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Globus Spirits Ltd
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Good day, and welcome to the Globus Spirits Limited Q4 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shekhar Swarup. Thank you. And over to you, sir.
Good afternoon, everyone, and welcome to our Q4 and full year '22 earnings call. I do you hope that you had a chance to go through our results and presentation. With me, I have Mr. Paramjit Gill, CEO of Consumer Business; Dr. Bhaskar Roy, Chief Operating Officer; Mr. Nilanjan Sarkar, Chief Financial Officer. At Globus Spirits, our strategy has always been to focus on maximizing returns from [Audio Gap]. An alcohol deficit state is one that depends on bringing alcohol from other surplus states in India for the use of liquor and ethanol within that state. This strategy allows us to maximize capacity utilization at higher pricing than other distilleries which are located in surplus states, from the very first day of the operations start, while investing in our consumer business in those states. This has been our guiding principle since our inception and continues to be a focus for growth in the coming years. In the year gone by, the company demonstrated strong growth in the consumer and manufacturing segments despite significant headwinds, especially in H2 due to the impact of floods and unprecedented inflationary scenario. Floods in Bihar led to a closure of the unit there for about 120 days over Q2 and Q3 and a major overhaul in the power plant of....
Mr. Swarup.
Yes.
Sir, sorry to interrupt. Your voice is breaking up, sir, in between.
Okay. Is my voice clear?
This is better, sir, yes. Thank you.
Okay. I'll repeat the last sentence. In the year gone by, the company demonstrated strong growth in the consumer and manufacturing segments despite significant headwinds, especially in H2 due to impact of floods and inflationary cost scenario. The floods in Bihar led to a closure of the unit there for 120 days over Q2 and Q3 and a major planned overhaul in the power plant of our Haryana unit lent the plant unavailable for about 40 days in Q3. On the other hand, measures like procurement of fixed price rise from FCI, which allowed us to sell ethanol at higher prices, lower interest rates, almost 4% versus nearly 8% last year, use of alternative fuels and upstream integration for production of PET bottles. There are a few initiatives that took place in this year that allowed us to mitigate some effect of the cost increases that are plaguing industry in India and overseas. We continue to generate strong cash flow, with this year's net cash flow from operations at INR 218 crores, and healthy return ratios with a return on equity of 24% and return on capital employed of 30% in the year gone by. In the past 3 years, we generated a total net cash flow from operations of about INR 495 crores. This has helped us with reducing our long-term debt as well as investing in expanding capacities as well as product and market development. Our focus on high cash generation and our capabilities of executing core business at most efficient investment levels in the industry gives us the confidence to further expand our footprint of manufacturing as well as gain more market in the consumer business. Going forward, price hikes in Rajasthan and expansion of Bihar by 20% in capacity without additional planting machinery, additional Jharkhand capacity, growth in consumer business as well as intelligent purchase of fuel will further support profitability and fuel our growth. I request Param to speak more about our consumer business initiatives and strategy.
Thanks, Shekhar. Good afternoon, everyone, and I hope you are all well. Our consumer business in FY '22 has continued to witness strong traction, with volume growth of 19% year-on-year to about 14.6 million cases and value or realization growth of 11% year-on-year to about INR 461 per case. The Value Plus segment continued to drive the overall growth in Consumer business, and clocked sales growth of almost 77% year-on-year to 4.87 million cases in FY '22. On a quarterly basis, volumes were flat for year-on-year and Q-on-Q. This is primarily due to Haryana, where the current excise policy, which is ending in 2 years, has been winding down. This is a normal procedure whenever the excise policy changes. And the market will normalize, and we are expecting the size opportunity as well as the growth opportunity to stay attractive for us. Let me take you through a quick analysis and strategy for this segment. In Rajasthan, our market share has increased to almost 32% on the back of strong performance of the Value Plus segment where our market share has increased to almost 45% in Q4 of the current year versus about 30% to 35% during last year. In Q4 of this year, an additional whiskey brand named Globus Green has been launched towards the end of March. We believe that this will play an anchor role to strengthen Globus' whiskey share in the state. In Haryana, we have gained marginal market share and are now at about 10%. We will continue with increased focus on Metro liquor, which market is expected to grow in the year '22, '23. The new offerings, which have been planned, will again play in the Value Plus segment and have the ability to shore up our profitability and business. In West Bengal too, our market share has seen some gain to a little over 2%. It's still having a huge headroom for growth. Our recent expansion at West Bengal facility is about to give us an added impetus to not only expand our portfolio of offerings, but this will also allow us to capture sudden market surges in that geography. We launched County Club in the Value Plus segment towards the end of April '22 and look forward to additional volumes and positive margin in months to come. In the Premium Liquor segment, where our focus has been the 5 key markets, you'll be happy to note that our brands have been introduced in Uttar Pradesh and Delhi. Further, we have reenergized and expanded our portfolio in West Bengal, backed by local production, thereby allowing us to expand quickly and efficiently in the entire state. TERAI India Dry Gin, has also been extended to Uttar Pradesh, West Bengal, Rajasthan and Mumbai. In the pipeline, we have plans to introduce Governor's Reserve, Oakton premium whiskey as well as Terai in the Q1 of FY '23 in Haryana, followed subsequently by introduction in the state of Telangana towards the end of Q1 or early Q2. Through these ongoing initiatives in select markets, we are hopeful to contribute meaningfully in the Semi-premium and Premium segment growth. I'm looking forward to a very exciting journey ahead with the support of all the stakeholders.
I will request Dr. Roy now to lead the conversation. Thank you.
Thank you, Mr. Gill. Good afternoon, everyone. Let me now take you through the operational performance of the company and update you about the upcoming activities -- capacities. On the manufacturing side, we are leveraging our 3 decades of operational capabilities towards the emerging alcohol deficit on the back of high procurement of ethanol for fuel blending. This approach has helped us deliver consistent performance and is poised well for further growth in the coming years. Total sales in FY '22 was 116 million liters, growth of 13% year-to-year and by 41% year-on-year to 40.1 million liter in quarter 4 of FY '22. The average realization for FY '22 was INR 55.90, higher by 5% compared to the last year and higher by 8% year-on-year to INR 58.6 in quarter 4 of FY '22. Capacity utilization was 83% in FY '22. Bihar and Haryana plant closures, the reasons already explained by Mr. Shekhar Swarup, were the main reasons behind the shortfall. Both plants are operating at normal capacity since mid of December '21. We also added new capacity of 140 KLPD at West Bengal in mid December '21, which operated at normal capacity in quarter 4 of FY '22, leading to an increase in the share in the manufacturing business to almost 59% of the total revenue in FY '22 and 67% in the fourth quarter. Short update on projects underway. Jharkhand, on track to commission Greenfield capacity of 140 KLPD by end of the quarter 1 of FY '23. Further, we have also started work on enhancing the capacity at West Bengal and Jharkhand by 60 KLPD more at each of the equations, with a total combined capital outlay of approximately INR 600 million. This is expected to be commissioned by quarter 4 of FY '23. Now Odisha, new capacity of 200 KLPD for ethanol and ENA with bottling plants, for which land acquisition has been already completed, fully for 25 acres. We expect to start the construction later in this financial year. Next, Uttar Pradesh. New capacity of 200 KLPD for ethanol and ENA with bottling capacity, for which land acquisition is underway. We expect to start construction in the next financial year. To sum it up, our capacity, which currently stands at almost 665 KLPD, is expect to increase to 925 KLPD by end of FY '23. I will now request Mr. Nilanjan to continue with financial updates.
Thank you, Dr. Roy. Good afternoon, all. I'll take you through the financial update. The consolidated net revenue recorded a growth of 28.3% year-on-year to INR 1,579 crores in FY '22 and 34% year-on-year to INR 479 crore in quarter 4 FY '22, on the back of growth in both Consumer and Manufacturing segments. In terms of segmental breakup, the Consumer segment revenue recorded a growth of 32% year-on-year to INR 679 crores in FY '22 and a growth of 6% year-on-year to INR 160 crores in Q4 of FY '22. The Manufacturing segment continued to grow strongly at 19% year-on-year to INR 651 crore in FY '22 and by [ 53% ] year-on-year and 90% quarter-on-quarter to INR 235 crore in quarter 4 FY '22. Coming to the margins, which were impacted due to higher cost effective second half of the fiscal. The increase in raw material, oil cost and packing cost is a major reason behind the hit in margins. The fuel and packaging costs increased by 37% and 40% year-on-year in FY '22, respectively, compared to the last year. Further, the plant shutdowns also impacted the margins to the tune of almost INR 45 crores at EBITDA level in FY '22. The company is gradually moving towards procuring FCI rice as the raw material, which will help to bring sustainability to the margins as it is procured at a fixed price. Also, the price of ethanol increased by INR 1.37 per liter, and a price hike in Rajasthan will aide margins. The company has generated a net cash flow from operations of INR 218.7 crore in FY '22 due to growth in business and improved profitability and lower finance costs due to clearing of debt and lower cost of debt. Our return ratios, ROE and ROCE have remained in the same range compared to FY '22 and FY '21 are 24% and 30%, respectively. The Board of Directors has recommended a dividend of 30%, that is INR 3 per equity share for the FY '22 as against INR 2 per share of FY '21. This concludes my report on the financial highlights. I would now request the operator to open the forum for questions. Thank you.
[Operator Instructions] The first question is from the line of Anshul Verdia from Edelweiss Wealth Research.
My first question, on the gross margins. So our gross margin has seen as fall -- has seen a fall in this quarter. However, from first quarter FY '23, we -- I see some levers to cushion that fall, like we are switching to FCI rice and the price hike in Rajasthan. So will you be able to quantify what margin expansion can come from these 2 activities assuming everything else remains same?
Thanks, Anshul. So there are 2 reasons for the drop in margins. One is the fact that our consumer business share in Q4 as compared to the previous quarters is lower for the reasons mentioned by PSG earlier. And the other is that, obviously, there's been a significant inflationary trend. So on grain, we've been able to -- we've reached a level where there will be no further inflationary impact, especially on the ethanol side because we'll be procuring rise from FCI. It no longer makes sense to convert broken rice or damaged rice into ethanol because of the price of that material. On the other hand, fuel is an area of concern and continues to be. And we have to see how the initiatives on fuel cost is going to play out, initiatives of the government on helping fuel inflation are going to play out. But internally, what we've already done on fuel is to increase use of alternative fuels, agri based, et cetera, to mitigate some of those increases. So we have to wait and watch and see how the rest of the quarter pans out. It's difficult for me to give a guidance.
Got it, sir. Second, on the 2 expansions of the 60 KLPD each which we have announced in this -- with this result. So if I see it on the per crore, on the basis of investing per crore on the KLPD, we are on the lesser side as compared to our past investments. So how confident are of these expansion coming by the end of this year given the inflationary environment and the steel cost and everything in the market? So any thoughts on that?
No. Our project costs are -- for the big ticket items, our project costs are completely fixed. And orders and advances have been paid. So there may be some change on minor -- on sort of the minor materials. But on major materials, such as stainless steel or large equipment, there's no impact that is expected. In terms of timing, we are very confident. This is something that we do regularly, set up plant and machinery. So we are very confident about our time line. So unless, obviously, there's something unexpected that happens, we are quite confident.
And last one. In FY '22, if I see the byproduct sales as a percentage of the net sales, it has grown to 20% as compared to 11% last year. So what is actually driving this? Right now, 20% is a big amount of the total sales, byproducts.
Yes. So reduction in consumer business in the last quarter and an increase in the manufacturing business in this quarter is -- will impact that number quite dramatically. In the year that -- in earlier part of the year, we saw a very high, how do I say it, a rapid increase in byproduct prices. A lot of that has cooled off in Q3 and Q4, which too led to expansion of revenue from then. This byproduct, we have 2 major byproducts. One is used for animal feed and the other is carbon dioxide. So animal feed portion is what saw most of this growth.
The next question is from the line of Nitin Awasthi from InCred Equities.
Sir, wanted some details on absolute numbers, if you could point out. Now you have said that FCI rice is going to put up pushing because you have a stability in your buying price, a price which was not there when you were procuring from a market [indiscernible]. So if you could put a range of gross profit margin in the fuels you generate for the ethanol business given that your procurement will be from FCI?
Like I mentioned earlier to the person who asked the question before you, Nitin, fuel is a open-ended thing for us. The kind of inflation we've seen on fuel across industries over the last few months has been quite unprecedented. And we have to wait and watch and see how this plays out.
No. I'm just asking about the raw material price, sir, not the fuel split, not [indiscernible] the fuel.
So what about raw material, Nitin?
No. So you -- the spread between your purchase of price of rice and your selling price of ethanol, the spreads, trying to understand that dynamic. So that dynamic of [indiscernible] it was closer to [ 50% ] it come down [ 32% ] roughly or maybe lower. Given on the procurement of rice from outside, now you are shifting to FCI, that's a cushion to it. So I wanted to understand the dynamics. Will there be improvement? How much improvement are you expecting? Will it go back to 35 percentage?
No, no. So I'm not foreseeing any improvement per se. What I'm -- the point of FCI is that there is going to be no further erosion due to increase in raw material prices. In the current situation, the price of rice from the market or from FCI is -- FCI route is more profitable than the market route. If the market route becomes more profitable, then we'll switch to that.
Got it. Got it, sir. And so the next question is on the power plant. You have continuously in your conversations kept on saying that you're looking at innovative methods if you're looking at policies to reduce this cost. Could you highlight some of these methods of policies that we're looking at to mitigate the that add to have that some comment?
So the reason we purchase power is to generate -- the purchase fuel is to generate steam. Steam is required for our process to make alcohol. In process of producing steam, we also produce electricity. Electricity is a byproduct of the steam production process. Electricity is also required at our distilleries. There are 3 types of fuels that we use: coal, husk of rice and mustard crop, as well as other based residues of the agricultural process, that's the third type. And waste residues could -- is a variety of materials, such as straw, such as wood chips. And there are several other such biomass which is -- which comes under the other category. Traditionally, we have been -- 80%, 90% of our fuel has been rice husk or mustard husk. Over the last few months, we have also added coal as an option. And we have added -- in certain -- in Haryana, other fuels as an option. Going forward, coal purchase, we have now shifted our -- but not entire, but we are attempting to shift our entire coal purchase directly from coal fields, reducing the sort of inefficiencies in terms of the middleman and other transportation. That impact should start coming in from June as soon as coal starts getting allotted to non-power plant uses. Currently, government is prioritizing power plant allocation of coal. And other biomass is very profitable for us. However, the use is limited to Haryana. We are working internally on expanding technical capabilities in other units to use that fuel as well.
Understood. Understood, sir. Sir nextly, wanted to ask the expansion. You have stated in your opening remarks that Odisha, you're looking to start construction later this financial year, whereas in UP you're looking to start construction next year, next financial year. Why the delay for the UP plant?
We have to manage with the capital that we have, Nitin.
Okay. So by next year, mid next year, you're expecting Odisha to come online here.
Yes. So I mean, I'm not giving any guidance yet on when we expect it to start. Our track record is typically 12 months. I'm foresting that later this year, we'll start construction in Odisha. But as of now, I'm not able to give any expectation on when that factory will start.
Okay. And UP, like you said, will be the next financial year as well.
Yes. As of now, what we have clarity about is that 995 or something close to that figure is what will be the capacity by the end of this financial year.
Understood. Understood. Sir, last question from my side. DDGS prices currently at the -- what are they trading at? And what were they during the quarter?
Yes. So DDGS Q4 average was -- Nilanjan, please correct me if I'm wrong, but it was around INR 34 or INR 32. And in the previous quarter, I think it was around INR 36, INR 37. So about 10% to 15% correction there has happened.
Yes, correct.
And right now?
It varies from state to state, but let's wait for Q1 to finish before we talk about Q1.
Okay. And the GST, any -- you got any -- have you seen any headwinds with GST on DDGS?
We had a couple of hearings, but the judgment is now reserved till after the summer vacation. So end of July is when it's going to come up again. Hopefully, that's when the judgment will come through.
The next question is from the line of Kaustubh Pawaskar from Sharekhan.
Yes. Sir, my question is on the consumer business. So this quarter, as sir mentioned that there were flat volumes mainly because of the Haryana market where there was a loss of sales because of the change in the export policy. So when can we expect it to stabilize? And when should we expect growth recovering to mid-teen kind of volume for our consumer business?
Thanks. As I said, it's a routine occurrence. And since it was a 2-year policy, obviously, last year, there was no change in policy. So market has already stabilized. The new policy is already kicking in, in about 2 weeks' time. And currently, the business is starting to run normal. So as I said, a very transitional thing. If it happens every year, nobody notices. But this time, since the policy was extended to 2 years, we are just able to notice that bit.
Right, sir. My second question is again, on -- more from a margin perspective, a little bit on longer term of 2 years' time . So now since our capacity is going up to around 950 to 990 KLPD, and this year, we ended with a mix of around 57 to 43 for bulk and consumer business. So over the next 2 years, where do you expect this mix to be? At around 55 to 45, considering the fact that you have a strong order book in for your ethanol business, and that would result in -- that mix to relay around 55 to 45, and this should result in a lower kind of EBITDA margins at around 20% to 22%, lesser than what it was, around 24% a few quarters back?
If I understand your question correctly, you're asking what will be the revenue breakup between consumer and manufacturing going forward?
Right.
So this is something that has come up regularly in the earlier calls as well. The nature of the manufacturing business is that as soon as capacity has come up and considering we set up capacities in deficit states, plus, we are good at running these capacities. The entire volume that has been added, comes in on the day the factory starts pretty much. So you see a significant growth in manufacturing volumes on the day that the factory starts. And then there is no further volume growth for that capacity. On the other hand, the consumer business is an organic growth process, which could be low in some quarters; in some quarters, it could be high. Over a longer period of time, my aspiration is to see that Globus' revenues are 50-50 between manufacturing and consumer. However, it is very difficult for me to break it down into quarter basis or year basis, and tell you, in this year, it will be so much; and in this year, it will be so much. But my aspiration and the company's vision is to create a balanced portfolio of revenues between manufacturing and consumer.
Right, sir. So in that context, should we expect consistent kind of improvement in your EBITDA margins provided everything is stable? We are seeing [indiscernible] prices correcting over the period of time. I'm not talking from FY '23 perspective, more from the '24, '25 perspective. Where do you see your margins if everything has stabilized? Even from the raw material point of view, supply situation has normalized, and you're getting a better supply of raw materials? So considering that, where could we see your EBITDA margins heading up?
See in the previous calls, I have said that Q4 of last financial year, those margins is something that I believe is stable for the company. On the other hand, in the last 5, 6 months, we've seen unprecedented inflation, especially on account of fuel. Now this is something that we have to wait and watch and see how it pans out here. I mean it's difficult for me to give you a guidance, '24, '25 [Foreign Language] margin [Foreign Language]
The next question is from the line of Himanshu Shah from Dolat Capital.
Sorry, sir. Harping on raw material again. But just can you provide some color? Like what has been the inflation percentage on broken rice front from open market purchase? Either on an absolute basis, the procurement prices on a Y-o-Y or sequential basis, how much it has seen an increase?
Yes. Nilanjan, do you have that for broken rice?
Yes. The broken rice price has increased by 14%.
Okay. And this is on a Y-o-Y basis?
So I just wanted to add to what Nilanjan said. After that 14% increase, we shifted to raw material procured from FCI, okay, especially for our ethanol business. So whereas the increase in broken rice is much more, but we have been able to hedge that because of shifting our purchase to FCI materials.
Okay. Okay. Okay. And that is largely on account of higher realizations for ethanol from -- produced from FCI rice?
A, higher realization and, b, fixed price of rice from FCI. So the rice that FCI sells us is at a fixed price for the entire year. It's not open to any sort of market movements.
Sir, can you just provide like what would be the current market prices of broken rice and what is the price at which FCI sells it?
So I can tell you, in Q4, I want to avoid talking about the current situation. Q4 broken rice prices were between INR 20,000 and INR 21,000, okay, per ton and FCI was about INR 20,000.
Okay. And fair to assume, sir, current situation might be even slightly worse, sir, especially in the backdrop of this Russia-Ukraine war and other stuff probably for the market price of broken rice?
Yes. We're in the middle of the quarter, I want to avoid talking about this quarter, please.
Fair enough, sir. Fair enough. And secondly, sir, what would be the composition of COGS between rice versus the fuel cost? And what would be the fuel cost inflation that we would have seen during this quarter?
Nilanjan mentioned that in his opening remarks. I think it was about 37% or 40%, the increase in the fuel.
37%.
Okay. And what would be the composition of COGS between fuel and broken rice and other materials for the capital, et cetera?
We can take that on another call, if that's okay with you. Let's give opportunity to the others for questions, please.
Fair, sir. Can I take another question then, sir?
Yes. Go ahead.
Okay. And sir, the 14 million volumes which we have done, can you provide some color in bulk alcohol much would be for captive use? How much we would have sold to OMCs under our contract? Full year number, we are aware of. But is it equally spreaded to? And how much would be the sell to alcobev companies? Some split, can you provide on that?
I don't think the team would have that figure handy, but we can get that for you.
Okay. And try to assume the realizations from alcobev companies would be more market-linked and that should be on a higher price, whereas OEMs were -- it's a fixed contract. So the swing in the...
No, no. For us, ENA and ethanol is fungible. Wherever we find there are better margins, we are able to divert volumes there. So in certain cases, it is higher. So there, we shift ethanol to ENA. In certain cases, it's lower, in which case, we make ethanol.
Okay. And sir, just last question. Animal feed prices, you said currently is around INR 36, INR 37 for Q4. And that is down by 10% to 15% on a sequential basis.
No, no. INR 36 is before they came down.
Okay. Okay. Okay. And so currently, they are down by 10% to 15%. Earlier, the realization was INR 36.
In Q4.
In Q4?
Yes.
The next question is from the line of Reshab Sisodiya from Concept Investwell.
Yes. Sir, my first question is on the innovation front which you have talked about in the IP around the new brands that and new products that you are looking at. So if you could just give us some color on how are we looking at the continued business going ahead with all of those innovations coming in?
Sure. PSG, could you take that, please?
Yes. So from the consumer business, obviously, as we have earlier also indicated, we are pursuing growth strategies in both the Value & Value Plus segment as well as the Premium segment. In the Value & Value Plus segment, we are extending our focus of going into Value Plus segment, especially in the states of Haryana as well as West Bengal as we speak and continue to consolidate and grow the strength we have already acquired in Rajasthan. In the Premium business, we had a couple of calls earlier highlighted the top line of our strategy of building a runway in the [ flood ] states where we believe we have the capability to win various certain parameters. And as we talk to you, we are already present in 3 out of the 5 key states, which are Uttar Pradesh, Delhi as well as West Bengal. And as mentioned in the earlier presentation, the fourth state of Haryana, we are likely to enter towards the end of this quarter, and the fifth state of Telangana towards the beginning of next quarter. With this, our whole focus will be to expand our business and continue to drive business growth in these 5 states, because our initial portfolio has been of 4 brands. And we will use organic as well as inorganic routes to grow this in the sense that we will be also adding brands and we will continue to work towards growing these brands. So the consumer premium business is expected to expand in the existing states as well as through the addition of 2 new key markets out of us. So both verticals are going to continue to be focused upon. And in the short term, obviously, it will be a bit of a yoyo. Sometimes, we have -- successfully, we have defended market share everywhere. Sometimes, the success in gain of market share comes in one quarter, sometimes it takes a little more than a couple of quarters. So very difficult to project how the salience between these 2 parts of consumer business will play out. But both have been very aggressively pursued. Does that sort of give you clarity?
Yes. Sure, sir. And then my next question is, on the bulk side, the current -- what are current utilizations that you are having in the quarter? And any aspirations for the full year?
Capacity utilization, is that the question?
Yes. And what are you currently looking at? Are the current plants running at close to 100%? And what are we aspiring for the full year?
We are at around 100%, and our aspiration is around 100%.
The next question is from the line of Kshitij Saraf from Tusk Investments.
It's on the consumer business. You mentioned, Shekhar, that the Rajasthan market share is north of 40% in this quarter. If you could throw some light on what contributed to this.
Thanks. I'll ask Param to take that, please?
Yes. What we had -- thanks, Shekhar. Kshitij, what we're indicating is that in the Value Plus segment of Rajasthan, we are now, even in the last quarter, being in the zone of mid-40s market share. Obviously, we have been over a long period of time trying to build our route-to-market strength in the market. And these shares are a culmination of many things that we are doing, right from continuously reenergizing and improving the efficiency of our sales force, to continuously add improved offerings of our portfolio, trying to zoom down on geographies and segments where we see higher headroom as compared to others. And also, time to time, within the market, if you do the sub-segmentation, you see certain areas and geographies and segments growing faster than some of the other areas and segments within the same state. And we think we are very proactive in rearranging our strategies to try and take advantage of these moving consumer orientation, and be the first one to try and capture it. So it's a culmination of the bucket of initiatives that -- and alertness that we always demonstrate.
And could you shed some more light on what your plan in the Value Plus and the Premium segment would be in terms of new launches? Would you be -- continue to be selective state by state in both the segments?
Yes. As of now, this as -- as we have indicated, we have added Value Plus segment, new entry in West Bengal. And it's very early days, just over a month now. And we are going through our notions of the routine, its trading availability, visibility, all the normal elements. And we are intending to try and elbow and create this market. And then we are a significant player in this market. In Haryana, where this segment came into being a little earlier than West Bengal, the segment still has a lot of headroom to grow. And we also as a player have been early entrants in the segment. And in the new policy, we are reasonably bullish that this segment will grow and offering us growth opportunities. So these are the 2 states we are expecting the segment to grow as well as our growth. And Rajasthan, we continue to keep making efforts to restate our peaks that we keep on achieving from time to time. In the Premium segment, at the cost of repeating myself, our initial offering as we stand today is a portfolio of 4 brands. There is Governor's Reserve, which is in 2 variants, straddling to joining price points in Semi-premium and Semi-premium Plus segments. We have Oakton which plays in the heart of the Premium segment -- I mean in this key category, as well as we have a Premium, Super Premium gin Terai. As soon as these brands stabilize and we get control over our route-to-market, this is our internal expectations, we have a product range of at least 2 premium brands which are lined up. Whether these products will get to see the light of the tunnel in the next 1 or 2 quarters, we will have to push it a little further. It's something which I would not speculate on. The intention is we have to continuously tick all the boxes before we take the next step. And to be very honest, there is enough opportunity of growth within the 4 brands and the 5 key geographies that we operate in. But suffice to say, we have a portfolio which is -- which can further be expanded at a press of a button.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Sir, I just wanted to understand, you did mention your capacity increasing from 665 KLPD to 925 KLPD by end of FY '23, right? .
Yes.
Yes. So in terms of revenue generation, you expect that particular -- the entire capacity to get fully utilized by FY '24?
Yes. So just very quickly before I come to that, I wanted to add something to what Param was saying to the earlier question. On our premium IMFL business, we are at a stage of capability creation. And the key capability that we're trying to create is a route to market or distribution. We've selected these 5 key states, which Param talked about. And once we are confident of our ability to service retail regularly with those brands that are selected, that is when we are going to launch more brands to try to take a larger revenue from the retail outlets that we're already present in. So that's really the strategy that we're running right now, build capabilities. And then once the distribution network is built, it becomes our core asset for the future. And we've got a very long runway in order to exploit that. So yes, thanks for that. So now the question right now is about capacity utilization. Yes. So we utilize our capacities immediately, right? That's why we position them in deficit states. If in Q4, our capacities are going to be 995, within Q4, we'll start utilizing that to some extent. And obviously, from Q1 onwards, you will see the full impact of that.
Okay. Okay. So ideal, what we're talking about, it's a 40% capacity increase as compared to what we are currently at, right? So ideally, our revenue-to-capacity, a 1:1 proportion is what one can...
No, it will be more, right? Because you have growth from the consumer business as well.
All right. Understood. Fair enough. And sir, secondly, on the margin front. Now you did mention about the various things that we have been doing in terms of procuring rice from FCI and then shifting coal and other efficiencies. So is there any kind of time line you can just throw in terms of normalization of your EBITDA margin to 25% that you mentioned is sustainable for long term, right? So any sort of rough timeline?
I wish I could. These are excellent questions. And when do fuel prices come down? When does inflation go back to normal? These are superb questions, but I unfortunately don't have these answers.
The next question is from the line of [ Raju Luis ], an individual investor.
I'm calling from Dubai. And my question, again, regarding the EBITDA margins. Because I looked at the last conference call in this investor presentation, wherein it was stated very clearly that we will be targeting around 24%, 25%. And that last investor call was held somewhere mid of February and -- few months back, 2 months back. And now we are very bad situation. So is there any guidance going forward?
Thank you so much, from Dubai. Our targets remain to achieve the EBITDA margins that we have sort of indicated earlier. We believe that the business we run in terms of manufacturing business as well as consumer business and the hedge between the 2 that we are able to offer can certainly give those margins. There are 2 reasons for the change in margins in this quarter. One is a lower consumer business due to reduction in volumes in Haryana that was expected, but one-off, as mentioned by Param earlier. And the second reason is the inflationary pressures in the Indian economy in the last 2, 3 months of the quarter -- in the last 2 months of the quarter. Both of them put together have led to erosion of margins. The extent of inflation that we've seen is -- has been unexpected. So to that extent, the margins have been lower. It's difficult for me to give an indication on what margins are going to be considering the inflationary situation that we find ourselves in.
One more question. When I look at your website, your Premium segment is not displayed in your website for quite some time. Is there any reason for that? Like, Oakton, Governor's Reserve, all those brands.
That's an astute observation, sir. We were transiting from a separate website for our Premium brands, which were housed in a company called Unibev, which was merged with Globus Spirits. And in process of this changeover, those brands were to be added. I think we've delayed that quite a bit, and we will add them very soon.
The next question is from the line of Hardik Shah, an individual investor.
My first question was there was recently a news article which said that, for ethanol [indiscernible], the Center plans to hike the price by INR 2 to INR 3. So could you throw some light on this?
My information is the same as yours. I read that article as well. Unfortunately, at this stage, I don't have further information to provide you. But considering the inflationary trends, there's no doubt that the government will need to give an increase in price of ethanol. It's -- my expectation is that it's only a matter of time that, that comes through.
Okay. And another question is, you mentioned your average realization is INR 461 and a further increase of INR 39 per case in Rajasthan. So considering as and how the current situation is, like your current margin rate, everything, what would be the effect? How much do you think will it increase by from INR 461? Because Rajasthan is just a part of your business.
Yes. Rajasthan is a large part of our business. You're right. I would say at least 70% of our volume comes from Rajasthan or something to that extent. So our average realization will go up by that much. INR 39 is the increase on the Value Plus segment. And on the Value segment, I think it's around INR 20. Nilanjan, can you confirm that, please?
Yes. Yes. Yes. [ INR 19 ]. Yes.
Okay. So from INR 461 , do you feel it'll go to around INR 480, INR 490 for us?
I think so. But it depends on how volume shape up in Q1. But Rajasthan will continue to be a very large share of our total volumes.
Okay. Okay. Just one last question regarding some date on the slide. On Slide 19, it's mentioned that production per million liter is 162 million liters, while the bulk volume million liters is 116 million liters. So what is the difference between the 2?
I'm not sure what figure you're talking about. Dr. Roy, did you have this clarity?
Slide 19. It's on your Slide 19 presentation.
May I request that we take this separately?
Sure. Okay.
The next question is from the line of Aditya Mehra, an individual investor.
Sir, my question is on the -- what are your expectations on the increase in the raw material prices going forward? And what do you think how much realization growth would be needed to match up the increase in raw material costs? And secondly, I think I missed the initial comments, so if you can please share the volume growth for the quarter and realization growth for the quarter?
Thank you. The growth in realization and volume is on our presentation. So if you could kindly download that from our website or the exchanges, you'll get that. But with regard to your first question of raw material prices, so our raw material prices are now fixed because we have shifted our procurement to FCI. There will be a small impact due to some broken rice we purchased for our ENA production. But we don't foresee that to be very significant. The main issue is fuel, which was -- which has gone up by 37% in the last quarter. And fuel inflation is something that continues for all industries in India. That's something that we have to watch out for. To go back to where we were, I guess we just have to look at Q2, Q1 or Q4 performance of last year. And all the data on that is again available on our presentation.
The next question is from the line of [ Sai Narayanan ], an individual investor.
Yes. I'm here from Bangalore. So as you know, [indiscernible]
Mr. [ Narayanan ], I'm sorry to interrupt, sir, but your voice is breaking up. May we request you to move to a better reception area, please?
Is it audible? Better now? Hello?
Yes. Yes, sir. Please proceed.
Yes. So I just want to ask Shekhar actually. After this capacity expansion in Jharkhand, Odisha and Uttar Pradesh including, so right now, our capacity is 150 million liters per annum. So how far it can go? That's the first question.
So I can answer that. In KLPD, it's a little bit easier for me. Our current capacity is 665 KL per day. By the end of this year, it will be 995 KL per day. In UP and in Odisha, we have proposed another 200 KLPD each. So that would take us to about 1,300 or 1,400, nearly 1,400 KL per day once it is commissioned.
Okay. So basically, you're doubling the capacity, right, in the span of next 2, 3 years?
665 to 1,400, yes, okay. You can say it's double.
Right. Now you said [indiscernible] aspiration to balance between the consumer vertical and the manufacturing vertical. So now when the capacity more than doubled at this point of time, don't you see that we have issue of dependency only on the Rajasthan market for a consumer vertical? More than 70% or 75% of the volume and the realizations are coming from Rajasthan. So now in that scenario actually going forward, don't you think that the margins, whatever estimate you gave, the quarter 4 of last financial year couldn't be sustained, and it can come down?
Our ambition is to grow our consumer business as well. Dependency on Rajasthan is certainly one way to look at it. Another way to look at it is the fantastic performance Rajasthan has given in the Value & Value Plus segment over the last 2 -- 4 to 6 quarters. So we are growing -- attempting to grow our consumer business in the other states that were mentioned by Param on this call. In terms of margin, as mentioned earlier, it is our attempt and our belief that we will return to our margins of 25% or so. However, in the current inflationary situation, it's very difficult to say how -- on a quarter-by-quarter basis how these margins will evolve.
It seems like we lost the connection for Mr. [ Narayanan ]. We move to the next question from the line of Ashok Agarwal, an individual investor.
So my question is that in last conference call, it was mentioned that the brownfield expansion in one of the state is being considered. So any update on that decision?
Brownfield expansion is being considered in West Bengal as well as Jharkhand of 60 KLPD each.
No. That is the new information which has been in this investor presentation. But last conference call, it was mentioned that it -- maybe 140 KLPD in brownfield expansion in one of the existing states. So I was wondering whether, maybe Haryana or Rajasthan or like that.
So that is Bengal and Jharkhand, 60 plus 60, 120.
The next question is from the line of [ Navneet Bahia ], an individual investor.
My question is, first, Shekhar, how receptive or how frequent is the government or the relevant authorities in giving you price hikes considering the unprecedented inflationary situation in both your ethanol as well as IMIL segment? Are they meeting more frequent or giving you more frequent price hike? Or are they expecting you to take some of the hit or across the industry take the hit because of the inflationary situation?
I would consider them fairly proactive. As mentioned already, we've received price hike in Rajasthan. West Bengal and Haryana is underway. Delhi also, there's been a price hike. Price hike on ethanol is already been made public domain. It hasn't been announced, but it has been discussed. There were some news articles about that, and we've discussed in this call as well. So I would consider them quite proactive. These things take time. So it requires patience, but I think they're quite proactive.
Okay. So quarter-on-quarter variance will always be there. But over a slightly longer time frame, the industry should be okay with the margins as and may if the government keeps giving timely price hikes even if fuel keeps going up?
Yes.
Okay. My second question is your land acquisition in Odisha. So is that going to be fully utilized for the 200 KLPD or you would have spares to consider...
No. We'll have some spare.
Okay. And my last question is the FCI route that you mentioned. Is that something you started doing in Q4? Or is that a Q1 phenomenon?
No. We started that in Q4. So therefore, the impact due to raw material hike is very small. The main impact on margins has been due to raw -- sorry, due to fuel.
Okay. Got it. So raw material, we can maybe consider Q4 to be the stabilized environment. Of course, fuel keep moving here and there to further impact your margins or benefits?
Yes.
The next question is from the line of Gagan Azad from Standard Chartered Bank.
Do you want that or should I ask [Technical Difficulty]
Let's move to the next question, please.
Yes. The next question is from the line of Nitin Awasthi from InCred Equities.
Thank you for the follow-up. Sir, I just wanted some rates from your side. ENA prices in West Bengal, if you could just highlight in the last quarter contract?
I'm sorry. Can you repeat the question?
ENA prices in West Bengal.
What about them?
No. Could you give me the absolute price in the last quarter?
I think it was about INR 56. Nilanjan, is that right?
yes. Yes. Yes.
Sorry. Could you repeat that?
INR 56, 5-6.
Okay. 5-6. Okay. So we haven't seen that kind of inflation that we have seen in the raw materials in the ENA prices as of now?
Not in West Bengal. We've seen that in Rajasthan and Haryana. Let's see, maybe...
Rajasthan and Haryana, what would be the prices?
INR 58 and INR 60.
Yes, yes.
Okay. Okay. Haryana, INR 60. Okay. Got it. So -- and one more last piece on my side. The tax rate, you had discussed in last con call that there will be a reduction in the tax rate. And you will come to the newer regime, that you start doing your tax rate would be around 26%. So by when will that start? Or is the -- are you going to...
So this was discussed in the Board meeting as well. And most likely, it's going to be made effective this year. But we have up till September to decide. Suffice it to say, our priority on deciding tax rate is first going to be on cash outlay. In the older regime, our cash outlay on the account of tax was about 19%, whereas our effective tax rate was 35%. And the difference between the 2 of 16% was the MAT credit that we were able to utilize due to various incentives or benefits that we had available. There are no new incentives or benefits that are being made available. But we still have some benefit due to an accelerated depreciation considering our power plants use renewable energy sources. So over the course of this year, we'll give you further updates on this. Like I said, by September is when we have to decide. But most likely, it's going to be the new tax regime.
Our next question is from the line of Anshul Verdia from Edelweiss Wealth Research.
Sir, just one follow-up on the earlier participant's question. Like we started using FCI rice price in the fourth quarter. So could you give us a broad ballpark number? What percentage of that rice price [indiscernible] for the ethanol production?
I'll have to tell -- I'll have a look at our MIS for that. So if all right with you, can we provide that later?
The next question is from the line of Reshab Sisodiya from Concept Investwell.
Thank you for follow-up. Sir, just 1 small question. Like [indiscernible].
Mr. Reshab Sisodiya, so sorry to interrupt, but your voice is breaking up.
Okay. Hello. Am I audible now?
Yes. Please proceed.
Sir, as per the data provided in the presentation, should we fairly assume that the difference between the production and the volume that we sell, the difference is being internally consumed in the bulk?
Yes. So I think so. Is that right, Nilanjan?
Yes, yes.
And going forward, we should expect this to stay at these levels, right?
No. Well, if you set up more capacities, then your bulk sale increases.
So in the short term, there could be a scenario where for the time being, the bulk revenue would be higher as compared to -- the bulk share would be higher as compared to the...
There certainly will be.
The next question is from the line of [ Sai Narayanan ], an individual investor.
So for this capacity expansion, actually, how much of debt we are planning to incur from banks or...?
Largely financed internally. Our debt levels are expected to remain the same as per this current balance sheet.
Okay. So on the premium liquor space, actually, the strategy is to select 5 focused markets and establish a route-to-market, establish a distribution channel and -- ensure that the retail participation is going to be high in accepting this brand. Is that the strategy here for the premium liquor?
Yes. That is the strategy.
Ladies and gentlemen, as there are no further questions, I now hand the conference over to Mr. Shekhar Swarup for closing comments. Over to you, sir.
Thank you, everyone, for joining us. If there are any further questions, we remain available by e-mail. Please do contact us, and we will get back to you. Thank you, again, and have a good day.
Thank you. Ladies and gentlemen, on behalf of Globus Spirits Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.