revenue from operations, what will be attributable to the ethanol sales?
Nilanjan, do you have that number? What is the percentage of revenue from ethanol in the quarter gone by?
I'll get back on it. It's almost in the range of -- on manufacturing, it is almost in the range of 70%.
70% of manufacturing. So it's around 30% of overall revenue.
30% of the overall revenue.
35% of overall revenue in the back of envelope, and that should be the number that we can cross-check there.
And sir, how have been the D&A price trends currently and for the quarter, how have the prices behave?
E&A pricing, while the E&A margins have been more or less stable. We've been able to pass on price increase -- cost increases to our customers. ENA offtake has been a little bit lower in Q2, and that's predictable.
It's a seasonal Q3, Q4 uptake is usually better because of the -- just the seasonality. So that business is going well as much as we can currently allocate to ENA, we are doing that. But we do get left over with capacity, which has been utilized through sale of ethanol.
Okay, sir. And sir, what should be the external ENA sales out of the total after the captive use?
So 70% was ethanol so 30% of manufacturing [indiscernible]
Sir, you have also mentioned that now mais will be the key input for running the Bengal plant. So whereas Mangiarotti raw material from Rajasthan. So what's the cost?
No. So currently, I did not say it will be the key raw material for vesting oil. Currently, for the next 2 or 3 quarters, rice is very much the key raw material. We have capability of using mais. So as and when mais is more profitable, we will use that. However, in the long term, I believe mais will be very important. And we are doing work on direct farmer purchases of mais because we do not need a mill unlike in rice, we need to buy from a mill. But in case of mais, we can buy direct from farmers. So that is why we are building the work on educating farmers about mais cultivation around our factories.
And last point for Diageo capital work in progress closing balance for September is INR 155 crores. So -- and the depreciation has remained constant for the first half. So what percentage of the project will be capitalized for the current year? And if you could give the CapEx number for the entire year?
Nilanjan, could you, please?
Yes. So the CapEx that should be capitalized in the current year will be almost INR 100 crores of the 120, 60 plus 600 in Bengal and Charkan. And there will be some more capitalization of other application work that is going on by another INR 10 crores to INR 15 crores.
So altogether, the capitalization we expect in H2 is almost INR 115 crores.
Right. And the packaging cost part, sir, any -- I think the previous packaging also from the inflationary trends were there? So how are the packaging cost behaving and what -- any outlook on that?
Can I answer this? Can I answer Yes, please. Yes. So in packaging cost, we had an increase in the glass bottle cost, but that was almost offset by a reduction in the CC box rate and also reduction in paper prices and Petrogen prices. Okay. So these are all -- overall packaging, no such major impact, minimal impact.
Okay. And then [indiscernible] lube and other expenses?
No, packaging is a part of my cost of material consumed, which is before the gross margin line in other expenses, only power and oil and other expenses come.
The next question is from the line of Mr. Weber Gupta from Bowhead India Fund.
Thanks for the opportunity. Am I audible?
Yes, please.
Sir, what was the increase in broken rice price when the SCI ban happened in the open market? And what is the broken rice price now?
In the last 3 months, it's been between INR 26,000 and INR 27,000 and INR 27,500 a tonne.
And sir, before the FCI right ban, what was briken rice price in open market?
Well, it's been around the same level since I would say, July -- June, July, it is around the same. So it's not like the ban led to a very sharp increase in raw material price. That's not the right messaging. It's to do with the export of broken rice from India that led to such a high price of rise. So with the export ban, there was no further increase, but now we have to wait for the new crop to replenish the dwindling supply and stock of broken rice in India.
Got it. And sir, my second question is in ethanol manufacturing, like broadly speaking, what is the broken rice cost as percentage of small sales?
Raw material cost is a very significant part of our cost card. I mean I don't have the number, but it's well over 60% of our cost of production is raw material.
And what would be a power cost for ethanol manufacturing?
Now it should be around 15%. 15, 15.
15%. So this is like as per sales realization or at cost of goods?
Cost of goods.
Cost of goods?
Yes.
The next question is from the line of Mr. Imran from Longbow India Capital Advisors LLP.
I'm hoping I'm clear to everyone. Question is on the ethanol prices. In FY '23, you got interim price increases and then again, the government has revised the prices in October and to a lower number. Is it going to be a very similar case even in this year? Or do you feel the new -- the latest price increases will remain there for the year-end build from here for the future?
So as I mentioned earlier, the oil companies have revised prices 5x in the last 2 years. I see them being a bit slow to react, but they are reacting in line with the market. So given that, I don't see a significant price increase coming up in the next couple of weeks.
But in case a situation like this to present itself. In fact, I don't see a situation like this presenting itself again next year. Next year's average grain price is going to be lower than this year's average grain price. So -- but even if it were to hypothetically, I do see them taking action to revise the price.
The government's mandate on E20 is very clear. In fact, the oil companies have to pay a penalty on every liter of petrol sold if they have not met the target of blending for that year.
Right, sir, my question is a little different. I'm asking in a situation where we have tokenized prices coming back to whatever INR 20, INR 21. In that case because the onces will come to you and say, look, we are not giving you INR 64 INR 65 now, we'll give you only INR 60. Is that -- is there a possibility?
If it is sustained for a very long period of time and small margins are very high for that period of time, then yes, certainly. I mean if we see a situation where for the whole year, prices are below 1,800, then yes, next year, there would be a downward revision. But they will not reduce prices if for 3, 6 months, the prices came down. I don't see that happening.
All right. And then this usually happens at the end of October, right, not in between the year?
So there is a price that is announced at the end of October for the next year, which has been delayed this year. We're still waiting for it. But thereafter revisions happen as and when there is a need.
All right. And sir, my second question is on the overall business. Can you give some color on your consumer margin? I mean, has it not be absolute in absolute terms, but the impact of this raw material price increase? Because I'm assuming the plant of the problem or majority of the margin reduction is on the consumer business, right?
Sorry, can you repeat that?
What I was trying to understand is, sir, because you didn't have any price increases in the consumer business and the raw material prices went up sharply. So is it fair to say that the majority of the problem or the margin reduction is happening because of the consumer business?
I mean, no, it's not majority, it's not the consumer business. Majority is the manufacturing business. But yes, there has been a reduction on margins even there. You're absolutely right about that. .
Right, right. And any cost on sustainable margins for the blended business, maybe in FY '25, if that is possible?
It really depends on how quickly we're able to grow our consumer business. As you can see, the growth rates in both value us and IMFL have been very interesting. So let's -- FY '25 is some time away. I think the thing to watch out for right now is how much is the price correction in raw material into December and in Q4. And at that stage, I'll be able to give a little more longer-term guidance.
But for now, we are waiting for the new crop for the raw material market to cool down shored up our inventories in that time of year and then look ahead for the rest of the year and be in a better place to give a guidance. At that time also, there will be some price increases in the consumer business around the time of February, March and April. So that's a good time to have this discussion.
[Operator Instructions] The next question is from the line of Mr. Dinesh an individual investor.
I have a couple of questions on the consumer business side. So there has been many articles regarding the FDA agreement that we could be a [indiscernible] the alcohol industry. So is it really beneficial to the alcohol industry? And is it because of first reason and the previous quarter where it was mentioned in the investor [indiscernible] that the company is exported to enter into international markets, sir? So can we impact this both or anything part of it?
Param, could you please?
Yes. So the key agreement, its direct immediate impact will be the reduction in the courses that are being used in blending which will benefit every player in the industry who use those costs?
And second is, it will probably make the cons of sports in the country a bit more competitive. So these are the 2 immediate impacts that will happen. The first one, we will benefit, of course, like most of the players, we will also benefit because we do add scotch is we use various combination of courses in our plans. The second one, does not have an immediate impact because -- in parallel, there is another huge phenomenon that is taking place is that globally, the interest in Indian spirit industry has been gaining very high provenance with almost every passing year.
And I am sure that will support me when I say that the Indian spirit brands would very soon be sustained where they will command their own price irrespective of what the price of other country brands, including scotches command in that country or category, including India. So does that sort of give you some clarity, sir?
Yes. And that's -- what about the plan of entering the international market could decrease [indiscernible]
So in the immediate short term, we are obviously -- we did start a little bit of work on Kenai. And as we have a little stronger super premium category under the umbrella of India's craft spirit company, we would be starting to focus on exports.
Exports will take a little bit of time to certify and bring provenance to the whole consumer business. But we also intend to create a lot of buzz and excitement around the brand in India because India is the mother of all markets. The world is actually coming into India are looking at us. So we want to make sure that we have a good place here, which is where the future of the spirits lives.
I got it, sir. Yes, okay. My second question is on the retina. So the subsidiary to comp with board average is well into operating only delay Haryana as the Board or is currently en Indian arena or it will be expanding to all of the locations the growers currently operating in?
So we would be -- so we are busy doing some renovations and its offerings and also bringing in some innovation, which is yet not known to the market and consumer and yourself.
And we will initially be starting with 3 states. And slowly over a period of time, as the category evolves, we intend spreading it in tandem with progress somewhere or ultimately, it could also fall in tandem with our premiumization journey where we have taken a conscious decision that our super premium category of India craft service company will also be available beyond the mainstream consumer business of global operates. So both journeys will happen concurrently.
Sir, just a follow-up on the [indiscernible] is also present in Mumbai and Pune. So with you subsidy in the is there any possibility of glorious entering into Mumbai on markets also going ahead.
Do you want to take that, Shekhar?
I'm sorry, I could repeat the question, I couldn't hear it clearly.
Yes, sir. So subsidiary we formed the bode company is already present in Mumbai and [indiscernible] So going ahead, is there any polaribility of global stand to enter the Mumbai and [indiscernible] markets also based upon [indiscernible]
So sorry, I also -- so Board beverages as of now has been doing a little some business in Delhi and Arana, not in Mumbai and Pune. Your information is a little bit incorrect. We -- as far as our IMFL business in Mumbai and Pune is concerned, we have started [indiscernible] there, but the other brands are still a little bit away from entering Maharashtra because we still base our prioritization of choosing markets, which a few investor calls prior had alluded to that the state, we should have a right to succeed as well as right to convert our business into a profitable business. Maharashtra is a little bit down the value chain. So we still are going to be entering some other states before Maharashtra terms comes. But eventually, yes, towers will be present in Maharashtra somewhere down the line.
So any time line, sir? Any time line [indiscernible]
Currently, if the -- currency is difficult to say, let's -- these are not our priority market. So we will keep you informed. Could we move to the next question, please?
The next question is from the line of Mr. Du Kasha from MART.
Milan quick follow-up question, if you could help me with this. And if you're not comfortable sharing the absolute number, maybe you could share it as an index or a percentage or whatever. So could you help me first with the April, May, June quarter, then the July, August, September quarter and the October, November, December quarter-to-date, what was the kind of coal prices?
Happy to share the information, we've got no problem with that, but I don't know whether we have it ready right now, [indiscernible]. Nilanjan, can you hear me?
Yes. Yes. Coal prices of quarter 2 has been around about 7.5, 7.6. That .
7.6 per kilo?
Yes. Okay.
Okay. Q1?
Sorry, sorry, [indiscernible] We are 7.6 per kilo and Q1 was 8.25. Current, I don't have -- current [indiscernible] to it.
But do you have an indicative idea that is it below 7.6 and 8.5? Is it more than that?
As I mentioned in my opening remarks, we are maintaining at the same price.
No, it will be the 7.6, [indiscernible]
So just to be clear, when you said maintained at the same price, the same could mean Q1 and Q2. So it's not clear. That's why I'm asking. Prices are different in Q1 and Q2, right?
Q2. Q2. Q2.
Which was -- which you were saying was 7.6%?
Yes. So [indiscernible], it's in the similar range as Q2 a little bit of up or down could be there as the quarter ends, but it is a similar range as Q2.
Got it. So which would be lower than Q1. Milad, could you also help with the exact same data for grain?
So you need to -- you want to know this for broken rice, not our average grain price because average green price would be affected by FCI purchasing as well.
So net of that, maybe I think it's better to understand that maybe broken rise and mais separately and some sort of weighted average of the grain, if there is some mechanism. Just to understand that is the grain price -- also -- so what I can understand from coal is that 8-point something came down to 7-point something and is maintained at 7-point-something. I mean, is this possible to know a trend of grain, if not the absolute number, but is it also the similar trajectory? Or is it going up and down?
Q2 and Q3 for grain is similar. In fact, Q3 is marginally upwards of Q2. Q1 was lower than Q2. Now Q3, Q4 -- sorry, end of Q3 is when we'll start seeing connections in this. So far, Q3 is slightly upwards of Q2.
Okay. That's interesting because in the beginning, you had mentioned that there's already some decline in grain prices because of non structural -- I mean non stock sort of coming into the market but other reasons. But now you're saying that it's actually even higher in Q3 versus Q2?
Short term are softening, and I'm not saying on a quarter-on-quarter basis, there is softening. I have always maintained in this call that the highs of Q2 have only been built upon in terms of cash growth in Q3.
So you're saying, so as we speak, there is a possibility that the grain weighted price might be even higher currently versus than what it was in the average of Q2, possibly?
Our grade of Q2 has some FCI, -- like I said, I don't . So we cannot talk about quarterly averages because of the FCI elements.
[indiscernible]
What I can tell you is Q3 is similar to Q2 but maybe slightly higher by about 2% or 3%. However, coming into December, we will see softening. So let's wait and watch and see how the quarter closes.
So you're right. Maybe a more sensible way to analyze this would be the Q1 open market prices versus Q2 versus Q3, netting off for FCI, to which I've understood your answer that it is where it is.
And with December factored into Q3, there's a possibility that overall Q3 might be the same or slightly more or slightly lesser than Q2. And the real full quarterly impact will start coming from Q4 of the new grain hitting the market. Is that a fair summary?
Correct. That is a good summary. .
[Operator Instructions] The next question is from the line of Mr. Saket Kapoor from Kapoor & Co.
Just in continuation. So the impact of the grain prices which was for Q2 was INR 17 crores will still persist, but only the production loss for INR 25 crores will not be appearing as the utilizing levels will move from 78% to 82%? This understanding is correct?
Yes, there will be no loss -- production loss in Q3.
But the higher grain price impact will still persist the real [indiscernible]
Higher grain -- the impact of higher grain will continue to persist. In December, we will have the new crop, and then we will see what is the extent of reduction.
So Q3 on a ballpark number will be similar only the advantage will be having will be INR 5 2crores part on the -- that hit which we took in Q2 will not be appearing for Q3. That's a fair understanding?
Yes. So there was a lot of stoppage in Q2. So our capacity utilization is around about 70%. We expect that to be around about 80% to 85% in Q3. So there will be revenue and growth in profits from there. But in terms of unit profitability, we end -- Q3 should be similar amounts of what we ended Q2 with is what I think this quarter will look like.
Sir, you have mentioned utilization levels at 78% in your presentation. So is it 78% or 70% for Q2 because then 4% and 10% is a significant delta?
Depend on what we take as capacity, it is 78% on the LPD.
[indiscernible]
765 NPD, it is 70% on 85%.
Okay. So 82% will be on what number?
85%.
[Operator Instructions] The next question is from the line of Mr. Dinesh, an Individual Investor.
Okay. And just to follow up to my previous. So just I want to understand that the consumer business in the consumer business where Q2 is lesser than -- I mean the R&D and today total consumer revenue was less than this year. It was a similar in the previous financial year also. So can we understand that there is a seasonality in this future for the consumer render any other reasons?
So Q2 generally is a bit softer than Q1 because in most of the states, the size runs from April to March. So generally, the Q1 and Q3 are indexed higher Q1 because as the excise year opens, new players coming to the market shops who have depleted their inventories pile of inventory is.
So Q1 is higher generally. And Q3, obviously, the season starts building up from -- towards the end of Q2. So October, November, December are more festive seasons of BR index higher. And Q4 in some of the states, there is a little bit of softening, more from because the business partners are getting ready for the renewal or a new excise policy.
Just 1 quick question for [indiscernible] so in the last quarter, there was testing that was an impact in the contract can move to enormous comes as a comp. But even in this quarter also, we can see that there is no such improvement. So this is an effort the segment going the impact going to be longer? Or can we see move to normal going ahead in the Q3 or Q4 somewhere?
I'm not going to really understand your question, sir. Your line is quite bad, sorry. You're not coming across clearly, sir. Maybe join again from another device to something [indiscernible] I can answer the other question.
Am I audible, sir?
Yes, much better.
My question is franchise bottling was incepted in Q1, and the management has guided that in Q2, it can reach to normalcy, but there was an impact. The impact can clearly be seen in this quarter also. So going ahead, is this impact will be persisting for a longer term? Or will the franchise bottle units come back to normalcy?
So franchise bottling is a small part of our revenue. The reason we do it is because we can tell the same customers, our E&E as can other bottling locations as well. I'm not very concerned about the volume movement over there because all our costs are direct costs, the change along with the volumes, and these are volumes of the brands that are owned by those companies. .
So I'm not very concerned about how that has moved and very difficult for me to give an indication on baseline grow or not because it's based on the fortunes of those brands. So on the towers or a roll challenge, those brands have to grow for us to get volumes.
As there are no further questions, I would now like to hand the conference over to Mr. Shekhar Swarup for closing comments.
Thank you for joining us today. This is for everyone a very happy Diwali. Please do in touch with us in case you have any questions, our IR team or direct it to us. Thank you. Bye.
On behalf of Global Spirits Limited, that concludes this conference call. Thank you for joining us today, and you may now disconnect your lines.