SOM Distilleries and Breweries Ltd
NSE:SDBL
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SOM Distilleries and Breweries Ltd
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Ladies and gentlemen, good day, and welcome to Som Distilleries & Breweries Limited Q3 FY 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nakul Sethi, Director, Finance and Strategy. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen. We welcome you all to the Som Distilleries & Breweries Limited Quarter 3 FY '23 Earnings Call. During the quarter, we sold a total number of 26 lakh cases of beer and 3 lakh cases of IMFL, resulting in an income of INR 1,510 million. Our flagship brand Hunter, Black Ford and Power Cool saw strong sales volume, the expansion of the company's customer base and overall volume was a result of both an increase in sales in market, where the company already had their presence, as well as the company success in increasing sales from new markets.
This was achieved by leveraging the company's existing strengthen and utilizing new strategies to reach new customers in the relatively untapped market. The key business highlights are as under. Our company has shown significant growth in sales with over 100 lakh cases of beer being sold in the past 9 months. This demonstrates a strong demand for our products and firmly establishes our position within the industry.
We held 14% of Karnataka's [ over beer ] market share in October '22, demonstrating our resilience and popularity in a competitive market. IMFL volumes during the same quarter were 3 lakh cases as compared to 1.6 lakh cases in the previous quarter. The expansion project is planned to be completed by quarter 1 FY 2024.
Coming to our financial performance for the quarter, we are pleased to announce a sales revenue of INR 1,510 million with a growth of 66.7%. year-on-year. During the same period, our EBITDA stood at INR 195 million, and PAT stood at INR 105 million with a margin of 12.9% and 7% respectively. The company's strategies have led to a growth in important markets, resulting in an increase in market share.
During the 9 months period ending FY '23, the company recorded a sales revenue of INR 5,550 million, representing a growth of 152.8% compared to the same period the previous year. Additionally, the company reported an EBITDA of INR 740 million and a PAT of INR 444 million. These results show a strong rebound from the previous 2 financial years where COVID had a major impact on the operations of the company. The company's outstanding results are a testament to the confidence in the excellence of our products and proficiency of our team implementing the plans.
The favorable reception of our products by consumers is a clear indication of the company's potential to expand the market share across all product lines. We would also take this opportunity to address concerns of the investors on the cancellation of the EGM for approval of INR 65 lakh warrants to the promoters. It was felt that there was a lesser need of funds towards CapEx in the company and as such, the preferential issue was deferred. Instead it was decided that we continue with the rights issue to give the existing minorities investors the opportunity to be a part of the growth story as a company.
The promoters are also willing to take up any undersized portion on these rights issue. This step will also lead to lesser dilution of equity. It was a cause of concern for some investors. Post expansion there is a need for further capital, then we shall evaluate and we do another preferential issue. Going forward, we believe that our growth trajectory will continue to be positive and we anticipate delivering robust volume and revenue growth. This is based on our strong foundation, the effectiveness of our strategy, and our ability to adapt to the ever-changing market conditions.
With this, we would like now to open the floor for Q&A. Thank you so much.
[Operator Instructions] The first question is from the line of [ Darshil Jhaveri ] from Crown Capital.
I hope I'm audible?
Yes.
So I just wanted to congratulate on your good set of results and now I would just like to ask in terms of our vision for next year now seeing everything is normalized. So what kind of revenue are we expecting for next year?
We are expecting -- so I think we should be ideally placed to answer that question after we declare our quarter 4 results. But I expect that we should grow by about 20% to 25% in terms of revenue for next year.
Okay, sir. And sir, so on such a -- and on a higher base, on a higher revenue, so we would get some kind of operating lever. So we could expect a similar increase in our profit margins like something that we did in Q1 or something around the 13%, 14% range. So will that be a fair assumption?
Yes, we could look at those kind of margins, because obviously when you have economies of scale coming in, so obviously, we tend to have higher margins in quarter 1.
So, we have more seasonality towards quarter 1, right?
Yes, because that's the peak consumption for season for beer.
Okay, sir. And if I can just squeeze in one more question, what is the current capacity utilization level?
I mean the Woodpecker plant, the Hassan plant is running at above 100% currently. Bhopal for the whole year would be about close to about 55%. And the plant at Orissa would be close to 40%.
Okay, sir. So, with our existing facilities, so what kind of peak revenue could these facilities make us and furthered our new CapEx, what kind of additional revenue, would that come in if that could help me a lot.
The existing capacity can give us a turnover of about INR 1,100 crores in beer only, I'm saying. And the additional capacity, which we are putting up can give us another maybe INR 150 crores to INR 200 crores.
Okay, okay. Yes, I think that helps me a lot. Looking forward to a good number.
The next question is from the line of Nitin Awasthi from InCred Equities.
Few questions from my side. Firstly, you had mentioned in the presentation, you have INR 100 crore expansion plan. Between the 2 plants, 1 in Bhopal, 1 in Karnataka plant, Hassan plant, sorry, in Karnataka. So could you divide this CapEx number, how much is going in for the Bhopal plant, how much is going in for the Hassan plant and by when will this work in progress be competed?
So I think the Bhopal plant is -- will cost us about INR 58 odd crores. And the Hassan plant would be about close to INR 43 crores, INR 44 crores.
Got it. And work on the expansion has started already?
Yes, yes. So we have, I think, done about in terms of payment, we have done about close to about 65% to 70% of the payment.
Okay. So by when do you expect this to do the trial production in the up and running, these 2 capacities expanded?
By quarter 1.
Beginning of quarter 1, or mid of quarter 1. The reason I ask this question is, sir, because you said Karnataka, we are running at 100%, so unless and until we do an expansion, our revenue will be stagnant.
Yes, yes. So we obviously will take advantage of the expanded capacity in Karnataka for the season.
Okay, so beginning of the season. That's the hope right now.
Yes, yes.
Noted, sir. And Orissa, if you could shed some light upon that Orissa facility, what percentage of utilization are we running at there?
So it's currently about close to about 40% for the 9 months.
Okay, and this is only beer or beer and IMFL combined?
No, this is only beer.
Okay, and how is the state shaping up sir, competition wise, another way growth because both the other states that you are in, you are doing pretty well, and if Orissa starts to kick in, you'll do -- we will be far more better. That's why I want to understand the scenario.
We are doing pretty well in Orissa. I was just looking at the market share numbers. We are close to about 12% in Orissa currently for the 9 months. So we are doing pretty okay, I think. So I think going forward maybe next year, we will do even better in Orissa.
Understood, understood, sir. And main competition in Orissa is coming from the usual guys you're competing within the other states or there are some home-grown brands there?
No. So, the main brand, who has got the main market share is UB there. It's the biggest out there, so yes.
The next question is from the line of Kuber Chauhan from IDBI Capital.
Congratulations on good set of numbers. Few questions are there. Just like to know that the INR 100 crore capacity, which is going to be onstream from -- I just heard from FY '24, so what would be the utilization for first year? And how much we are targeting for couple of -- I mean for peak utilization, how much years it will be passed on for that?
So I mean I just cannot answer that, what would be the utilization of that utility, but we are hopeful that see the facility, which is running up in which is being put up in the Bhopal plant, it is canning line. That will be within the overall ST of the Bhopal plant, but it will be sub-divided to a canning facility. So obviously there is a need for bigger canning facility as we look at quarter 1, and as we look at entering new states like UP, which we want to target next year.
Woodpecker, we are already running short of capacity. We are still at 100% considering that we are in the lean season. So obviously I think going forward we will have good capacity utilization coming out of the Karnataka plant also on a expanded capacity level.
Okay, sir, and the second question is, on I mean, why -- I mean what was the purpose for right issue and not raising reducing debt more? So we could have done it easily by raising few amount of debt and [indiscernible] What was the root for going for right issue?
We per se are a little averse to raising more debt currently. And because we still have got about I think about INR 150 crores of net debt sitting on our books. So that was the reason for taking more of -- I mean, going through their equity route. We might take some debt because as most of the states are moving towards a duty paid model, so we will take some working capital limit, maybe towards the end of this financial year or in the early part of the next financial.
Sir, what would be the working capital day for this quarter?
Sorry.
Working capital.
Working capital, yes.
So the days which if you can just highlight on that.
So I think the debtor on an average will be realized in about, I think about close to about 60, 65 days.
Okay, okay and sir, I mean, from last 3 quarters, we are maintaining double digit margins, EBITDA margin. So how we are looking at that in future? And are we going to maintain it? And if we are maintaining it, then what could be the drivers for it?
I'm sorry, I'm not able to listen to you properly.
Yes. I was saying that from last consecutive 3 quarters, we are maintaining a double-digit margins, the EBITDA margins. So are we going to maintain it in future? And if we are going to maintain it, then what could be the drivers for that like from the cost per se, from the price hike per se?
See the cost pressures are still there, so it will be very difficult to predict or to give you a guidance about the kind of EBITDA margins we expect in the future, but it will be our endeavor to maximize the margins.
Okay, okay. And sir, last question, the Genius Prestige brand, which is gaining kind of a 46% share in Karnataka. So are we going to expand it in other states as well?
So yes, we expect that we'll start operations in IMFL in Orissa also pretty soon. So let's see how the response comes in Orissa going forward.
The next question is from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited.
Couple of questions. Firstly, can you give some broad overview on how the UP and Delhi market are performing where we are new into the business? And if you can give volume detail.
Sorry. Please come again. I lost you.
I was asking about how the performances in UP and Delhi market where we have entered last year. And if you can mention about the volumes for UP, Delhi, it will be helpful.
I mean Delhi and UP are new markets for us. So I think it will be the real indicator of the market share, which we have garnered or taken would be for the next financial year. This year, our main concentration has been on our home markets that is MP, Karnataka, Kerala and Orissa for that matter.
Okay. And so in 9 months FY '23, we have, let's say, in terms of growth, we have got the 2 advantage. One is obviously the FY '22 had a low base because of the COVID and also because of the change in the MP, Madhya Pradesh excise policy, but now we have a larger base in terms of volumes for FY '23, so now you are mentioning that 20% to 25% growth, so is it fair to understand that most of this growth will come from the new market like UP, Delhi or you feel that there is still high growth potential in Bhopal and Odisha and Karnataka market as well?
So we still I mean are very hopeful that we'll grow further in our existing markets of MP, Orissa and Karnataka and Kerala. Though we are also looking at like you rightly said at Uttar Pradesh and Delhi to fuel our growth further.
Okay. And in terms of this INR 100 crore CapEx, so do we require any debt for that CapEx?
Yes, l lost you.
Yes. So I was asking that for this INR 100 crore CapEx, we will be require any debt?
No, as of now, we do not anticipate that we'll require any debt.
Okay, so and how you are planning to use this INR 50 crore of rights issue?
That will be mainly for our working capital.
Okay, mainly for our working capital. Okay and last question from my side, on this INR 100 crore CapEx, will there be any capacity expansion or it's just canning capacity?
So we are actually doubling the capacity in Karnataka. So from 45 lakh cases, going up to 90 lakh cases.
Okay, and in Bhopal?
So Bhopal, the capacity will remain the same, except that we'll have another canning facility coming up.
Okay, and one just last question, you mentioned about the capacity utilization say Bhopal was 55%, Odisha 40%, so this is for 9 months, right?
Right.
So since our business is seasonal where Q1 would be having let's say 80%, 90% utilization, and then other 3 quarters would be having a lesser utilization, so in a annualized basis, what could be the peak utilization we can go?
It goes to about 80%, 85%.
Okay 80%, 85%. Okay.
[Operator Instructions] The next question is from the line of Manan Shah from Moneybee Investment Advisor.
Can you hear me?
Yes, now we can hear you.
Sir, on the CapEx, the INR 100 crore that -- so have we ordered these lines or are we in the process or have we received the deliveries of these machinery?
Sorry, please come again.
The CapEx for the INR 100 crores. So you mentioned that we have ordered. So, I mean, when do we expect the delivery of these machineries?
They are in the process of being delivered. So I think everything should be done by quarter 1.
Okay, because we are just now 2 months away from for the quarter 1. So to utilize these capacity for the new season, I believe there would be fair amount of time required to install these plant and machineries as well.
No, we are working on it.
Okay, and my second question was, if we look at the mix between our 3 brands, Hunter, Black Fort and Power Cool. So there has been a substantial increase in the mix. So Power Cool mix has gone up substantially to almost 64%. So if you can just throw some light why is this happening? Is it because we are entering newer geographies and using this brand to enter those geographies or there is some other reason, there's more pull for the Power Cool in our existing geographies, if you can just highlight over there.
So Power Cool, in fact, has been doing exceedingly well in Karnataka, where we are gaining market share. That is one of the reasons why the contribution of Power Cool is increasing.
Okay, so this increase is not because of our entry into UP and Bihar market?
No, no, no, it's doing very well in Karnataka as of now.
Okay. But we are not seeing the traction towards our more premium brands of Hunter and Woodpecker that we had launched?
In which market?
In Karnataka.
So we are -- so the natural traction, which has happened is between Black Fort and Power Cool. Hunter, unfortunately is taking sometime to pick up, but we expect that Hunter also would do well in the next financial year.
Okay, and Woodpecker I believe we had launched, we were planning to launch in a big way. So if you can just throw some light over there.
This summer, we launched Woodpecker in a big way and we are doing exceedingly well in the broad beer space through Woodpecker in Bangalore and around.
Okay. So are we planning to launch this in other states as well or it will be currently in Karnataka only?
We'll first start with Karnataka.
Okay. And on the IMFL volumes as well now there has been a decent growth over there as well. So can we expect this run rate to continue or to improve going forward or there was some impact of our contract manufacturing with Radico because of which its volume went up.
No this sale is not comprised anything of Radico sales because we got a different arrangement with them. So this is all our [Technical Difficulty] and we are hopeful that we do well in IMFL also going forward in Karnataka.
Okay. So I mean, these volumes we can expect these to continue.
Yes, yes, very well.
Okay. If I understand this would be due to our taxes of our Genius brand?
Yes. And we also have now got a dedicated team, which is concentrating on IMFL sales.
Okay, okay. Understood. Sir, earlier we were of the view that this press that we were doing, those funds would be utilized for doing this CapEx of INR 100 crores, but now since we've cancelled that, how do -- how will we manage to fund this CapEx?
So we have already out of say INR 100 crores, we have already spent close to about INR 70 crores. So there is not much gap left as such.
Okay, understood. And when are we expecting the deliveries of these machineries? I mean is it in the next month should we expect the deliveries or it will be by March when we see the delivery of...
It's ongoing.
The next question is from the line of [ Darshika Khemka ] from AV Fincorp.
Am I audible?
Yes, ma'am, you are.
So a couple of questions, sir. Firstly, congratulations on a good set of numbers. Firstly, I wanted to know the split between our own brands' revenues and the contract manufacturing revenues basically wanted to know what would Radico's arrangement be contributing to our revenue currently?
And the second question is that, I actually sort of missed the opening remarks that you had on the rights issue. If you could please repeat that it that it would be very helpful.
So I think about the sales which we have posted is about 99.5% or 99% is our own sales.
Okay. So the contribution from Radico is negligible so to speak?
Negligible. All from other brand is negligible. This is all our sales or you can say 99.5% of, I hope that answers your first question. Second question was?
Could you please repeat your opening remarks on the rights issue part? I actually sort of missed that.
The rights issue is being done for the working capital needs of the company. That's it. So anything specific you wanted me to address on that?
The amount [indiscernible]
It will be up to INR 50 crores.
Up INR 50 crores?
Yes.
[Operator Instructions] The next question is from the line of [ Ayush Agarwal ] from MAPL Value Investing Fund.
I hope I'm audible?
Yes, sir.
Sir, congratulations on good set of results. 2 questions, sir. One is on the CapEx. You mentioned that Karnataka facility will almost double from 45 lakh cases to 90 and but Bhopal capacity will not go up, so how will it add to our revenues in the canning facilities?
So the canning facility, the realization is -- canning facility realization is much higher than a per case basis of a bottle. And there are certain markets which have got a higher saliency towards cans, that is one state is UP, which we want to target next year. So therefore, the need for a enhanced canning facility.
So what would be the difference between bottles and cans per case?
About 20% increase.
40%?
20%.
20%. Okay, so this INR 100 crore CapEx is supposed to be around INR 150 crores, INR 200 crores of additional revenues?
Yes.
And you mentioned that the existing facility can do INR 1,100 crores of revenue? So in total, after this CapEx, we will be in a state to do [ INR 1,300 ] crores of annual sales?
Yes.
So assuming that we'll grow 20%, 25% in FY '24, we'll reach optimal levels very soon. So what are our future CapEx plans if you have thought about any?
Not right now. Maybe subsequent calls after 3 months, we can address that question again.
All right. Also in the presentation, I noticed that I see that our IMFL realization has fallen, what can be the reason for that?
Because we are selling more of that brand in Karnataka, which has got a lower realization.
[Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference back to Mr. Nakul Sethi for closing comments.
I would like to thank you all for joining us on the quarter 3 FY '23 conference call. Trust all your queries have been adequately addressed. Should you require any further information, please reach out to our Investor Relations team. We will revert to you with all necessary scale at the earliest. Thank you so much.
Thank you very much. Ladies and gentlemen, on behalf of Som Distilleries & Breweries Limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.