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Globus Spirits Ltd
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Ladies and gentlemen, good day, and welcome to Globus Spirits Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Shekhar Swarup, Joint Managing Director. Thank you, and over to you, sir.
Thank you. Good morning, everyone. Welcome to our earnings call. As we've been keeping you informed in our previous interactions, over the last few years, we, at Globus Spirits, have focused on creating steady growth through a well-entrenched distillation business as well as laying a foundation for growth in our consumer business. With this as our platform, we have been able to report strong results in Q4 FY '23.
Amongst the key highlights of the year that's gone by were the additional capacities that became fully operational. In Jharkhand, we announced the commissioning of our greenfield 140 KL ENA and ethanol plant, which has contributed well for about 6 months of the year. FY '23 was also the first full year of operations for the expanded capacity at West Bengal. The installed capacity of the company at the end of FY '23 was at 765 KL per day, of which 335 is dedicated to ENA, and the balance is fungible between ENA and ethanol. As we go ahead, we will attempt to convert more capacity to fungible as it allows us additional optionality.
Our second expansion in West Bengal and our first expansion in Jharkhand are expected to be commissioned in late Q1 FY '24. And once complete, our total capacity will be 905 KL per day. We also now look forward to starting construction at Orissa in Q3 FY '24. The capacity for this plant is targeted at 200 KL per day. However, it will be finalized in the coming months. The target CapEx for this capacity is around INR 160 crores. And with access to interest subsidy, we will be financing this project with around INR 120 crores from debt and balance from internal accruals. Our interest subsidy loan is at around 4% rate of interest.
On the UP project, we have started construction of the bottling plant at Lakhimpur Kheri, and we hope to start bottling our entire range of brands for the UP state by the end of Q3 FY '24. In the last few quarters, Param and I have spoken to you about all the work that has been happening in the Premium+ space. I'm very happy to inform you that this quarter, the segment of Premium+ brands has brought in 6% of our consumer revenue. This is a small but important step as we gather more steam towards getting to our first milestone of 20% consumer segment revenue share.
With many new and innovative product offerings and expanding distribution presence, we are very excited about the prospects of these products. I request Param to talk a little more about this.
Thanks, Shekhar. Good morning, everyone, and I hope you all are keeping well. In the overall consumer segment, the aggregate sales in Q4 of FY '23 came in at 3.25 million cases, which was lower on account of a fall in Value and Value Plus segments. And this was due to the short-term environment intervention in the Value Plus segment. Average realizations saw a robust 20% increase from INR 451 per case in Q4 FY '22 to INR 540 per case in Q4 FY '23. Going forward, with our product mix improving towards the Value Plus and Premium segments, we believe realizations will continue to remain robust.
The Premium segment is showing very promising prospects. Our revenue in Q4 clocked almost INR 11 crores against INR 1.8 crores same time last year. On a full year basis in FY '23, it was up by almost 700% to INR 37.4 crores. West Bengal, UP and Delhi markets have settled well, having completed 1 full year of operations in these markets. We entered Haryana towards the end of Q3 FY '23. We are going to be further entering a new state of Punjab in early Q2 FY '24. This gives us confidence to expand our offering portfolio, and we will be launching some exciting new products in this calendar year across elective markets.
Mountain Oak, which is a deluxe whiskey, was launched in West Bengal in Q4 FY '23 and SNOSKI, a premium vodka in 2 variants, during April '23 in UP. We will now be taking these brands to other states selectively. Our premium rum is to be launched in Q2 of FY '24, and we will also be entering the single malt whiskey segment later this year. Our flagship product in gin, which is the Terai craft gin, is going strong, and we have decided to widen distribution with [indiscernible] Terai than the previous year. We are aggressive towards growing the Premium business. And towards that, we are now building capabilities with digital marketing initiatives as well as key account distribution.
Coming to the Value and Value Plus segments. Our overall revenue in this segment took a dip due to seasonal changes, RTM changes and excise policy impact, which we have discussed in previous calls. However, in Rajasthan RML, the Value Plus segment continues to demonstrate our brand strength at the marketplace. This was supported by our Black Lace Rum, which in the second year of launch delivered a double-digit market share in this segment in the quarter gone by.
Globus Green, our second whiskey brand in the state, is also in its second year and is gaining consumer acceptance. We have also launched the kewra flavor in the Value segment last year, and we will continue to work in increasing our product offerings to the ever-evolving consumers in this space. I'm glad to say because of our innovative product offerings, our market share in Rajasthan improved in Q4 FY '23 and FY '23, over 50% in RML at 33% overall.
In Haryana, our strategy to creating a sustainable business model is playing out. We have maintained our increased contribution, and we will continue to build brand strength. Consistent efforts on Metro Liquor, which is in the Value Plus segment, have helped stabilizing the volumes. We see continued momentum in this segment as we go forward.
In West Bengal, as mentioned earlier, there is again a market change in the Value and Value Plus segments, which led to some disruption in our service by the industry. The good news is the introduction of the Value Plus segment is the way for building a profitable runway in this segment. We are servicing this segment with 2 brands and plan to play a key role in growing the segment as well as our role in it. For now, West Bengal market remains a medium, long-term play.
I will now request Nilanjan to take the lead.
Thank you, sir. Good morning, everyone. Coming to our margins. As illustrated in the investor presentation, the Q4 EBITDA margins were about 16%, excluding IMFL investments, which was slightly higher than our expectations. The ENA price revisions over this year have been helpful with prices up 15% year-on-year to INR 61 per [ fuel ]. This quarter saw a softening in fuel costs by 27% Q-on-Q. However, grain costs remain elevated. Commodity and fuel prices generally start increasing at the end of Q1 with the onset of monsoons, However, with the work that has taken place on shifting raw material-based FCI, converting more capacity to ethanol, better fuel efficiency and higher inventory of fuel, we expect that the margins will continue to remain at the current level of around 15% in the next 1 or 2 quarters.
The company has generated a net cash flow from operations of INR 122 crores in FY '23. Our return ratios, ROE and ROC are 14% and 17%, respectively. The Board has recommended a dividend of 60%, that is fixed by equity share for the FY '23 as against INR 3 per share of FY '22.
Since all the results and the investor presentation have been published in advance, I will not take more time, and we'll open the floor to questions. Thank you.
[Operator Instructions] We have the first question from the line of Prithvi Raj from Unifi Capital.
Shekhar, I do have a couple of questions. The first one is on the consumer business. So for the last few quarters, I guess, we are regularly seeing somewhat other kind of disruption here. So I just wanted to get a sense what exactly is happening? And how do we see it going forward?
Sure. So there are 2 parts to this. One is the Value and Value Plus segment and the other is the Premium+. On the Premium+ side, things are more or less going according to plan. There are some end-of-year excise policy changes that take place, which is a part of the business. So I wouldn't say there is any disruption or any extraordinary disruption there per se. But in the Value and Value Plus segments, there's been 2 or 3 sets of disturbances.
In Rajasthan, earlier on in this year, we had spoken about how there is a new base in the Value Plus categories, and the whole year has played out according to that. We are now seeing growth come in from this new base. So it is a disruption that took place. It's now behind us. What's very interesting in Rajasthan is that our brands has continued to gather strength. We are now at an overall 33% market share, but in the Premium+ -- in the Value Plus category, it's over 50%. I believe last year, it was around 40%.
In West Bengal, things have been extraordinarily disrupted. There's been several route-to-market changes that have taken place. And frankly, it's left the entire industry a little bit flummoxed. So like Param said that we are monitoring this, and we remain hopeful on stability here and therefore, allowing brand owners and market operators and other stakeholders to go about their business.
Haryana is playing out the way we expected. We've taken a certain call on reducing our trade spends over there and focusing on margins. So that is playing out. We will become more aggressive here. We're monitoring the environment, and we'll become more aggressive here in the times to come. But for now, the business is playing out as planned and was informed to everybody earlier on in the year.
So I hope that gives some clarity to you.
So given this context, how are we looking at volume growth here? Is it possible for us to do a high single-digit volume growth? Or...
I think so -- I think so very much. West Bengal is obviously at a very low base. Haryana, we have to see how the market shapes up before we can -- I can comment on that. But Rajasthan is growing very well. And that is the largest chunk of our Value, Value Plus business. So yes, high single-digit growth is something that we expect.
And my next question is on the margins. Obviously, we have seen an improvement in this quarter. So how are we looking at exit of FY '24? Can we go back to 15 to 17 percentage kind of EBITDA margin?
So we are roughly in that range now. We look at this at IMFL -- because IMFL obviously needs to reach a certain scale before it starts contributing profit. So at IMFL, we and Nilanjan said, we're at about 16%. I had indicated around 15% in the last call as well. So we are in that range. I do have visibility for up to 1 to 2 quarters. The biggest element in this is fuel pricing is price of coal. I think what we did very well is bring in energy efficiency across our plants as well as we've been able to secure good contracts with coal, which will see us through most of the monsoon period. And as a result, I believe that these levels of margins can be sustained for the next 1 to 2 quarters.
Beyond that, it really depends on how coal supplies continue in the country. If the current levels remain, then I do believe that this level of margin is sustainable for the rest of the year. But I have visibility for 1 to 2 quarters, which is what Nilanjan also mentioned.
And my final question is on the income tax [ phase ]. When are we expected to move to the new tax regime?
I think it's -- Nilanjan, can you take this?
Yes. We are contemplating to go in this current financial year. We will see in the first quarter and decide, but our plan is to go in this financial year.
[Operator Instructions] We have the next question from the line of Shlok Dave from CAO Capital.
Congratulations. Finally, it looks like the ship is turning around. I had asked you a question last quarter on coal prices, and we had a fairly detailed chart on that. Sir, can you again quantify the exact things that you are seeing on the ground now? Is there no parity with the international prices in the domestic supply? And you mentioned that you have tied up some contracts for the next 1 or 2 quarters. Beyond that, how do you see things moving? What are your hopes and expectations there?
So frankly, unlike last time, I haven't looked at the international pricing of coal in the last 30 days. So it's difficult for me to say what happened right now. But suffice it to say what we've seen in -- between Jan and March is that there's been an increase in coal supply. Coal India and its subsidiaries has been doing a lot more frequent auctions of coal for the open market. The size of auctions have also increased year-on-year. We've recently participated in the coal linkage auction that's taken place for the nonregulated sector. And basis all of this, we've been able to secure our fuel prices for this monsoon period, not 100% of our requirements, but well over 50% of our fuel requirements.
In North India, we are not able to purchase coal these -- the North Indian boilers are based on agri waste, such as rice husk and other wastes, and it's very difficult to store this for a very long period due to the volume -- low density of fuel and therefore, the volume. So what we're seeing is that coal supplies are good, they are strong with the NRS auction and linkage that we've gotten, a large part of our requirement will get covered going forward. So it brings in a little bit of stability in our coal prices and our fuel costs. And with the added storage that we've been able to create, we'll be able to sort of reduce the volatility in this going forward.
In future, really where coal prices go is very difficult for me to say. It's a function of supply. Really demand in India, we all know how it moves, but supply is something that we don't know how it moves. So it really is based on how good are the supplies from Coal India.
Right. Right. So for your reference, coal prices internationally are back to Jan '22 levels, just before the war started. They're back to $150, $160 range. Sir, next question is, you mentioned -- you give a rough guidance on the consumer Value, Value Plus volume growth. Can you do a similar thing for the ethanol volumes? Because there have been a couple of shutdowns, plus one of the facility was not fully operational for the year, the Jharkhand one. So what do you expect this year in terms of ethanol volume growth?
Yes. We -- I don't think we are prepared to give that number right now on this call, but I think it's a good point. What we can do is create a sort of a waterfall...
Yes, I would really appreciate that, sir.
Yes, I think we can do that. We'll do it subsequently and add it our investor deck -- I think that's a great idea.
Sir, I really appreciate it, sir. Sir, one final question. There were 2 developments last thing -- over the last couple of quarters. One was we had a setback in Telangana. So any progress on that side, any resolution there? And the second was those IT department raids. And I know you have not disclosed anything, so nothing incremental would have happened. But [ having been ] dismissed the case, have you received anything saying that, okay, you have nothing to do with the -- like we didn't find anything?
No. So that has -- I'll talk about IT and then [ PSG ] can talk about Telangana. There's been no sort of order or demand from the department as yet. And as I mentioned on the last call that as and when there is there are concrete steps forward. We will keep everyone updated. So as of now, status quo, nothing has been -- no orders or anything has been initiated.
Sir, no escalation from their side and no dismissal from their side?
Yes, yes. So it's status quo. There has been no -- we have not received any orders from the department. So that's a fact. That's a data point. So I'm able to talk about that.
PSG, can you talk about Telangana, please?
Yes. Thanks, Shekhar. So in Telangana, obviously, what happened was, we -- one of our flagship brands [indiscernible] managed to get excise approval. But as you know, that some of these approval processes can be strange. The brand is approved in all other states and [indiscernible] so. And as a result, we had to pull back on our strategy because the whole business plan for the state has been based keeping the brand in mind. So as a result, what we did was we have pulled back in Telangana. And as I have mentioned in my presentation earlier that we are entering Punjab. Punjab is the next chosen state, and that we will be acting in June. So...
Sir, clarification. Punjab is for Value and Value Plus? Or is it for Premium? The entry, I missed that point.
No, Punjab is for Premium+.
Sorry, sir. Punjab is for?
Premium+.
Premium+, okay. Okay. Great sir. All the best, great quarter this time.
The next question is from the line of Kshitij Saraf from Tusk Investments.
Congratulations on the turnaround. One question on the [indiscernible] business shaping up in terms of the marketing efforts we've been putting in. Where do we see at an overall level we would be achieving breakeven either in terms of time or in terms of volume, although it might be a bit hard because their activity going on the sale. But anything you could share in terms of the developments? And where do you see this going forward in the next year or so?
So Param, could you take that, please?
Yes. So I think what we are doing is, we are -- we are doing a few things, and then I'll try and -- see all I can say is at this point of time, our growth will be 3 digits. So there will -- it'll not be a double-digit growth. It will be a triple-digit growth that we can definitely put on the table. Beyond that, it's a bit difficult, but let me elaborate a bit for your benefit. See one is, we mentioned earlier in a couple of conversations is we are building capabilities. And right now, we are entering digital marketing as we talk and also investing in key account activities for the [ on-premise ] segment.
Now on the brand front. So this will start giving us more work into the marketing and creating brand [ pull ]. On the product side, we are obviously increasing our portfolio of products, the products are ready, and they were waiting on the route to market has been established to launch, and these products are getting launched as we have [ enumerated ] earlier.
The third thing we are doing is we are very slowly but in a sure footing way, expecting our [indiscernible]. And these are all dynamic because some things get preponed, something gets pushed a little forward. And hence, it makes it very difficult to see beyond the quarter as to how things are going. But as I said, it will be a triple-digit growth for sure. So that should give a lot of comfort to the market from...
So I just want to add one thing to what Param said, typically what [indiscernible] state takes 2 to 3 years, around 3 years to breakeven, at least, 2 full years of operations. And considering that we -- it's our first full year of operations in 3 states, plus we're wanting some more states. So it's difficult to say exactly when this profitability that comes in at an overall basis, but we monitor this state by state, really.
Got it. That's very helpful. And on the Value and Value Plus, new base that we have, you mentioned high sort of single-digit growth there. Any additional traction you're seeing apart from Rajasthan in any other state to significantly scale up these segments?
So I think the greatest opportunity there is in Haryana and West Bengal. But both these states have been seeing its set of challenges over the last few years. We remain committed in both the states because we understand the opportunities. But there are a few things from a regulatory standpoint and market standpoint that need to stabilize before we get into advancing our market shares and volumes. Whatever advances we make must be done in a sustainable manner. So we are still waiting for those regulatory aspects to get cleared up before we get aggressive in these 2 states. So really for this year, the growth is going to be driven by Rajasthan and the other 2 states are on wait and watch kind of mode.
The next question is from the line of Nitin Awasthi from InCred Equities.
A lot has transpired in this quarter, and I think the company has also gone through a lot of things. So hence, I have a long list of questions. But before getting to that, I would just like to make a comment here that, one, it is appreciated from the investor community that the company is becoming more and more investor friendly. Why am I saying that? I'm saying that because of the relevant data and the input given by the investors taken in a positive note by the company. And the proof coming out in a presentation becoming more and more friendly when it comes to data, et cetera, which is more [indiscernible] in this industry.
Moving on to my first question, sir. UP, you said you're going to set up a bottling plant there before you set up a [ distillery ]. I think this is the first time you would be doing that, please correct me if I'm wrong. And would you be entering both the IMFL segment and the IMIL segment before the [ distillery ] itself through the bottling unit?
So thank you for your words, Nitin. So as per your question goes, see, UP as opposed to the other states where we've entered, where we've seen opportunity in ENA, ethanol as well as consumer, the rationale for the UP investment is largely the consumer business of the state. And as a result, we are prioritizing the bottling plant before we set up the alcohol production capability there. And UP, yes, will see the entire range of our portfolio. There may be some brands which are not there, but pretty much the entire range starting from Value, Value Plus and Premium.
Understood. So UP [indiscernible], you are entering that segment, right?
Yes. The strategy is to be -- the strategy is to be in all segments. The timing of each strategy might vary. So after the bottling plant starts, you may have a period of 12 to 18 months where different categories have been launched at different times. But yes, very much, we intend to be in all the categories in UP.
Understood, sir. When is the bottling plant going to be commissioned?
So I mentioned that in my opening remarks, it's around Q3 -- end of Q3 of this year.
End of Q3, okay, because that opens a very large market for -- at least the IMIL segment, which you are saying would grow in the single digits. This would predominantly push it back into the early double digits, if I'm not wrong.
Yes. But that's really going to -- we're going to really start seeing that or monitoring that in the next fiscal. In this fiscal, as a first step, we're going to move our bottling of the Premium brands into UP. So that's going to add some profitability. UP is very important for profitability of our entire IMFL operation. So the first step is to reduce costs by shifting. Next step would be then to look at the Value and Value Plus segments. So like I said, 12 to 18 months after a start-up of that bottling plant, we'll start unlocking some of these opportunities.
Understood, sir. Sir, one straightforward question, can we hit 1 million pieces in IMFL segment given the geographical addition and the product portfolio addition in the coming fiscal year?
Yes, that's a good question. Param, can you take that?
No, no. We are still a while away from reaching 1 billion cases in IMFL. We are -- yes, it's a step at a time. We've -- as I said [indiscernible] couple of lakh cases, 2 lakh cases. I think that's still going to take us a couple of years more.
Yes, I don't think we're going to...
We are all dreaming for it. We are all stemming for it. But yes, realistically, it's just a bit further down the line.
So we're not going to grow 5x in this year, Nitin. But Param said earlier that we are very much in the triple-digit growth. So let's just leave it at that for now.
Understood, sir. With many excise policy changes coming through, Haryana excise policy. And why I'm bringing this policy particularly up because this stake was not getting price hikes for a number of years. Again, in this policy, I don't see a price hike. However, there has been a lot of tweaks around prices given to retailers and minimum selling price being imposed and all those things. So could you just walk us through, is the net impact positive of this policy on the [ kit ], on our business?
Param, could you take this?
So the net impact is more or less neutral, but in IMFL, it is definitely giving an opportunity to get some positive impact in the Value and Value Plus, there is -- as of now, not much opportunity seems to be visible. Obviously, we will wait and watch how it goes further in the year. IMFL, definitely, there seems to be an opportunity on a couple of brands to get some more [indiscernible] in terms of moving up [indiscernible].
More questions from my side. However, I'll join back in the queue so that everyone has an opportunity.
We have the next question from the line of Aditya Solana from Niveshaay.
Congratulations for the good set of numbers. My first question is on revenue. Can you please provide me the bifurcation between the ENA and ethanol?
Okay. Nilanjan, do you have that number that is split between ENA and ethanol?
I think the way we track that, sir, is just total bulk alcohol because some of our capacities are fungible. We don't really track how much is -- how much share of revenue between ENA and ethanol.
Sir, I have the number for the entire year. Ethanol has been 55% and ENA has been 45% per total -- total sale that has happened in the bulk alcohol.
Sir, my next question is which [indiscernible] the company and what are their prices?
Can you repeat that? Your line is not clear.
Sorry to interrupt. Mr. Solana, can you please use your handset to ask a question?
I am audible?
Yes, you are. Please, go ahead.
Which [indiscernible] the company and what are their prices?
We are using a rice for production of alcohol. We purchased rice for ethanol. This year, we have -- our entire ethanol production will be from FCI rice. And that is given to us at a fixed price of INR 2,000 per quintal, ex FCI depos. And for our ENA, we are using broken rice purchased from the open market. The prices of this are volatile through the year, they go up and down. And in the year that has gone by, we've seen prices range from around INR 1,900 to about INR 2,300 per quintal. Currently, we are at the higher end of that range.
Okay. Sir, one more question. From both [indiscernible] Orissa and Uttar Pradesh [indiscernible] what would be the fungible between ENA and ethanol? And what would be the total capacity that we can produce? And what would be the total projected value?
So right now, we are not -- right now in UP, we are only setting up the bottling plant. In Orissa, we are setting up a distillery. The tentative capacity of that distillery is 200 KL, and this will be dedicated ethanol for the time being. So after Orissa is complete, you will have about 335 dedicated ENA and about 330 -- sorry, 430, which is fungible between ENA and ethanol, and 200 of Orissa, which will be dedicated for ethanol.
[Operator Instructions] We have the next question from the line of Sarvesh Gupta from Maximal Capital.
Just to clarify first on the grain prices. I think in Q2, you had mentioned it was around 19.5 in Q3 '21. And now you are saying that the range has been 19 to 23. It was being closer to the high end of the range. So in the last 2 quarters, 3 quarters, we have moved from 19.5 to 23. Is that the right understanding of the grain prices?
I think our average prices for the quarter are about 22 -- between 21 and 22. But we've seen instances of 23 as well, that is what I meant in my last response.
Okay. So like you elucidated for the coal wherein you said that we have the visibility because of our -- we sort of locking in for the next 2 quarters. And thereafter, it will be dependent on how coal prices will be. So what would be your comments regarding the grain prices? And what is to be expected?
So on ethanol, we've locked in based on FCI, as I mentioned, for this entire year, up until September, then the new ethanol year starts. So this year's ethanol year is from December to October. And then from next year, it will be to October -- sorry, November to October. And for the current year, we've locked in our rice prices at INR 2,000. And of course, the fuel aspect of it as well, not for the whole year, but for around 1 to 2 quarters.
On broken rice purchase for ENA, we are not able to dock that in. And however, ENA prices, we have control on the pricing of ENA. And Nilanjan mentioned that we've grown our ENA realizations by 15% this year. So to that extent, it's not a very big risk factor because if there is a very dramatic change, it takes some time to adjust the prices. But with regard to our consumer business, well, that's a fixed price for 1 year, so that risk obviously exists in the business.
Understood. And on the IMFL business, I think there were 2 trends, which we saw. A, there was some softening this quarter, I think compared to the last quarter in terms of the overall IMFL business, which was a bit surprising given that we are really at a very, very small number as of now. And second is, compared to the losses that we did, which was almost to the tune of 2% of EBITDA. So what is the expectation of an absolute loss coming from this business in this financial year as per your yearly budget?
No, we -- so the volumes have gone more or less as per our plan. In Q4, we were expecting a slightly weaker quarter because of the states that we present in, the changes in excise policy that takes place. So no significant disruption there. It's more or less as per our plan. But on the investment side, I've maintained that around INR 20 crores plus/minus a little bit is what we want to invest in the IMFL business. So it's going to be in that range for this year as well. We're trying to, like Param mentioned, create capabilities. We have almost all our states are within that 3 years -- 2 to 3 year window of being -- of getting to the journey of breakeven. So in this year, INR 20 crores to INR 25 crores is the kind of loss that we will continue to make, and this is an investment into the company's future.
So this INR 20 crores -- INR 15 crores to INR 20 crores number is a little bit, I would say, in case we have a large ambition to be a large player in this business. It sounds a very small number as such in the grand scheme of things. So I mean, compared to any strategy, which would have been to sort of putting the P&L at a slightly more risk for 1 or 2 years, but then going for a very large sort of a number here. How do you compare these 2 strategies? And why are we looking at a very incremental sort of spend...
I think that's a great question. I mean -- we are at a stage in the IMFL business where we are creating a distribution network. We've got back end capabilities to produce this product. So aside from like the UP that I mentioned where we are creating capability on back end as well. There is no real capacity creation or CapEx that is planned in the consumer business. So the spends are really on creating teams and capabilities. We invest -- our teams have the ability to service a much larger volume, and that volume obviously takes time to generate. And therefore, there is a loss.
We are also, from this year onwards, going to be investing money in marketing these products in the states or rather in the regions that we've got a satisfactory distribution presence. I think the question of putting in more fuel in the tank and going a little more aggressive starts coming in once we have capabilities in distribution, we've reached a certain critical mass in terms of contiguous states or number of outlets that we're present in, and we're still a couple of years away from that. And in this process, we want to invest in a meaningful manner, but also be cautious of our return on investment. I think if we are to put in, say, 2 or 3x that number in this year, I don't think we're going to get 2 to 3x times the business. So it has to be done cautiously and in a step by step manner.
[Operator Instructions] The next question is from the line of Imran from [ Longo ] India.
My question is on your cash flows. If I assume margins in 15%, 16%, 17% and if I look at year and then the years coming, I think we would be close to generating about INR 300 crores of operating cash before this CapEx and all. So what are the plans going forward other than these 2 facilities that you will put in the future, maybe this year, next year and after that?
Yes. I think that's a great question. Until now, the company has -- the way we've done capital allocation in the last couple of years is that we would deploy this capital first for our IMFL business that gets priority, and the cash that was left was deployed in capacity generation in the ethanol space. The ethanol space, we have identified a few states when we started our expansion cycle 2 or 3 years ago, where we believe that there is sustainable return -- sustainable, sufficient return on capital available and in those select states, we have gone ahead and created capacity. Orissa is the last one for that. UP is, of course, a longer-term consumer-based play, which is also part of our CapEx cycle, and that will come in later on.
But on the ethanol capacity generation, Orissa is going to be the last one in this CapEx plan. Thereafter, as of now, I don't see more states available where the capacity creation has this sustainable and sufficient return on capital available. We wait to see how country moves towards E20. We really need that to happen now. We're currently about E10. We need to see what are the stages to get to E20, and how that ramp-up is taking place before we create another CapEx plan. So currently, after Orissa, this is the end of this CapEx plan, and there's no further CapEx for capacity creation that is [ undecided ].
The capital that we're able to raise from banks for this capacity creation is very interesting, interest costs at around 4%. And to that extent, we do feel it adds to our returns to use that financing of auction. Thereafter, you're going to get to a stage where debt is being paid off for some time because of the cash generation that you spoke about. It's natural and also building up some reserves in the company to try to do something interesting and inorganic in the future. But currently, there's no inorganic opportunity that I see, but there will be in the future, so keep some fuel for that as well.
So that's the thought right now the Board for how capital can get allocated in the company going forward, pay down debt once our CapEx cycles are complete as well as build reserves for inorganic opportunities in the future.
This is super helpful. The second question is on the Haryana plant. Last quarter, we had some problems. So can you tell us what is the status there? If not already, this is...
No. Haryana has bounced back in terms of operating to our internal targets. We didn't have -- 95% is our standard capacity utilization targeted for the whole year. We didn't reach 95% in Haryana in Q3, but I believe it was close to 90%. I think it was 88% or 89% in Q4. And as we go into Q1 this year, we are targeting 95% from Haryana, in fact, in all our plants, the maintenance is more or less complete than we had planned, and now we should be firing on all cylinders going into Q1 and Q2 of this financial year.
In last quarter, we had a INR 10 crores, INR 12 crores hit on the EBITDA. What was in this quarter?
Could you say that again, please?
So what I was saying is, last quarter, I think we had about INR 10 crores to INR 12 crores hit on EBITDA because of this facility. What would that number would have been in the last quarter?
You mean due to lower capacity...
Lower capacity or aging of equipment, multiple issues are there...
Right, right, right. So Q3 over Q4, you mean?
Yes.
Okay. So I think someone else asked this question earlier on, and I promised them a waterfall on capacities in this whole year because there's been a lot of up and down, new capacity has come up, maintenance closures, et cetera. So we'll prepare that and add it to our investor deck. Give us 24 to 48 hours to do that.
Just one more question on the consumer business, and then I'll join back the queue. If I look at your consumer business, you have a very large share in Rajasthan and multiple factors ahead of you in Rajasthan now. Now we are also present in 5, 6 more states. Do you see any sort of replication of what you have done in Rajasthan? In any of the states that you are entering based on your...
So consumer business needs to be broken into 2 to be answered correctly. One is the Value, Value Plus and the other is the Premium+. In the Value, Value Plus, we are present in Rajasthan, Haryana, West Bengal and Delhi. Delhi is a sticky market. It single -- low single-digit growth. We've got 20% to 25% market share in Delhi, and it's been like this for a very long time. It's also a much smaller market for Value, Value Plus.
Haryana and West Bengal, I think we've all covered in quite detail in today's call. We remain very excited about the prospects there. However, they are slightly longer-term opportunities to unlock, and we remain committed to replicating the Rajasthan level of success in these 2 states as well. But it is a medium to long term opportunity. So it's not going to happen in this year for sure. This year, Rajasthan will continue to drive the Value, Value Plus business.
With regard to Premium+, we are present -- in addition to the 3 states I mentioned, we're also present in UP, and we are launching in Punjab. And here, it's -- we've also covered this that it's going to -- it's a certain journey. We are building capabilities. It takes 2 to 3 years to breakeven in the state. And we've got lots of products in the way, and all of this is driving our expected growth of triple digits in the coming financial year.
The next question is from the line of Navneet Bhaiya, an Individual Investor.
Shekhar, congrats for the revival in our margins. I have 2 questions. What are your gross margins in the Premium segment right now?
Sure. Nilanjan, can you answer that, please?
So our gross margins in the Premium segment is around 43%. Terai alone is at 71%.
Sorry, I didn't get the last part. Terai is how much?
71%.
71%. Okay. So Shekhar and Param, you, of course, alluded to the fact that it takes about 2 years for the state to turn around. For a business overall in the [indiscernible] segment, is there a number, say, INR 100 crore top line or a INR 150 crore top line when you would not be having any more EBITDA losses that you can foresee?
So I think that will depend on each state, as we said. [indiscernible] third year of operation. We are envisaging every state will reach initial position. And as we are stepping up, we obviously have to -- we'll keep adding new brands portfolio. And our portfolio addition will start slowing down and the sales growth will continue its momentum. So if we prepone our additional brands on the runway of the state which starts when it starts doing well, we will probably extend 1 more year to putting a huge marketing spend in that state on that brand. So the state P&L with the original brand will be a plus, but with the new brand, [indiscernible] will again go into minus.
So that is the way to look at it, but we are -- as I said, we are absolutely with a hawk eye managing the fact that every brand as it goes in the state must start becoming sustainable in its third year. And we feel that almost all or maybe barring 1 or 2, which may stretch another few months or 1 more year, they should stop getting into the investment mode from the negative EBITDA point of view. And they will stay in the investment mode because we will still accelerate growth depending on what our business objective at that point is. We do have a large larger view today, but we keep tweaking it.
So the state on its own, if it don't keep adding portfolio, it will [ stop ] generating money, but we are also adding portfolio to [indiscernible]. But the losses will start tapering down because when 3 brands are getting some margin and 1 new brand takes a [indiscernible], the states gets into a far, far healthier position because what we want to do is as soon as it becomes -- we're not interested in taking a INR 1 crore profit in the state. What we want is we want to really get into a place where the state is profitable in the [indiscernible] profitable and not the bottom turning [indiscernible] black.
Understood. In your Premium segment, would Terai contribute, what, 70%, 80% of the overall turnover or...
No, no, no. Terai is a superpremium luxury range brand. It has a much smaller contribution. But this is in terms of top line. I think I'm speaking as a correction, Terai would be about in the high-teen because I'm speaking as the correction...
Yes. I'll just comment on this one. Terai contributes on profit about 20% -- 20%, 25% of our profitability. In terms of volume, it's a very small percentage. But in terms of profitability, it's about 20%, 25%.
Yes. Yes. Understood. Okay. Second, I again noticed in your presentation, you are looking to launch quite a few new brands of vodka, rum, as you mentioned. I wanted to know about the initial brand that you launched. Shekhar, I think this was some 3, 4 years back, Oakton, Laffaire, Governors' Reserve. Are these doing well as well? Are these on focus? Or we are focusing on...
So this year -- yes, yes. So the year gone by the numbers you reported are on the back of the Governors' and Oakton only. What you are seeing today is Governors' and Oakton only. The new brands have just started moving in.
Yes. Absolutely. So the...
To answer your question, there's no -- we're not moving away from the brands. We are adding more brands. I mean -- so creating capabilities like creating that highway and now in some states, our highways are getting ready. So now we need more cars to ply on this highway and that's the work that's happening.
Okay. So your results from your earliest launched brands are maybe [indiscernible] maybe more than Terai, if I were to understand correctly. Am I right?
Can you say that again?
The success that you got from your earliest launched brands, like Governors' Reserve, Oakton, are they successful as the results that you're seeing from Terai or better?
I mean success is a relative term, and I think we'll all be happy with even more success. But what's -- we are satisfied with the performance. It's more or less in line with our plans. We've had, in some areas, overperformance, in some areas under performance. But that is the nature of the life cycle that we're in. As our business grows, we'll get better at forecasting and budgeting. But as of now, satisfactory performance in most states and in brands.
Okay. Understood. That's encouraging. My last question is you, do you plan to launch your IMIL, the Value and Value Plus segments in the new states that you are adding, like Jharkhand. Orissa, I noticed you said it's a dedicated ethanol facility. So do you have any plans for [indiscernible] the lower-end consumer segment in these case as well?
Yes, we do. We do very much. I think we've got bigger fish to try right now in terms of UP, Punjab, Haryana, which we just launched for IMFL. There are a couple of new categories that are very exciting for us, some we have spoken about. And our innovation team continues to work on a few other activities, which we have not yet spoken about. These have been taking a lot of our time and frankly are more rewarding for our time and money than getting into Jharkhand. But yes, in the medium term, Jharkhand is very much on the table. It's not something that's planned for the current fiscal.
How long does the regulatory approval take to come to launch your Value, Value Plus segments in the new states?
No. I mean not much yet. I don't have an answer really, but assume 30 to 60 days, I guess.
Yes, generally, within the quarter. Yes, yes.
I mean once we start business planning in Jharkhand the regulatory approval time frame will be a part of the business plan. So currently, we are not planning it. So that's why I don't have a concrete answer.
Understood. Fair enough. Congrats, and all the best for the future for quarters.
The next question is from the line of Nitin Awasthi from InCred Equities.
Just one question this time around Chhattisgarh, as a market, has seen a lot of things transpire over the last few months, especially in the Value and Value Plus segment. And that would open a gateway for somebody like you who has alluded to -- not alluded, referred rather to the right to win whenever you enter a state. So this state would be providing the right to win for established players right now. So would you be looking at the state?
Which state are you talking about?
Chhattisgarh.
Chhattisgarh, okay. No, we have no plans in Chhattisgarh right now. Like I said earlier, we are really busy here. And frankly, at this stage, we got to pick [ battles ]. And we picked a few and we are focusing on that right now.
[Operator Instructions] Ladies and gentlemen, as that was the last question for today, I would now like to hand the conference over to Mr. Shekhar Swarup, Joint Managing Director, for closing comments. Over to you, sir.
Thank you. Thank you, everyone, for joining today. Please reach out to us if you have further inquiries, we'll be happy to answer them. Have a good day, and see you again after some time.
Thank you very much, sir. On behalf of Globus Spirits Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.