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Radico Khaitan Ltd
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Ladies and gentlemen, good day, and welcome to Radico Khaitan's Q1 FY '24 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded.
I would now like to hand the conference over to Mr. Himanshu Shah from Dolat Capital. Thank you, and over to you, sir.
Thank you, Carol. Good afternoon, everyone. On behalf of Dolat Capital, we welcome you all to Q1 FY '24 Earnings Conference Call of Radico Khaitan. We would like to thank the management for giving us the opportunity to host the call.
On the call, we have with us Mr. Abhishek Khaitan, Managing Director; Mr. Amar Sinha, Chief Operating Officer; Mr. Dilip Banthiya, Chief Financial Officer; and Mr. Sanjeev Banga, President, International Business.
Let me hand over the floor to Mr. Abhishek Khaitan for his opening remarks. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. Thank you for joining us on our Q1 FY '24 results conference call.
We have started the fiscal year FY '24 on a strong note with Prestige & Above category brands growing over 27% year-on-year. This was led by all our core brands, such as Magic Moments vodka, which crossed 1.5 million cases sales during the quarter; Morpheus Premium brandy, After Dark Blue whiskey, 1965 Spirit of Victory Premium rum, et cetera. Both consumer and trade response for the new packaging of 8PM Premium Black whiskey has been very encouraging, and it has continued its strong growth strategy.
Over the last couple of years, white spirit category in India has grown faster than any other category. In 2006, when we launched Magic Moments vodka, the category was made and gradually Magic Moments became our category creator. Today, it is the seventh largest vodka globally, and we hold 60% market share of the entire vodka industry in India.
Now we are seeing a similar scenario with the craft gin space. A few years ago, this space was nonexistent in India. Jaisalmer is the only Indian brand at this price point in the luxury gin space and had over [indiscernible] market share. Capitalizing on the opportunity in the Indian craft gin space with Jaisalmer's success, we have now tapped into the super premium gin category where the industry size is much larger given a more affordable price point. The growth in this segment is also very strong.
During the quarter, we announced the launch of our latest addition to the super premium product portfolio: Happiness in a Bottle: A Happily Crafted Gin. The collection features 3 exciting variants: Joy of Juniper, Joy of Pink and Joy of Citrus. With the introduction of the Joy of Pink variant, we have ventured into the unique pink gin category. While each of these expressions has been curated from a selection of 15 botanicals, standout ingredient across all variants is Ashwagandha, a renowned herb known for its vitality and mood-enhancing properties.
[ After Dark ] has initially been launched in Rajasthan and will be rolled out in 4 to 5 more states in Q2 FY '24. This brand will also go on to create a unique position for itself and become a category creator as many of our previous launches. We also plan to launch one more luxury whiskey brand in the second half of FY '24.
While there have been signs of deflation in certain commodities, the scenario remains volatile for glass and ENA. We continue to cautiously monitor the industry trends. Given the IMFL portfolio premiumization and price increases in both IMFL and country liquor businesses, we have seen our margins improve significantly on quarter-on-quarter basis. Although we have faced raw material pressure in the short term, but that does not impact the mid- to long-term growth and margin trajectory.
Our Sitapur project is progressing well and in the last stage of implementation. We expect to start commercial production during Q2 FY 2024. Radico Khaitan is progressing firmly on the path of this exciting premium brand creation journey, which will be further strengthened by the backward integrated manufacturing platform. Going forward, we continue to focus on our long-term plans of premium IMFL portfolio expansion with new brand introduction in both white and brown spirits and leveraging the benefits of our capital investments.
I would now like to hand over the call to our CFO for a detailed operational and financial review. Thank you, and over to you, Dilip.
Thank you, Abhishek. Thank you, everyone, for joining us on this call today.
During Q1 of FY '24, we reported a total volume of 7.36 million cases, which is 8% growth on a year-on-year basis. Prestige & Above category volume grew by 27.2%. Including the Royalty Brands, our P&A volume growth is around 33%. In volumes -- in value terms, the Prestige & Above category registered 40% growth.
During FY '23, we had rationalized volume of certain regular category brands as a conscious strategic decision to mitigate input cost pressure. With the recent price increases, we have seen improvement in the regular volume on a quarter-on-quarter basis.
Prestige & Above category now accounts for 36.5% of IMFL volume compared to 29.6% in quarter 1 of '23. Improvement in IMFL realization is due to the combination of price increases and continued premiumization. On a year-on-year basis, there was a 160 basis point impact due to the price increase on our IMFL sales value.
On quarter-on-quarter basis, our gross margin improved significantly due to the price increases received in Country Liquor business. This is also being supported by price increases and ongoing premiumization in IMFL business. On a Y-o-Y basis, despite significant commodity inflation across ENA and glass bottles, we have been able to sustain gross margins.
Although price of certain packaging materials has softened recently, we cautiously monitor the trend of ENA and glass bottles where volatility persists. Glass cost increased by over 15% and ENA price by around 8% on a year-on-year basis.
Other expenses increased due to the [ track ] and sales duty, which was earlier recovered from customers, and now it is a part of EDP and cost to us. Some of the other expenditure is on account of higher power and fuel costs.
Overall, we have a strong financial position, comfortable liquidity. During these times, we are taking all necessary steps to sustain our financial strength, maintain robust business model and grow consistently, competitively and profitable.
With this, we now open the lines for question and answer.
[Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama Institutional Equities.
So firstly, congrats on a very good set of numbers, sir. So you have seen very strong growth in the P&A volumes, which is stronger than even the good numbers posted by the market leader. So I want to understand, what is driving this? In particular states, are you getting a bit more market share? I understand a lot of your premium luxury products are doing well. But would you point out any particular states where there has been market share gain?
So first of all, I must tell you that the P&A segment growth that we are witnessing is across all states and geographies wherever we are present. First of all, Magic Moments is commanding a 60% market share and is on a healthy growth rate of 28% to 40% across all geographies.
Secondly, 8PM Premium Black that we launched in 3 years back is now a 3 million case brand and is very buoyant and well accepted in the prestige category. It is the fastest-growing whiskey brand in India. It's available in states like Andhra Pradesh, Telangana, Uttar Pradesh where -- Assam, Jharkhand. So it's growing at a very fast pace in all these markets.
So besides, as I said, 8PM Black and Magic family, which is big, there are other premium brands that we have launched like Royal Ranthambore, which is very well accepted and started growing at a very rapid rate. So 1965 Premium rum is now the largest-selling premium rum in the defense category -- defense sector. And in the domestic market, it is now reaching a high market share wherever it is present. And in the days ahead, it will be a brand to reckon with in the domestic sector as well.
So if you come to think about it, all the brands are responding. Jaisalmer is doing extremely well. We have -- last year, in fact, in the -- we hope to maintain a 50%-plus market share. In fact, in the quarter gone by, you will be surprised, we have a 70%-plus market share. So we -- it's a very encouraging response to all our premium brands. And this trajectory -- growth trajectory, margin trajectory is there to stay. Thank you very much.
Sure. A very quick question. Now again, U.K. FDA talks seem to be in final stages. It has been in final stages for 2 years, so don't know when it will come. My very simple question is, will any of your brands get impacted by this? And will you be concerned on this, if at all?
So first of all, let me tell you that the U.K. FDA is on the cards. And like the treaty that has been struck with Australia, where the interest of domestic industry has been well protected, we know that the government of India will protect the district -- domestic industry. However, I must tell you that as far as Radico is concerned, it's a unique situation where we are breaching all price points in the premium and luxury categories, moving up and up on the price ladder. And we don't really see a great impact with the U.K. FDA impacting our brands.
Sir, my last quick question is on the 2 key raw materials in glass. The #1 beer company said that for the balance part of this year, at least the next 2 quarters, they don't expect any meaningful correction. Do you also have the same purposes? And on ENA, with all this very high inflation in rice and government regulations also saying that the ethanol in terms of grain usage, et cetera, some restriction, what -- how do you see inflation in ENA for the balance part of the year?
So the glass side, as you know, has been given an increase 2 times last year. I think we don't foresee any more inflation in the glass prices, rather some correction had taken place in recent past. As far as the ENA is concerned, yes, the grain prices have been on rise. But we see this is a matter of 2, 3 months, first of all, because when the new crop comes, the prices generally comes again on the declining trend.
Secondly, as far as the government FCI policy on the [ canola ] concern, there is an interaction going on a continuous basis between the industry and the government. And I think it should also get resolved. So we see some inflation in the -- until October, November. And thereafter, it should be again on a normalizing trend. But yes, the commodity is volatile.
The next question is from the line of Ashwani Kumar from Edelweiss Mutual Fund.
Sir, how many states have given -- have allowed a price increase for you people in the last 2 quarters, especially in this quarter?
For the -- there are 8, 9 states who have given pricing where the bigger one is Telangana and all that. Last year also, we got the price increase. We said in an earlier call also that we did average -- last year, we got a price increase of 300-plus basis points. And whatever price increase materialized in Q1 of FY '24, the weighted average impact of that on the top line will be around 170 to 180 basis points.
But the positive side of this is that 10 states had given price increase, which will impact FY '24. And the government in most states have been very receptive to the pain of the industry. So that's a very positive sign for us and for the sector.
And sir, even this quarter itself, you made very strong margins of roughly 12.5% against 9.8% in the last quarter, I want to say, 4Q '23. So what is the kind of margin which you'll make for this entire year?
As we have already spoken and guided that we expect the margin for this year to be in the kind of mid-teens kind of thing. So we continue to maintain that guidance, 14% to 15%.
14% to 15%. And do we expect to go back to the margins of roughly FY '21 or FY '20 in the range of 16% to 17%? By when, if at all?
So we agree that in 2 to 3 years' time, we aspire with this kind of brand portfolio and premiumization and premium brands growing in strong double digits, that mid-teens margin in 3, 4 years, we are expecting.
And sir, by when will -- is our alcohol plant expected -- the expansion which we were doing?
So as we stated, the Sitapur plant will come into operation in the Q2 of FY '24.
Q2. And by what capacity we will reach by end of FY '24?
So it will be around 95% to 100% capacity by the end of FY '24 because plant stabilizes in a couple of months and, thereafter, it runs on 95% to 100%.
Okay. And any other capacity expansion expected at the end product or the -- on the RM side?
No, we don't expect any more expansion on the distillation side. We have had this expansion, keeping you 7 to -- 5 to 7 years requirement for our P&A category and other growth in like regular and whatever, and consumption is growing. So we will have distillation CapEx for a -- complete for next 6 to 7 years.
Okay. And what's the current debt on the books, sir?
Current debt is INR 700 crores. Net debt is INR 700 crores.
Okay. And what is the repayment schedule for the debt?
Next 4.5 years, the debt will be actually [ especially due ]. However, as per our plan, we expect by '26, it should be negligible, back to a 0 debt kind of company.
And sir, on the current sales of -- or in the current profit of roughly INR 60 crores a quarter, what is the kind of FCF or the OCF we generate?
So as CFO, on the current, let's say we -- as we said that after meeting the needs of the CapEx and working capital requirement, that this FCF will be -- it will be able to generate that, by which we will be able to retire the debt this year, next year, FY '26.
The next question is from the line of Sonaal from Bowhead.
Sir, could you repeat what is the EBITDA margin guidance you gave for this year? And does that include the benefit of backward integration? Or this is excluding the benefit of backward integration?
So the EBITDA margin, it still doesn't have the impact of the backward integration as far as Sitapur green field is concerned. And we said that by the year-end, when we have every operations for Sitapur and everything, we will be in the mid-teens kind of EBITDA margin.
So this EBITDA margin includes Sitapur, right?
Your voice is a little cracking or something. Can you be more clearer?
Sure, sir. Is it better now by any chance?
Yes, it is a little better, yes.
So this mid-teen margin which you're talking about, so it's more like a Q3, Q4 kind of guidance, including the benefit of Sitapur backward integration, right?
Yes.
So it includes the Sitapur. Got it, sir. So can you, sir, in terms of the -- you said something about the glass pressure. So are you expecting a correction has already happened in Q2 or expecting in Q3 as sort of the glass pricing are concerned?
No, I don't think we expect that in our business model. If it comes, it will be good. We're working with the glass industry on that, but yes, not expect that.
And whatever price hikes we have taken so far, sir, in real estate, some of them may have come mid-month last quarter. So any further benefit of historical prices, which will flow through in Q2? And what would be the quantum?
So the impact in the first quarter has been in the range from 90 basis points to 100 basis points because Telangana comes in the middle of the quarter. As I said that overall, on annualized basis, the impact is 170 to 180 basis points. So the balance impact from Telangana and some of the states is going to materialize in the coming quarter, and the weighted average will be in the 170 basis points.
The next question is from the line of Harit Kapoor from Investec.
I had a question on popular. So you've seen a sequential uptake in volume growth -- on volume in the popular side. So from hereon, given that your portfolio, I mean, the impact of high inflation that you would have reduced salience, that would have gone out. Would you expect popular to start delivering volume growth here from Q2 onwards?
So Harit, as you've seen that some of the states where the price correction has been done, I think we have a gain on quarter-on-quarter basis, started during on servicing the market, which was 9% on a quarter-on-quarter basis. As we said that our focus is on the P&A category. We expect that revenue category to grow in mid-single digits, and we continue to maintain that.
Got it. Very clear. The other question is on the gross margins. If you look at this quarter, you've seen a sharp increase and driven by the country liquor price increases as well as your mix improvement. And obviously, you are expecting the 12.5% EBITDA as the year progresses to be 15% -- 14% to 15%. Just wanted to understand that progression, would that largely be driven by the further mix improvement from here? Or do you think the bulk of this incremental benefit will come from the Sitapur backward integration?
Yes, it is a combination of both. First of all, the product mix is improving as luxury and other brands, which has been there, has been going in 40 -- 30%, 40% kind of thing, which is giving us better margins. And Sitapur backward integration will also help. So I say that a combination of all the factors will bring us to mid-teens kind of margin.
Got it. And last [ housekeeping ] one was on the depreciation. Does this quarter depreciation really reflect the Sitapur CapEx?
So this quarter, depreciation is around INR 24 crores, and Sitapur is then capitalized in Q2 of FY '24. We expect the annualized run rate on depreciation to around INR 125 crores. So INR 30 crores, INR 32 crores quarterly.
The next question is from the line of Sandeep Jain from Baroda BNP.
Just one clarification. The 15% margin guidance which you are giving, it's an exit quarter margin or you are saying full year FY '24?
Exit quarter margin.
This is exit quarter margin, okay. And it includes the benefit of the plant, which is coming -- or maybe problems -- probably second half or so? That includes the benefit of the EBITDA, which will come from the raw material sourcing and all?
Yes, it's a combination of all backward integration as well as the brand life.
The next question is from the line of Kaustubh Pawaskar from Sharekhan.
Congrats for a good set of numbers. Sir, can you let us know what was the industry growth for this quarter? And if you can help us with various segment growth trajectory, what was the growth for white spirits, whiskey and rum category? How is this category doing in this quarter?
So the industry in which liquor has actually grown by about 5%. And the coming quarters should see a resurgence further.
Okay. And if it is possible to give us the segment-wise growth, how the white has done for this quarter and the whiskey segment, how far is their growth?
Okay. If you would want segment-wise growth, I can help you with that. Whiskey has grown by about 4%. Rum has grown by about 5%. Gin has grown by about 5%. Vodka has grown, as an industry, by 15%. And brandy has grown by about 2%. So there is an overall growth of 4% to 5% from the industry.
Right. So our growth in P&A is around 26%, and overall volume growth of around 8% is ahead of the industry. But especially in P&A, we have seen that our growth has been better than the earlier guidance of around 15% to 18%, what used to [ advantage ].
So considering the response you are getting in various markets and the launches you are planning to do in the quarters ahead, should we enhance this guidance to around close to 20% in the coming years because of the market share growing and the response that we are building into the various markets?
So we continue to maintain the guidance of 15% to 18% growth in P&A category consistently every quarter over last year. And as far as the regular is concerned, we still maintain that single digit -- mid-single-digit growth. Overall growth, we expect around 9% to 10%; and on top line, it's 15%, 16%. So the growth can be higher. But as far as we maintain this because we believe in it. The first quarter, we have grown 33% if we include brand -- Royalty Brands. So that's a market demand and everything we are [ catching to ].
Right. And for the overall realization growth in this quarter, what would be the growth because of the improvement in the mix?
So the realization improvement is 400 basis points in this quarter over last quarter.
Okay. And what could be because of the mix -- what's the mix and the price increase? You said price increase impacted you around 80 to 90 bps. So...
Yes, the rest is product premiumization.
The next question is from the line of Shivang Joshi from Centrum PMS.
I wanted to understand, sir, can you give an indicative range of gross margin that you would be making on the IMFL and non-IMFL? And just a clarification, since you've got the pricing in non-NFL segment, you would be back to, what, high single-digit EBITDA margin in that space? Or is it higher during the quarter?
For the gross margin, I say that EBITDA margin on our non-IMFL is in the range of around 6%. On IMFL side, it is 15% for this quarter. Gross margin on non-IMFL is around 9%, 9.5%, and it is above 50% in IMFL segment.
Okay. So I remember in one of our earlier conversations, so luxury or crafted product, the super premium categories, super premium luxury products, can you give an indication of what they would be -- I mean, in terms of overall revenues, an indicative number, how much they would be contributing for the revenue in the quarter? Or how much do you expect them to contribute in FY '24 versus FY '23 since you'll have higher availability of ENA for your luxury products this year?
See, in the portfolio, we do not give any guidance on revenue or anything. But what we can say surely that now especially with the increased capacity of Rampur and the way Jaisalmer is responding both internationally as well as in the domestic market, in the next 1, 2 years, it will significantly contribute to our bottom line.
Okay. The intention is just to understand, so in FY '22 -- sorry, FY '20, FY '21, when we used to do 50%-plus gross margins, we have substantially taken up our portfolio in terms of premiumization. Yet, when you see the gross margin level, the gross margin still appears to be roughly around 43%, 44% on a blended basis. This is first quarter after receiving the price hike in non-IMFL. Now I understand your entire raw material basket has been witnessing major inflation. But as things smoothen, do we -- when do we expect your gross margins to touch the earlier levels of closing -- close to 50% on a blended basis?
You are right that in '21, '22, we had a gross margin between 49% and 50%. Last year, FY '22, '23, the inflation on grain and glass prices has taken away almost 900 basis points from the gross margin, which has been compensated by price increase and product premiumization.
Now nobody can predict about the commodity prices. However, with the current state of the commodity pricing, I think the margin of -- current margin is around 43.5%. We expect, again, to go back to the 48% kind of margin in 2 to 3 years' time with the product premiumization. So the point is this is all being made good from the product mix. So had it not been there, then margin would have been upward of 50%.
And your benefits of backward integration would also kick in higher gross margin, right? When you are seeing 40% to 50% view, I mean, should we assume an even higher number, maybe factoring the benefits coming from the backward integration? And currently, what is the spread between make versus buy in your view?
The backward integration is part of the total business model because we are going to use all of the ENA capital in 3, 4 years' time. So the margin which we are expecting is a combination of the green field -- the backward integrated facility and the premiumization all put together.
Okay. And currently, if you -- at the current ENA pricing and the raw material cost, what would be roughly the gap between make versus buy per liter, if you can give any indicative numbers?
Currently, the ENA is in the range of INR 69, INR 70 per liter on a blended basis.
So we should get -- okay. So INR 10 per liter should be the ballpark benefit that you should get on...
[ Yes, I'd blend it into ] INR 10, sometimes INR 8, sometimes INR 11, INR 12. So it depends on the grain cycle.
The next question is from the line of Karan Taurani from Elara Capital.
My question was on the regular segment. You mentioned that growth in volume could be mid- to high-single digit over there. But the decline in Q1, could we expect that H2 recovery will be sharper in terms of the regular volume? And what would drive that?
So the point is we have started for, after 4, 5 quarters, sequentially the improvement in our regular category. And the 5% which we talk about will be for the whole year based on the business plan. Some of the price increase in the regular category has come in. In some more content, we will continue. But our focus, as we talked about, is on the pricing above category where we would be current buoyant product mix and premiumization happening in the country as well. We're expecting a strong growth there.
Right. And the second question was on backward integration. So I think you mentioned earlier that the positive impact of this backward integration is somewhere close to 150 to 180 bps on the EBITDA or the gross margin. Now with wheat prices going higher, other grain being under pressure, do we maintain that guidance of positive impact?
So first of all, this is again a temporary growth rate because the rise in the grain prices were abnormal in last 3, 4 months. But we don't expect that the commodity prices continue to be upward of this. So when we guided about 150, 180 basis points, it was in the normal circumstances. It is like we earlier got own version, the bought-out ENA was around INR 12. Today, it's INR 8 to INR 9. So it varies from the point. It is a matter of 2, 3 months. Thereafter, again, when it normalizes, we will come back.
Right. And just the third and the last question would be around the potential market share within the Prestige & Above segment in the whiskey category. So as you said, 8PM Black, you are seeing traction, you are seeing traction in other brands like Royal Ranthambore as well. But any update to kind of innovate within the mid and upper prestige segment or maybe in the luxury segment to compete with peers over there as well, like for now?
So can I take this one? See, I'll tell you what, if you look at the industry, how it has behaved in the P&A category, the P&A category has actually moved up 1% from 21% to 22% of the total IMFL sales. Whereas as far as Radico is concerned, our share in the P&A category has moved up 2% points by -- from 13% to 15% of the industry. So Radico is growing in the P&A category much faster than the industry. That's purely because we are focusing on premiumization, and this trend shall continue.
Right. So let me put it this way, like apart from 8PM Black, which are the whiskey brands that you're betting upon for getting this strong P&A growth within this key category? Yes.
Okay. So let's say, we were not a dominant player earlier in the whiskey category. We have a leadership position in the gin, in the vodka, in the brandy segment, all premium segments. And now it's a year of transformation where whiskey is becoming a mainstay. 8PM Premium Black was 1 million in the first year, 2 million in the second year, 3 million in the third year, and we are getting strong for the 4 million in the coming year in this year.
Having said this, Royal Ranthambore is the big future brand of this country. We are looking at doubling our volumes in the current year. And it's been very well accepted, doing very well across all markets that we have gone and launched. And it is the first Indian whiskey. We claim it is the finest blend ever made in India. It's the first premium whiskey which is competing with international brands, priced higher than them. So that's a big one that we are betting on.
Then there are some other whiskey brands like After Dark Blue, which has been launched in some states and where it has been very well received. But I would say 8PM Premium Black and Royal Ranthambore just now, and what is going to happen is that the industry would be surprised because in the Q2, the second half -- not Q2, the second half of the year, we come up with another luxury whiskey to enhance our portfolio.
Got it. So there is a plan in place to expand the whiskey portfolio as well, apart from the gin and vodka where you have a significant recall?
Absolutely.
The next question is from the line of Vikas Tulsyan from Vision Ahead. [Operator Instructions]
Sir, my question is that how your brands are doing internationally and which of your brands you expect that -- which of the luxury brands you expect that they will do better in the overseas market like Rampur or Royal Ranthambore?
And sir, my second question is, how do you -- after your successful launch of ready-to-mix vodka in Karnataka, so how big do you see this such product category? And sir, how was the July month? Third question.
All right. So let's talk about firstly luxury portfolio and also in the international markets. Rampur, as you know, has been an all-time favorite with the people outside of India as well. And we have, at the moment, about [ 3 ] discussions of Rampur in the international market. Key markets include U.S., Europe, Middle East, Australia, Singapore, and the travel retail is also a very significant channel for us.
These brands are doing exceedingly well. And we, as we've always been saying, we are unable to meet the demand because of the malt availability, but we addressed that a couple of [ years ] ago when we tripled our malt distillation capacity. A lot of malt is going to be available as we go forward in this year. And we've maintained this year, we hope to triple the volumes of our Rampur inventory in malt this year compared to last year.
Same situation is there. So we had the Jaisalmer classic and then last -- late last year, we launched the gold edition. Both the expressions of Jaisalmer are also doing very well in the international market and even in the Indian domestic market, where we have more than 50% of the luxury gin space over here. Sangam, the new World Malt that we have just introduced the first shipments have reached a couple of markets now. And hopefully, we should get the feedback and response, and we will be expanding that also in the very near future.
So in terms of our luxury portfolio, even Royal Ranthambore is doing very well in the international markets as well as travel retail. So we are very positive of the performance of our luxury portfolio in the international market.
So you were -- you just asked about the RTD. So let me just give you some information on that. Okay, Magic Moments vodka cocktail has been launched in 330 ml cans. We have deliberately avoided bottles because it appeals to the younger target audience and it's the emerging trend. It's in 3 flavors: cola, mojito and cosmopolitan. It has been launched largely to capitalize on the growing cocktail trend and the RTD increase after the pandemic. The culture of drinking at home with friends has gone up, and that's what we want to capitalize on. The market, actually, you will be surprised between -- in the 2 years between '21 and '22, has grown by 39% to 40%. Between 2017 to -- between 2022 to 2027, the projection is a growth of CAGR of 10%.
Now traditionally, what cocktails in the country have always been made from vodka, so we have seen this as a big opportunity to use the biggest vodka brand, Magic Moments, to create the biggest RTD brand, which is Magic Moments Vodka Cocktail. It's a great product, well received in Karnataka. And now seeing the response, we are going ahead and launching it in 4 states as we speak, which is J&K, Rajasthan, Goa and soon to be launched in more states in the South, North and East India. But in over the next 12 months, it should be a national product.
And sir, can we also expect similar product in other liquor ready-to-mix like in whiskey and other gin drinks?
We don't have any such plans right now.
Okay. And sir, how was the July month?
So we continue to have this. And I think quarter-on-quarter, at this point of time, as we have guided, that we will complete our target for the -- on an annualized business.
The next question is from the line of Abhijeet Kundu from Antique Stockbroking.
Great results, congratulations on that. My question was on the luxury portfolio. What's the CapEx that you are doing both backward integration and a better-quality ENA and malt? To what extent does this supplies your volume expectations? I mean if APM has to grow at a strong rate or Royal Ranthambore, which is more of an Indian whiskey and can -- and we really see very strong growth, what kind of volumes can -- I mean, what kind of volumes are your -- is your current capacity or post-CapEx capacity good enough to support, that we won't have to reinvest further?
So in fact, the backward integration has been taken as a strategic call to grow our branded business. And first of all, at this point of time, also we procure around 7 crore liters of alcohol annually on large season for that reason in various parts of the country. So is that -- in future also, our own ENA, we can cater to our production and the growth. We will continue to buy some of the alcohol outside also.
And I can't put, at this point of time, the number that it will be cater -- able to cater, we are doing 32 million right now. The growth with what's happening in India is continuing to be there. So as we said that it will be sufficient for next several years that we have our internal distillation capacity, and some of that will be outsourced from outside producers as well. So we don't see the constraint of the capacity of distillation in the future.
Okay. Got it. Yes, I asked that because even in own branded, like normal has become 3 million cases of that. I don't see why Royal Ranthambore can't achieve that in the next 2 years, 3 years, while it's going at a very rapid pace.
Royal Ranthambore is a star product of the country today, not only Radico. The response is extremely encouraging. And I can assure you that in the times ahead, it's going to be a brand to reckon with.
The next question is from the line of Pankaj Kumar from Kotak Securities.
The question pertains to the impact of Karnataka where we've seen the increase. So how do you see on that? And what volume Karnataka is contributing to?
So the Karnataka increase definitely is increased. And with this increase there, and there is bound to be some impact on the volume side. But as we have seen in the past also that with the increase, and we knew MRP and all that, that has been set in due course of time. I think in the next 1 to 2 quarters, again, the volume might get impacted because of the increase in [ Indian rupee ] will get adjusted.
And just to add one thing, Karnataka is predominantly a lead category market. So from an overall vertical strategic focus for the team, it doesn't impact much.
And what percentage of volume is coming from here?
It is around 9% to 10% of overall volume.
Okay. And sir, my second question is related to the other expense increase, which you have said earlier that it's due to some change in track and trace. Can you highlight -- elaborate more on that?
Well, the excise policy, which was announced in [ May or earlier ], we were getting reinvestment from the customer. Now it has been -- so it is a cost here. Earlier, it was part of the EDP.
No.
No, earlier, it was cash to the customer. So this is now being part of the other expenditure, so some in the revenue as well as the cost side.
Okay. And sir, lastly, on the Royal Ranthambore, you said you're looking to double the volume from this special brand. So by when do you intend to achieve 1 million case? Any intended target that you have on Royal Ranthambore? That was my last question.
So see, it's operating in a, basically, in a very, very premium segment, which is the scotch segment. And there, we are seeing a very good traction for it. I think time -- we need some more time. This year, we should double our volume. I think by next year, we should be able to actually project our volumes for the next 3 to 4 years.
The next question is from the line of Mayur Gathani from Ohm Portfolios.
I just wanted to have an update on Delhi, what is happening there? Is there any improvement?
So Delhi right now is a stressed market. The policy is yet to settle down. It's still going through its own highs and lows. We are actually getting a reasonably good volume, and we are happy with it. It's not much of a moderation, but the industry needs to actually work out a solution with the government on the policy, maybe in the coming policy, for sure. Right now, this market is struggling.
Okay. Sir, how much does Delhi contribute to your revenues? And is it a significant market?
It is in the range of 2%, 2.5%.
The next question is from the line of Darshika Khemka from AV Fincorp.
Congrats on a good set of numbers. Most of my questions have been answered. I had just one last bookkeeping question. You answered one of the participants regarding the EBITDA margin by segment. Could you please repeat that? For non-IMFL, IMFL and P&A -- the EBITDA margin as per the -- for non-IMFL, IMFL and P&A categories.
Yes. So IMFL, blended EBITDA margin is at 15%; and non-IMFL, 6%.
And for the regular and P&A?
So we don't actually give that, but definitely premiums are much, much higher than regular.
The next question is from the line of Anurag Jain, an individual investor.
My question is on the non-IMFL business. The non-IMFL business revenue was INR 248.6 crores in the last -- in the quarter gone by. Could you please throw more light on this business? What is the current position and medium-term outlook for this business?
So the non-IMFL business, because we have put up a facility at Sitapur, so there is a bottling capacity put up for UPM and CL as well. Growth in non-IMFL has been, on account of that, we have seen a volume growth of around 31% on Y-o-Y basis and around 11% on a Q-on-Q basis. There has been a price increase in the range of 15%, 16%, which has also been reflected in the revenue numbers. And UPML prices are higher than the yield prices, so there is some impact of the product mix as well.
So just to add to what Dilip said, see, the non-IMFL business in UP is a compulsory evil. We have to do it because the government wants us to do it. All distilleries are mandated to do it. And the important point that I want to make is that it's a business that is doing pretty well in UP and growing. And we hope to stay with that.
The next question is from the line of Vikas Tulsyan from Vision Ahead.
Sir, can you also give us your export breakup? In terms of total percentage of the sales, what is export and what is the domestic sales?
In terms of volume, it's about 4% to 5%. In terms of value, it's about 8% to 10%.
And sir, what do you expect in next 5 years, this export market?
Well, it's all dependent upon the mix that we do in the domestic and the international. So it's on -- there's a healthy competition that we keep having internally, but we expect both domestic and international to keep growth at a rapid pace.
So which one will grow faster, export or domestic?
Too difficult to predict because domestic would like to grow faster than export, and export would like to grow faster. But eventually, it's ready for that [ steep growth ].
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.
Thank you, everyone, for joining us today. We are confident of maintaining our long-term margin expansion given the premiumization of our portfolio. And recently, we see price increases, both in IMFL and non-IMFL segments. We look forward to interacting with you on our next earnings call. In the meanwhile, if you have any queries, please follow and feel free to write to us. Thank you, and over to you.
Thank you. On behalf of Dolat Capital, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.