Globus Spirits Limited (GLOBUSSPR) Q3 FY23 Earnings Concall Transcript

Globus Spirits Limited (NSE:GLOBUSSPR) Q3 FY23 Earnings Concall dated Feb. 15, 2023.

Corporate Participants:

Shekhar Swarup — Joint Managing Director

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Nilanjan Sarkar — Chief Financial Officer

Analysts:

Prithvi Raj — Unifi Capital Pvt Ltd — Analyst

Tarang Agarwal — Old Bridge Capital Management — Analyst

Imran Khan — Longbow India Capital — Analyst

Jatin Chawla — RTL Investments — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Agastya Dave — CAO Capital — Analyst

Jatin — InvestSavvy — Analyst

Sourav Dutta — Minerva Asset Advisors Private Limited — Analyst

Prem Thakur — Individual Investor — Analyst

Nikhil Agarwal — Tusk Investments — Analyst

Nikunj Pachisia — SKP Securities Ltd — Analyst

Sai Narayanan — Individual Investor — Analyst

Navneet Bhaiya — Individual Investor — Analyst

Udit Gupta — Individual Investor — Analyst

SB Bhaiya — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Globus Spirits Limited Q3 FY ’23 Earnings Conference Call. We have with us today Mr. Shekhar Swarup, Joint Managing Director; Mr. Paramjit Gill, CEO, Consumer Division; Mr. Bhaskar Roy, COO; and Mr. Nilanjan Sarkar, CFO. [Operator Instructions] There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]

I now hand the conference over to Mr. Shekhar Swarup. Thank you and over to you, sir.

Shekhar Swarup — Joint Managing Director

Good afternoon, everyone. Welcome to our earnings call. Sorry about the delayed start today because of some technical difficulties at our end. At the outsets of this call, I’d like to address the recent announcements by the company about the income tax search. This was a routine search that was conducted and during the search, no unaccounted assets received. There was no meaningful impact on business operations during the search. And since the completion of the search, we have not received any assessment on the operation from the department. We will, of course, inform SEBI regarding any updates on this from time-to-time.

At Globus in the last few years, we’ve focused on creating steady growth through a well-entrenched destination business, as well as laying the foundation for growth in our consumer business. Both these sides of our business continue to make strides in the quarter gone back. Our currently announced the commissioning of our greenfield 140 KL Grain ENA and Ethanol plant, happy to inform you that in the quarter gone by this facility has produced to 90% of capacity utilization with efficiencies improving every month. The installed capacity of the company is now 765 KL per day, of which 335 KL is dedicated to ENA and the balance is fungible between ENA and Ethanol.

Our second expansion in West Bengal and our first expansion in Jharkhand is underway. There have been some delays due to global supply chain disruptions. However, the delays are now behind us. We expect both expansion projects to be completed in early Q1 ’24, adding 60 KL per day at each location. We also now look forward to starting construction at Orissa as soon as all regulatory approvals are in place.

Energy costs have been a hot topic, and I’m happy to inform you that various initiatives that have been taken up by our engineering and operations team have resulted in reducing energy consumption by 5% in West Bengal starting in the month of December, with the potential of going up to 20% savings, savings in energy consumption that is. Over the course of next year, we will be implementing these learnings from our West Bengal plant to all our locations, and this will enable us to reduce fuel consumption by 20% at locations in East India and 10% to 15% in our other locations.

On margins, as illustrated in the investor presentation, which I hope you’ve seen by now, excluding IMFL investments and an exceptional underperformance at Samalkha, Q3 EBITDA margins were in the range of 14%. ENA price revisions over the year have been helpful with prices up 20% year-on-year and about 13% year-to-date. This quarter saw a marginal softening in fuel costs. However, grain costs remained steady.

From January, we are beginning to see Coal India making large quantities of coal available to industry, and this has helped reduce cost of fuel further. As long as this continues, coal costs shall remain subdued. As many of you would be aware, though we use multiple fuels, including coal, rice husk and other agricultural wastes, coal prices drive the entire market for fuel. In Q4, however, grain prices have started seeing an upward movement. Going forward, I expect margins to remain in the range of 13% to 15%, excluding IMFL. As we go into the next financial year, price increases, especially in our Value and Value Plus categories, will start getting realized, and that will help our margins further.

We’ve been very excited about the prospects that our Prestige and above brands hold. And in the last few quarters, Param and I had spoken to you about all the work that has been happening towards creating competencies and reasons to win in the marketplace. I’m very happy to inform you that this quarter Prestige and above brands have brought in 7% of our Consumer revenue. This is a small, but an important step, as we start to gather some steam towards getting to our first major milestone of 20% Consumer Segment revenue share.

I request Param now to talk a little more about this.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Thanks, Shekhar. Good afternoon, everyone. And I hope you all are well. In the overall Consumer Segment, the aggregate sales in Q2 [Phonetic] FY ’23 came in at 4.05 million cases, up 7% year-on-year. I’m sorry that was Q3. It is noteworthy to mention that in the quarter gone by, the average realization of the Consumer Segment further improved from INR510 per case in Q2 of FY ’23 to INR527 per case in the quarter gone by, that is for Q3. This was on account of better mix across states and continued lower trade spends in Haryana, in line with maintaining our focus on better brand profitability. Going forward, with our product mix improving towards Value Plus and Premium segments, we believe realizations will continue to remain robust.

Let me start on the Value and Value Plus segments. Our overall revenue in this segment grew 22%, which is happening. In Rajasthan, RML, the Value Plus segment continued to demonstrate our brand strength at the marketplace. This was supported by our Black Lace Rum, which in its second year of launch, delivered double-digit market share in this segment in the quarter gone by.

Globus Green, our whiskey which is also in its second year, is slowly gaining consumer acceptance and is helping us get stronger in the whiskey portfolio as well, which is led by our Country Club, which is our flagship whiskey. We also launched the kewra flavor in the Value segment last quarter, and we’ll continue our work in increasing our product offerings to the ever-evolving consumer.

In Haryana, our strategy to creating a sustainable business model is playing out. We have maintained our increased contribution of INR26 per case, and we’ll continue to build brand strength. Consistent efforts on metro [Phonetic] liquor we saw in our Value Plus segment are bearing fruit, as we are seeing momentum build in this segment, and both our brands in this segment are inching up.

In West Bengal, there is again a route-to-market change in the Value and Value Plus segments at the end of last quarter. This led to some disruption in our service by the industry. The good news is that the new RTM is more favorable to brand building and will help us in times ahead. In this change, a new category in the Value Plus segment has been introduced. This clearly demonstrates that across states opportunity of this segment is now being recognized, which will augur well for us as we go forward.

Coming to the Premium segment, we are happy to report that the [Indecipherable] and this segment is showing very promising prospects. Our revenue in Q3 clocked almost INR15 crores against INR2.3 crores on same time last year and INR4.4 crores in Q2 of this year. Haryana, where we have launched sometime at the beginning of Q3 has also shown encouraging reception to all our three brands with the rising launch in the current quarter. In Telangana, however, we could not get approval for one of our key brands to operate and hence, are revisiting our strategy for the state and keep you updated.

In West Bengal, we have expanded our portfolio now to take advantage of the self-owned local manufacturing facility and are hopeful of hosting meaningful growth in the coming quarters. We are in the process of launching Mountain Oak Whiskey as we talked to you.

UP as well as Delhi markets also have settled well, as we inch closer to the end of our first full year. This gives us confidence to expand our offering portfolio, and we will be launching three new products in this calendar year across selective markets, two of them in the first quarter of FY ’24.

Focus relatively has been undertaken to strengthen our key accounts stability, as we continue to drive our premiumization journey. We expect to close FY ’23 with close to about 2.25 lakh cases under our belt, thereby setting ourselves up for a great future.

I will now hand over to our CFO, Nilanjan, to take this forward. Thanks.

Nilanjan Sarkar — Chief Financial Officer

Thank you, sir. Good afternoon, everybody. Since all the results and the investor presentation have been published in advance, I will not take much time and we will open the floor for questions.

Questions and Answers:

Operator

Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Prithvi Raj from Unifi Capital. Please go ahead.

Prithvi Raj — Unifi Capital Pvt Ltd — Analyst

I just have couple of questions. So the first, can you give that capex for Q4 and next year, and how much it will be funded through internal accruals and then borrowings?

Shekhar Swarup — Joint Managing Director

Nilanjan, could you please take that?

Nilanjan Sarkar — Chief Financial Officer

So you are asking the questions for the Q4 of next year?

Prithvi Raj — Unifi Capital Pvt Ltd — Analyst

No, no, Q4 of this year and then, FY ’24 full year, what is the capex plan and how it will be funded?

Shekhar Swarup — Joint Managing Director

Before Nilanjan speak, for next year, it is based on our approvals coming through for Odisha. So currently, we are working on that. So, Nilanjan won’t be able to give you that figure. As soon as the approvals are in place, then the capex plan will get firmed up. But for Q4, Nilanjan, pleased do give the figure.

Nilanjan Sarkar — Chief Financial Officer

For Q4, the entire capex what we have pending is for the 160 KLPD that is pending to be done, and it will be entirely from our internal accruals.

Prithvi Raj — Unifi Capital Pvt Ltd — Analyst

And what’s the figure?

Nilanjan Sarkar — Chief Financial Officer

We have spent almost — on 160 KLPD, we spent almost INR35 crores, INR40 crores. Another INR15 crores [Phonetic]…

Shekhar Swarup — Joint Managing Director

Yeah, INR20-ish crores left.

Nilanjan Sarkar — Chief Financial Officer

Yes, another INR20-ish crores left.

Prithvi Raj — Unifi Capital Pvt Ltd — Analyst

And Shekhar, if you assume you get approvals for Odisha and UP greenfield projects over the next couple of quarters, how much can be the capex and how are you planning it to fund?

Shekhar Swarup — Joint Managing Director

So, the capacity of these projects has not yet been firmed up. It’s based on the approvals — bet income based on approvals. We will then decide how to correctly engineer, but let’s assume that each of them are the 200 KL project. If it is 200 KL, it will cost us about INR150 crores for each. There may be some debt financing, maybe about 20%. 25% could be financed by debt, and the rest would be internal accruals. But as I mentioned, it’s all based on when the approval come. This debt amount is also assuming those projects start on the same day. So there’s a lot of if and buts. That’s why I said I can’t give you clarity, but each project is roughly INR150 crores. If it’s a 200 KL plant, if we take up one project in this year, then there shouldn’t be any need for debt. If you take up two projects, then maybe about 20% debt.

Prithvi Raj — Unifi Capital Pvt Ltd — Analyst

That’s clear. That’s quite helpful. My second question is on the IMFL business, we see the way the revenue has increased this year has been quite good. But –and what revenue run rate can we reach EBITDA breakeven in this particular business?

Shekhar Swarup — Joint Managing Director

Yeah, so I’ll let Param give more details on that. But roughly, we are — according to our plan, every state takes two years to break even from the date we launch in that state. And different states have been opening up at different time periods. All states, we haven’t gone into together. But as a rule of thumb, approximately two years to break even in every state. Of course, there are some states that we’ve had problems like Telangana, Param was talking about. So aside from any of those problems, we are seeing that states are taking two years. Param, do you want to say anymore?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Yeah, the way we do it is the first year when we introduce, obviously it takes us quite a long lead time, gets the product out and gets the brands into the market. So from the day the first liquid flows in, we can say end of third year regardless of that year whether whichever part, time of the year, we launch it in. The third complete year, we expect almost all the states barring an exception here and there to turn around and start contributing to the kitty.

Prithvi Raj — Unifi Capital Pvt Ltd — Analyst

And my final question, Shekhar, again on margins. Say in last few quarters, I guess, you have been guiding that you can reach to 20% EBITDA margin. Okay, but now we are talking 12% to 14%, that is also excluding IMFL. So what exactly has changed the narrative here? Is it because you expect this ENA inflation and fuel inflation to remain for many quarters going forward, or is there any pricing pressure that you’re facing from your customer?

Shekhar Swarup — Joint Managing Director

No, I mean, ENA prices, we’ve been able to pass on our cost increases, as I explained earlier. This — so that margin range I mentioned does not include price increases on the Consumer business, which will start coming in, in April, as was expected. If you remember in the last couple of calls, I’ve said that in each of our businesses, the time it takes to pass on cost differs. So ENA is the quickest followed by Ethanol, followed by our Consumer business. So ENA has happened. Ethanol has happened. However, ethanol price increases were not in line with what we were expecting, but whatever it was, has happened. And now, we are expecting consumer prices to start getting revised from April onwards. In fact, Rajasthan has already announced a price increase of — Nilanjan, please correct me, I think it’s INR25 for Value and about INR40 for Value Plus.

Nilanjan Sarkar — Chief Financial Officer

Yes, yes.

Shekhar Swarup — Joint Managing Director

Yeah, so all this will start getting implemented next year. So we are still working at new cost in the Consumer business without any new prices. So that’s going to increase margins. Ethanol price increase has been unsatisfactory, not in line with what we were expecting. So there has been some margin erosion there. But without Consumer, 15% is something that I can see clearly right now.

Prithvi Raj — Unifi Capital Pvt Ltd — Analyst

Thanks, Shekhar. That’s quite helpful.

Operator

Thank you. [Operator Instructions] The next question is from the line of Tarang Agarwal from Old Bridge Capital. Please go-ahead.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Hi, good afternoon and thanks for the opportunity. Three questions from my side. First, if I see on a sequential basis, your Consumer business as a proportion of your overall revenues has increased, which is also validated by your commentary, your realizations moving up from INR510 to INR526 and so on and so forth. But for whatever reason, the gross margins are down by about 110 bps, right, Q-on-Q. And my understanding in the previous quarter was that you were seeing cost inflation coming off in so far as raw materials are concerned. So has that actually, if I’m — again in your opening commentary, you spoke about maybe grain prices actually inching up in Q4. So if you could just give us some sense in terms of what’s happening there. That’s one.

The second, on the power and fuel cost, if you could give us the number for Q3 FY ’23, and what was the number for the same period last year? And third, if you could just tell us what’s happened with Samalkha, which resulted in lower-than-expected yield. Thanks.

Shekhar Swarup — Joint Managing Director

Sure, Nilanjan, can you take this on?

Nilanjan Sarkar — Chief Financial Officer

Yeah, on the first question — can you repeat your first question, please?

Tarang Agarwal — Old Bridge Capital Management — Analyst

Yes, so on a quarter-on-quarter basis, if I see your Consumer business, the share of Consumer business is higher than your — than the previous quarter, which is Q2 FY ’23. Yet, the gross margins have actually come off by about 110 bps, right, from 41.1% to about 40%.

Nilanjan Sarkar — Chief Financial Officer

Yeah.

Tarang Agarwal — Old Bridge Capital Management — Analyst

And my sense was that as we were going into Q3, the grain prices were actually softening or at least that would be my anticipation. If I just add the two, then theoretically the gross margins should have increased, but that’s not happened. So what am I missing here, if you could…

Shekhar Swarup — Joint Managing Director

See, we can do a deep-dive on this, but the main things that have happened in Q3 are as follows. There has been an uptick in Consumer, which you have noticed. There has been an addition of the Jharkhand capacity and all of that has come in as ENA. The first, say, 30 to 45 days of Jharkhand, the efficiencies were pretty low. That is only started moving up, as I indicated in my opening remarks towards the later part of the quarter and now of course, it is as per our target. The next thing that impacts margins is the IMFL business. Of course, not so much as gross margins, but EBITDA, which — where there is an EBITDA loss. These are the three major things that have played out last month — last quarter.

With regard to commodity prices, there has been a slight reduction in fuel cost very nominally. We are seeing a much more — a greater reduction into January. Of course, let’s see what happens in the rest of the quarter. But Q4, we’re also seeing an uptick in grain prices. The reduction in grain prices that we were expecting in the season — in the harvest season has not happened to the extent it was expected. But to the extent of our Ethanol business, we are covered with FCI grain. However, this does impact our Consumer business. ENA, of course, we’re able to pass on grain costs pretty well now. But our Consumer business is impacted because of high grain and fuel costs throughout the year. And as I mentioned to the person before you, cost increase — price increases in Consumer are going to start coming in April, which will offset the cost increases that has happened in the current financial year.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Okay. What was the average grain cost, if you were to tell me in Q2, and how has that trended in Q3 and how you’re looking at it for Q4?

Shekhar Swarup — Joint Managing Director

Nilanjan, do you have that Q2 information?

Nilanjan Sarkar — Chief Financial Officer

Yeah. Q2 average green cost was INR19.63. And Q3, it was 19 — in the same range of INR19.45 to INR19.50. So there was a hardly — a marginal decrease in the grain cost. I’m talking about grain from the open market, which is the damaged food grain.

Shekhar Swarup — Joint Managing Director

In Q4, we are seeing this go to about INR2,000 and INR2,100 per quintal.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Sure. Okay, and how much is the power and fuel costs in Q3 this year? And what was it for the corresponding period in the previous year?

Nilanjan Sarkar — Chief Financial Officer

Okay. Let’s say, power and fuel comparison is mainly of three [Indecipherable] mentioned of three, coal, multi-fuel and rice husk. While rice husk was sitting at almost INR5.5 per kg last year same period, which grows up to INR8.9 per kg in the current period — nine-month period. Coal, which was at INR7, rose up to INR10 and multi-fuel, which was at almost INR1.9, rose up to INR3.2.

Shekhar Swarup — Joint Managing Director

But Q-on-Q, there is some reductions there, 3%, 4% reduction in that. And then, Q4, there has been some reductions as well.

Nilanjan Sarkar — Chief Financial Officer

Yes, yes.

Tarang Agarwal — Old Bridge Capital Management — Analyst

As I understand, it is about INR74 crores in the previous quarter. So I’m just looking at the absolute number for this quarter?

Shekhar Swarup — Joint Managing Director

Okay. Nilanjan, do you have the absolute number for power and fuel?

Nilanjan Sarkar — Chief Financial Officer

Yeah, the absolute number on the rate impact on a nine-month period compared to last year was a negative of INR77 crores, INR77 crores was the net — grade [Phonetic] variant.

Shekhar Swarup — Joint Managing Director

That’s not the question. What is the total power and fuel spend in Q3?

Nilanjan Sarkar — Chief Financial Officer

Okay. INR105.37 crores.

Shekhar Swarup — Joint Managing Director

Yeah. Now, the reason is, it goes up dramatically because of Jharkhand factory.

Nilanjan Sarkar — Chief Financial Officer

Yes, yes.

Tarang Agarwal — Old Bridge Capital Management — Analyst

And what was it in the same period — same quarter last year?

Nilanjan Sarkar — Chief Financial Officer

I’ve given you the number for last year. The current year number is INR222.78 crores.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Got it. This is for nine months, right?

Nilanjan Sarkar — Chief Financial Officer

It’s the nine months. Yeah, it’s for nine months.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Sure. And last on Samalkha?

Shekhar Swarup — Joint Managing Director

So Samalkha, the plant and equipment is aging. We’ve seen some, how do I share it? Lower recovery in Samalkha, lower alcohol yield in Samalkha due to aging equipment. These equipments are being replaced or repaired, and we expect all of that to be complete by the end of this quarter.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Okay. Perfect. Thanks.

Operator

Thank you. The next question is from the line of Imran from Longbow India Capital. Please go ahead.

Imran Khan — Longbow India Capital — Analyst

Hi, thanks for the opportunity. Sir, can you please share your power and fuel mix? How much comes from rice husk and how much is coming from coal?

Shekhar Swarup — Joint Managing Director

I don’t have. I don’t think any of our team members have that number ready, but roughly speaking, 60% is rice husk and multi-fuel, and 40% is coal.

Nilanjan Sarkar — Chief Financial Officer

Yeah. Yes.

Imran Khan — Longbow India Capital — Analyst

And what was this number roughly last year?

Shekhar Swarup — Joint Managing Director

Similar.

Nilanjan Sarkar — Chief Financial Officer

Similar number.

Imran Khan — Longbow India Capital — Analyst

Similar number? Okay, thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Jatin From RTL Investments. Please go ahead.

Jatin Chawla — RTL Investments — Analyst

Yeah, hi, good evening. Thanks for the opportunity. My first question is the price increase that you have received in Rajasthan, is that sufficient to cover the cost inflation that you’ve seen in FY ’23? And at least in Rajasthan, would Consumer margins go back to normal going forward?

Shekhar Swarup — Joint Managing Director

Yeah. I mean, INR26 is about — on ENA terms is about INR8 a liter, which is sufficient.

Jatin Chawla — RTL Investments — Analyst

Okay. Second, you mentioned about the fact that the ethanol price increase is lower than expected, and it seems at the levels at which we are operating today, the return rate ratios on the ethanol plant also will not be great, so why is it then that you still are looking to add more plants? [Speech Overlap]

Shekhar Swarup — Joint Managing Director

I never said that ethanol returns are not great. I said that ethanol rate increase was not great. That doesn’t mean the return on our investment is not great.

Jatin Chawla — RTL Investments — Analyst

So even with current ethanol prices and current kind of cost pressures that we see, we are still making reasonable returns on ethanol, sir?

Shekhar Swarup — Joint Managing Director

Yes.

Jatin Chawla — RTL Investments — Analyst

Okay. And this quarter, there has been a sharp increase in other expenses and employee expenses. Is that all to do with the Jharkhand plant?

Nilanjan Sarkar — Chief Financial Officer

Yes.

Shekhar Swarup — Joint Managing Director

The [Indecipherable] increase.

Nilanjan Sarkar — Chief Financial Officer

Yes, it’s all to do with the — other expenses comprises of your power and fuel also, and it also comprises of bottling expenses, the number — the higher we bottle, the expenses on bottling will go up. And also on your question on employee cost, we had the liberty of capitalizing costs till the Jharkhand plant was not capitalized, which was capitalized last quarter — end of last quarter. After that, we had to charge off expenses, which of employee cost. So that was another blip in the expense.

Jatin Chawla — RTL Investments — Analyst

But going forward, we should assume this kind of run rate to continue?

Nilanjan Sarkar — Chief Financial Officer

Yes.

Jatin Chawla — RTL Investments — Analyst

Okay. In this margin guidance that you gave of 12% to 14%, that is only for 4Q, because in FY ’24, at least 1Q onwards the Rajasthan price increase should come in and give me the [Speech Overlap].

Shekhar Swarup — Joint Managing Director

Yeah, this is 4Q.

Jatin Chawla — RTL Investments — Analyst

Okay. And FY ’24, any guidance you would like to give?

Shekhar Swarup — Joint Managing Director

Difficult to say. It’s difficult to say right now, but this should be the base for FY ’24. We have to see how coal volumes continue through the year. Last year, we saw Coal India reduce coal volumes dramatically and increase their own stocks. So I hope that doesn’t happen. It doesn’t make sense why Coal India should do that. I hope something like that doesn’t happen. And if coal continues to be available for industry, then I don’t see a problem increasing on these margins as the year goes by.

Jatin Chawla — RTL Investments — Analyst

Sure. And on the ethanol side, any chances of you getting any price revisions, or will this now happen only next year in December once the, like for, the next season comes in?

Shekhar Swarup — Joint Managing Director

We are able to share. We are trying, like coal prices is public domain, that information. So the information is available with decision makers. But let’s just — to be a conservative, let’s assume it only come next year, but the work is on to get some sort of interim pricing.

Jatin Chawla — RTL Investments — Analyst

Okay, thanks. Thanks for your time.

Operator

Thank you. [Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.

Saket Kapoor — Kapoor & Company — Analyst

Yeah. [Foreign Speech]. And thank you for the opportunity. Sir, firstly, regarding this Jharkhand unit, sir, when will the units start contributing the expenses, which we have debited for the quarter? When it will commensurate with the revenue, sir? What’s the way forward?

Shekhar Swarup — Joint Managing Director

It is making profits today. There is no problem. It has made profits in Q3. It is also making profits today.

Saket Kapoor — Kapoor & Company — Analyst

Okay, but since it was — the higher expenses were highlighted on account of Jharkhand, so if you could explain the reason then for the spike.

Shekhar Swarup — Joint Managing Director

So there was — Jharkhand facility was not functioned in Q2. In Q3, it was commissioned, and you saw impact of revenue and expenses in Q3. So it is a start-up of a new factory and therefore, in the first quarter, revenue will jump as well as expenses will jump. And thereafter, it will stabilize.

Saket Kapoor — Kapoor & Company — Analyst

So what should be the run rate going ahead? So this quarter, we are not getting the entire benefit of the revenue, that is to be understood?

Shekhar Swarup — Joint Managing Director

Yeah. 90% capacity utilization in Q3. This will go up by maybe 4%, 5% points. [Phonetic] Average, we are able to utilize 95% of our capacity. So to that extent, revenue will increase, but most of it is there.

Saket Kapoor — Kapoor & Company — Analyst

Okay. And the expense line item will remain the same? It is not that the running up with — if the ramp-up cost is not different, then what — it is a regular course of business?

Shekhar Swarup — Joint Managing Director

Yes.

Saket Kapoor — Kapoor & Company — Analyst

Okay. Sir, you did spoke about this softening of the coal prices. I missed your earlier commentary. So sir, going ahead, sir, how is Q4 currently shaping up in terms of the raw material basket, if you could give some more color? Sorry, if it is for your repetition.

Shekhar Swarup — Joint Managing Director

Yeah, this is a repetition. I’ll quickly summarize in interest of taking the other questions. And then, when the transcript is available, you can get more details. But we are seeing coal prices soften in Q4. However, grain prices have been upwards. It is my expectation that without IMFL losses, we will have an EBITDA margin of around 15% in Q4. Going forward, we will get an increase on Consumer prices, especially in Value, Value Plus. That will help us shore our margins further.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir. Sir, if you take this packaging part and also how do the glass prices affect our input cost? So a color on this line item?

Shekhar Swarup — Joint Managing Director

Glass prices — if glass prices goes up, our input costs go up.

Saket Kapoor — Kapoor & Company — Analyst

Yes, the glass prices are firm, sir I think. So I wanted to have the impact whether there is a dent on the margins because of higher glass prices or how are we dealing with this?

Shekhar Swarup — Joint Managing Director

There has been, but for us, most of the impact has been on account of coal and grain prices — coal/fuel and grain prices. There has been some impact on glass as well. Our glass procurement is much lower. By volume, majority of our business is in PET bottles. The premium brands are in glass bottles.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir. And coming to — lastly to the expansion in the West Bengal facility, sir, taking into account the expansion that is supposed to kick up in Q1 of next financial year, what should be the geographical mix test? In percentage-wise, which state will garner the highest in the ascending order?

Shekhar Swarup — Joint Managing Director

Are you saying which state will have the highest capacity?

Saket Kapoor — Kapoor & Company — Analyst

The highest capacity, yes, sir.

Shekhar Swarup — Joint Managing Director

The highest capacity will be in West Bengal.

Saket Kapoor — Kapoor & Company — Analyst

In West Bengal. And what would be then our market share there, sir, in the IMFL and in the product profile we have looking forward?

Shekhar Swarup — Joint Managing Director

I mean, these are two different things. Size of the unit and market share in Consumer are two different things altogether. And these things are not — they’re not directly proportional at all.

Saket Kapoor — Kapoor & Company — Analyst

But with the scale-up with of our capacity in West Bengal that the nearest competitor, I just wanted to understand what would be our market share with the expanded capacity? That was my question.

Shekhar Swarup — Joint Managing Director

Market share of what?

Saket Kapoor — Kapoor & Company — Analyst

Of India, IMFL segment, sir.

Shekhar Swarup — Joint Managing Director

Sir, our IMFL segment volumes — I mean, I cannot — our market share will be a few percent points at best. And size of the market share is not relevant.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Sir, the capacity increases to service the ENA and ethanol opportunity, and not to service the IMFL requirement, just in case if that clarity was short [Phonetic].

Saket Kapoor — Kapoor & Company — Analyst

Okay. So our dependence on the external purchase of ENA will go down, that is the main?

Nilanjan Sarkar — Chief Financial Officer

Yeah.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Sir, we do not purchase, ENA with us. We already have our capacity there. We already have a capacity. We already [Indecipherable] purchase.

Shekhar Swarup — Joint Managing Director

Sir, if you don’t mind, let us set up a call and I can explain this to you more in detail one-on-one.

Saket Kapoor — Kapoor & Company — Analyst

Okay sir, I’ll join the queue again.

Shekhar Swarup — Joint Managing Director

Okay. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Agastya Dave from CAO Capital. Please go ahead.

Agastya Dave — CAO Capital — Analyst

Hi, am I audible?

Operator

Yes, sir.

Shekhar Swarup — Joint Managing Director

Yes, please go ahead.

Agastya Dave — CAO Capital — Analyst

Yeah, thank you very much, Shekhar, for your commentary. Shekhar, what exactly happened in Telangana? You said that one of your key brands was rejected. What exactly was an issue? Is it a permanent setback in the state? What were the parameters on which the brand was rejected?

Shekhar Swarup — Joint Managing Director

Param, could you please?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Yes. So the size has not approved, Governors’ Reserve, the red color whiskey, the red label whiskey. Their contention is that two brands having the Governors’ Reserve name, we do not want to approve at the same time. And while there are enough competition brands who play in the different price points and yet have similarity of some part of the name, there are many, but we have not been able to secure that approval. And in the absence of that approval, now we’ve been, obviously — other brands have got approved and we have done a soft launch. But since this brand has not got approved, we are reevaluating our thought process of how to proceed, but be rest assured that this is not going to any way impact our overall strategy of our end result, nor is it going to impact the overall top line and bottom line business plan objectives. These things can happen from time-to-time. And we haven’t seen it yet because we’ve got approvals everywhere else like all other companies do. But there are instances where states behave in a unique way. And as an organization, we are dependent and…

Shekhar Swarup — Joint Managing Director

I understand.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

We can only wait so far and then, we have to evaluate ourselves, yeah.

Agastya Dave — CAO Capital — Analyst

Right. Sir, on this IMFL target that we have shared over the last few quarters that we are targeting a 20% revenue share coming from our IMFL branch. So what kind of timelines do you foresee for achieving these targets? Because so far, the scale-up has been fairly decent, I would say, almost impressive. How do you see things going from here, because you also have a lot of capacities coming in the other segments?

Shekhar Swarup — Joint Managing Director

Yeah. So just to clarify, that 20% is a segment revenue share.

Agastya Dave — CAO Capital — Analyst

I understand, sir. Yeah, yeah, yeah. I understand, sir. In the Consumer segment, right?

Shekhar Swarup — Joint Managing Director

Go ahead, Param.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Yeah. So I think it’s a little further down the line. Let me put it like that, that’s what we set ourselves up for. And we have all routes available to us how to grow this category. In the short term, let me take the liberty of stating it upfront that we are — our plan is to, for sure, more than double our volumes and revenues in the coming year. And as the pace picks up, our vision is going to get bigger and bigger because we are introducing new brands. A little difficult to put a timeline and then, be held accountable to that timeline at this stage. But what we will do is, as we keep demonstrating quarter-on-quarter how we are progressing, we are very confident that the larger stakeholders will derive a lot of confidence [Phonetic] and comfort to see that we are not only on a current path, but we are well on it. I think that should suffice, sir.

Shekhar Swarup — Joint Managing Director

Yeah, I just want to add something to what Param said. One of the reasons it’s very difficult to give a date on this, also because the Value and Value Plus segments are growing at a pretty good rate as well.

Agastya Dave — CAO Capital — Analyst

Yeah. Yeah. Yeah.

Shekhar Swarup — Joint Managing Director

So that’s why it becomes difficult to give an exact date, because if that number was a static number, it would be a lot easier.

Agastya Dave — CAO Capital — Analyst

A lot easier, yes.

Shekhar Swarup — Joint Managing Director

Both are growing. It’s something that we’re working towards. You’d appreciate that despite a strong growth in the Value and Value Plus segments in Q3, we’ve landed at a 7%.

Agastya Dave — CAO Capital — Analyst

Yeah, that’s impressive. Yes.

Shekhar Swarup — Joint Managing Director

And if it hadn’t been for that growth in Value/Value Plus, we could have been north of 10%.

Agastya Dave — CAO Capital — Analyst

Right.

Shekhar Swarup — Joint Managing Director

So we got to balance both of these things and see how we land in terms of share of segment revenue.

Agastya Dave — CAO Capital — Analyst

Right. Shekhar, I’m sorry to repeat this question about coal and the cost side. You’ve, obviously, gone into great details. But — so kindly help me understand this better. When I look at the international prices, when I look at the coal prices, our problems started on the margin side when the coal prices jumped up after the Ukraine attack, right, Russia-Ukraine war started. And the prices went through the roof, and they stayed there for…

Shekhar Swarup — Joint Managing Director

Let me preempt you there. Last three, six months, I’ve spent a lot of time modeling Indian coal prices with the international coal prices.

Agastya Dave — CAO Capital — Analyst

Right. And the link is not working out at least for me.

Shekhar Swarup — Joint Managing Director

There is no link. The link was established when the war started.

Agastya Dave — CAO Capital — Analyst

Yeah. And it has not gone away.

Shekhar Swarup — Joint Managing Director

It has not gone away. I’m 100% seeing the same thing as you’re seeing. It does not make sense to me, but that is how the Indian coal market is behaving, and I don’t know why.

Agastya Dave — CAO Capital — Analyst

And when I tried to figure it out at the international level, the reasons for the prices coming down by 50%-odd in coal over the last 30-odd days, the reason given is that the Indian imports have fallen. So that is — just adding to the paradox here…

Shekhar Swarup — Joint Managing Director

And the data that I’m seeing for Indian coal prices is not just our purchase data, but also a wider auction results of various Coal India auctions that took place in India. That link is broken. I don’t know why. But the good news is that it can’t remain broken forever.

Agastya Dave — CAO Capital — Analyst

Right. Right. Right. Shekhar, would you — so if I look at our peak performance, right, the 20%-plus margins and then, the going was really, really nice. What would be the number one villain for you? Which has dragged down the margins the most? Is it just the lag effect of ability to pause the consumer prices much more slowly than what you would like to, or is it the coal prices?

Shekhar Swarup — Joint Managing Director

No. Single reason is coal.

Agastya Dave — CAO Capital — Analyst

Yeah. Okay. That is what I thought. And that is behaving very artificially, right? That’s — it’s not being driven by market forces as of now?

Shekhar Swarup — Joint Managing Director

Yeah. No, uptil Ukraine war and before, there was a link. After Ukraine war, there was a link. But after that, the link has gone.

Agastya Dave — CAO Capital — Analyst

Yeah. Yeah. Yeah. Great. One more thing, Shekhar, some of your competitors have actually mentioned that — so I have also been tracking the grain prices, and I saw that the wheat prices — even though international prices were collapsing, the wheat prices were very, very steady in the domestic market. But now they have started coming off. And at least the data I have, and I’m pretty sure your data is much better than mine. But the data that I have, I have also seen around the rupee fall INR1, INR1.50 per KG fall in the broken rice prices also. So again, I — immediately, I own up to the fact that my data quality could be bad, especially on the grain side. But you mentioned that…

Shekhar Swarup — Joint Managing Director

There was a reduction, but — and that was in early January. But thereafter, the markets have gone the other way.

Agastya Dave — CAO Capital — Analyst

Okay. Thank you very much, Shekhar. And let’s hope that the coal — the market link is actually start working again. I think that’s the big drag on the company as of now. Thank you.

Shekhar Swarup — Joint Managing Director

Not just the company, for the economy.

Agastya Dave — CAO Capital — Analyst

For the economy, I know, I know. Everything has come down, international prices of crude and coal, both have come off, but Indian prices, I don’t know why they are staying up like this. But thank you very much, Shekhar, and all the best. Good luck, sir.

Shekhar Swarup — Joint Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Tarang Agarwal from Old Bridge Capital. Please go ahead.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Hi, thanks again for the follow-up. Just a couple of more questions. One, on the IMFL investment side, can you give us a sense on how your IMFL investments were for nine months FY ’23 versus what they were for the same period last year?

Shekhar Swarup — Joint Managing Director

Sure. Nilanjan, do you have that?

Nilanjan Sarkar — Chief Financial Officer

Yeah. IMFL investment, basically, on the fixed cost was almost — for the nine months was almost INR14 crores, which included a breakup of INR4 crores in marketing and rest is the personnel cost. That’s on the fixed cost. And rest is, before contribution, we have trade spends and all those costs. So complete breakup can be made available from…

Shekhar Swarup — Joint Managing Director

What was this last year? What was this INR14 crores last year?

Nilanjan Sarkar — Chief Financial Officer

INR14 crores last year was bare minimum. I don’t have the number right now, but I can provide you. I don’t have the number right now.

Shekhar Swarup — Joint Managing Director

Would have been — my sense would have been under INR5 crores.

Nilanjan Sarkar — Chief Financial Officer

Yeah.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

It would be somewhere around INR4-ish crores.

Nilanjan Sarkar — Chief Financial Officer

Yeah, INR4-ish crores.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Okay. So bulk of your IMFL spends have actually come in Q3, right?

Nilanjan Sarkar — Chief Financial Officer

Yes. Yes.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Okay.

Shekhar Swarup — Joint Managing Director

No, no, this is nine months versus nine months.

Tarang Agarwal — Old Bridge Capital Management — Analyst

I know, if I go through the presentation, it speaks about — okay, that’s a negative INR8 crores EBITDA that you’ve laid out in the presentation. Got it. Yeah. The second question is Samalkha must have been an issue [Indecipherable] pervasive for quite sometime, right? I mean it’s not something, which may have glaringly shot up in Q3 alone?

Shekhar Swarup — Joint Managing Director

No, Q2 and Q3, Q3 was much worse than Q2, but it was there in Q2 and in Q3.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Okay. And last…

Shekhar Swarup — Joint Managing Director

And if your question is what was the impact in Q2, we can pull that out and make it available to you. Right, we don’t have that.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Okay. [Foreign Speech] And the last question, I mean — Shekhar, I mean, the coal pricing has been quite onerous in terms of managing in this environment. At the same time, if you look at how our gross margins have trended, they’ve significantly lowered than what they were because — primarily because of how rice costs have moved now. Given the government’s endeavor to the trust on having grain-based ethanol, right, how are your conversations happening there? I mean, because — I mean, at some point of time, this could be an industry pervasive issue, right? [Speech Overlap]

Shekhar Swarup — Joint Managing Director

Yeah. So that’s interesting. This has been taken up with the Ministry of Petrol as well as the oil marketing companies. They are sensitized to the issue. They understand that coal prices — the coal price impact has not been fully factored in, while computing prices for this ethanol year. And frankly, work is on to see if an interim price revision can be made. But someone else asked earlier on this call what should we expect. Work is on. I cannot say expect a price increase. It’s an incorrect — it’s a speculative statement by me if I was to say that. And therefore, I must say that listen, let’s assume what we know, but work is on pricing of ethanol as well.

Tarang Agarwal — Old Bridge Capital Management — Analyst

Got it. Thanks, guys. All the best.

Operator

Thank you. The next question is from the line of Jatin from InvestSavvy. Please go ahead.

Jatin — InvestSavvy — Analyst

Yeah, hi. So I had — thanks for taking the question. I was looking at the projections on EBITDA. And you have EBITDA loss on IMFL. Now with the [Technical Issues]

Shekhar Swarup — Joint Managing Director

I think we lost that line.

Operator

Sorry, sir, the line for the current participant seems to have disconnected. We will move to the next participant in the queue. We have the next question from the line of Sourav Dutta from Minerva Asset Advisors Private Limited. Please go ahead.

Sourav Dutta — Minerva Asset Advisors Private Limited — Analyst

Thank you for taking the question. I just wanted to know whether the West Bengal and Jharkhand plants that came online in Q4 and Q2, respectively, they are operating at 90% capacity utilization as well, or they’re slightly lower?

Shekhar Swarup — Joint Managing Director

Overall, Samalkha — if I leave out Samalkha, our capacity utilizations are generally around 95%. Jharkhand mainly had 90% this quarter because of the first time it was being started up.

Sourav Dutta — Minerva Asset Advisors Private Limited — Analyst

Okay. And the new expansions, the three of them that happened in West Bengal, Jharkhand and Bihar, how do you see them ramping up — what sort — in terms of capacity utilization?

Shekhar Swarup — Joint Managing Director

I’m sorry, your line is not very clear.

Sourav Dutta — Minerva Asset Advisors Private Limited — Analyst

Am I audible now?

Shekhar Swarup — Joint Managing Director

You are audible. Could you repeat your question?

Sourav Dutta — Minerva Asset Advisors Private Limited — Analyst

Yeah. I’m saying the West Bengal, Jharkhand and Bihar projects, the expansions that are going on in the [Technical Issues]. How do you see the capacity utilization ramping up for these new expansions?

Shekhar Swarup — Joint Managing Director

I see them running at full capacity utilization.

Sourav Dutta — Minerva Asset Advisors Private Limited — Analyst

Okay. So like as soon as they commissioned, they should be running at almost full utilization, okay?

Shekhar Swarup — Joint Managing Director

Yeah.

Sourav Dutta — Minerva Asset Advisors Private Limited — Analyst

Okay. That’s it. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Prem Thakur, an individual investor. Please go ahead.

Prem Thakur — Individual Investor — Analyst

Yeah. Hi, everyone. Most of my questions have already been answered. But I have two questions. Can we have — how much was the utilization level overall, including the new capacities during this quarter?

Shekhar Swarup — Joint Managing Director

Nilanjan?

Nilanjan Sarkar — Chief Financial Officer

I will — can you repeat that question?

Shekhar Swarup — Joint Managing Director

Capacity utilization, average capacity utilization all in?

Nilanjan Sarkar — Chief Financial Officer

So average capacity for Samalkha, which was at — almost at 79%. Overall average capacity utilization in all the plants was more than 94%, except for Jharkhand, which was a startup at 90%.

Prem Thakur — Individual Investor — Analyst

Okay. And can you have anything in our mind on the growth in the average utilization that we are expecting going forward, especially in the bulk alcohol, ethanol or ENA?

Shekhar Swarup — Joint Managing Director

This is — on ethanol, we are not expecting any increase. We’ve spoken a lot about that today. I won’t go into that. On ENA, if there are cost changes, don’t get passed on, whether it is upwards or downwards. So this year, we have seen an increase in cost. Excuse me. So that’s been passed on as the increase in ENA prices.

Prem Thakur — Individual Investor — Analyst

Okay. One more question I want to ask. At Bihar location that we are adding a little capacity, there is 19 KLPD, right? So I want to understand why if there is a more [Indecipherable] that we are — they are taking [Speech Overlap]? Is there any…

Shekhar Swarup — Joint Managing Director

From an ROE point of view, it’s very interesting.

Prem Thakur — Individual Investor — Analyst

Okay, sir. Is there any scope at this location, any large expansion [Indecipherable] going forward, or we have [Speech Overlap]?

Shekhar Swarup — Joint Managing Director

So our expansion opportunities have been identified. And those are what we are working on. Besides this expansion, in Bihar, we do not foresee any further expansion.

Prem Thakur — Individual Investor — Analyst

Okay. Thank you so much, sir.

Operator

Thank you. We have the next question from the line of Agastya Dave from CAO Capital. Please go ahead.

Agastya Dave — CAO Capital — Analyst

Yeah. Thank you for allowing the follow-up. Shekhar, this is a small question. In Odisha, while you’re awaiting the clearances, have you firmed up the — any like local partners that you would need for bottling or setting up a bottling plant or managing your distribution, will you go that route, or will you be doing everything in-house?

Shekhar Swarup — Joint Managing Director

No. Our business model so far is to do everything in-house. I don’t foresee any change in that, whereas it may — there is a compelling reason to appoint such partners. We’ll examine it. But as of now, we don’t see any reason.

Agastya Dave — CAO Capital — Analyst

Sir, in all the states that you are active in the Consumer segment, you control the distribution completely in-house. There are absolutely no partners?

Shekhar Swarup — Joint Managing Director

Param?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Could you say that again, please?

Agastya Dave — CAO Capital — Analyst

Sir, are there any local partners in the Consumer business that you partner with, for example, setting up a bottling plant or managing your distribution, or is it completely in-house?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

What we have is — yeah, so I understood the meaning of your implication of partners. So the places where we have our own mother units, all the distilleries are economically viable to service the other state, and I’ll give you a specific example. Delhi, Andhra Pradesh, we feed from our Rajasthan unit, Behror. West Bengal, we are feeding from our current unit within West Bengal. Haryana, we are feeding from our current distillery at Haryana. However, in Telangana, we have a bottling tie-up. That is the definition of the partner. And that is the — we make choices based on which is the more efficient model. And we can ensure that quality is not compromised.

Agastya Dave — CAO Capital — Analyst

And specifically, related to Odisha, you are not going to do it with a partner, because you have a — you’re going to have a very large distillery in the state, it makes sense to keep it in-house, right?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

So as of now, we are not operating IMFL in Odisha. And when the time comes, we will, at that point of time, make a proper announcement to this.

Agastya Dave — CAO Capital — Analyst

Right. Right. And Shekhar, just a follow-up on one of the comments that you just made that the oil — the Ministry of Oil and the OMCs are well aware of what they have done, like shortage you guys with respect to the coal prices, right, because the pressure is also coming from a government agency, which is Coal India. So are the state governments also accepting that there is a need to increase the consumer prices more than what is actually the norm because of these pressures?

Shekhar Swarup — Joint Managing Director

I mean, it’s difficult to paint all the states in one brushstroke.

Agastya Dave — CAO Capital — Analyst

Okay.

Shekhar Swarup — Joint Managing Director

So I can’t do that. But Rajasthan has given us a price increase. So let’s see how that shifts up here.

Agastya Dave — CAO Capital — Analyst

And you are happy with the Rajasthan increase, right? There, you are absolutely not complaining whatsoever of getting shortage? That’s sufficient.

Shekhar Swarup — Joint Managing Director

No, no. It’s sufficient.

Agastya Dave — CAO Capital — Analyst

Okay. Great. Thank you very much, Shekhar. Thank you.

Operator

Thank you. We have the next question from the line of Jatin from InvestSavvy. Please go ahead.

Jatin — InvestSavvy — Analyst

Yeah, hi. Sorry, the line got disconnected earlier. So going back to the question I was asking, one, on IMFL, how do you see your EBITDA shaping up going forward? And two, on Samalkha, how long do you think — how much will be the impact in the coming quarter and then, by when does that get sorted? And therefore, what I’m coming to is how do you see the projection on [Technical Issues]?

Shekhar Swarup — Joint Managing Director

Yeah. Your line is still a little bad, but I think I heard most of it. IMFL, we addressed this earlier, two to three years from the time we launch in a state, we hope to be breakeven. Each state is, they have different time periods. So it’s not possible for me to say on this date, all will be breakeven. We’ve completed our first full year. However, there was Haryana that was launched during the course of this year. Samalkha will take all of this quarter to stabilize, and we expect that from Q1 onwards, we’ll be firing on all cylinders again. What will be the impact in this quarter for Samalkha? I do not have that calculation, but let’s just hold on for some more time. And at the end of the quarter, we’ll give you that update.

Jatin — InvestSavvy — Analyst

So in terms of your assessment, how do you see the EBITDA margins, let’s say, if you want to take a good guestimate on the EBITDA margin going in the next quarter and one after that, Q4 and then Q1?

Shekhar Swarup — Joint Managing Director

I’ve already given that guidance in my opening remarks. 13% to 15%, excluding IMFL, is what we expect in this quarter. Next year onwards, we’ll start getting in price increases of our Consumer business. And we have to wait and watch how the coal situation continues to unfold in India.

Jatin — InvestSavvy — Analyst

So [Technical Issues].

Operator

Sorry to interrupt, sir. The line for you has gone bad. You are not audible, sir.

Jatin — InvestSavvy — Analyst

Can you hear me now?

Operator

Yes.

Jatin — InvestSavvy — Analyst

So my question is that in the current quarter, in your calculation, excluding the IMFL bid, it was around 14%. And now, in the quarter going forward, IMFL being the highest growth segment which you are seeing and if that has a larger negative EBITDA, obviously, with growth, it’s likely that the EBITDA goes lower. So are we saying that the EBITDA margins, on an overall basis, not excluding IMFL, would possibly be dipping going forward from what it was at 10% this quarter?

Shekhar Swarup — Joint Managing Director

No. I don’t see that. In fact, IMFL is profitable. With lower volume, we have less [Technical Issues]. We don’t increase loss with more volume. You reduced…

Jatin — InvestSavvy — Analyst

That’s actually what I had asked a little earlier that are we seeing the losses as a percentage go down? Because yes, it takes two years to stabilize, so…

Shekhar Swarup — Joint Managing Director

Yeah. So with more volume, there is less loss.

Jatin — InvestSavvy — Analyst

Okay, sir. You don’t expect the EBITDA losses to grow further than INR8 crores in the coming quarter on IMFL?

Shekhar Swarup — Joint Managing Director

So — Param, can you comment on that? I’m not sure what our budget is for Q4.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

That’s — so yeah, I think the way you put it, yeah, I think your number is in the zone. We, obviously, can’t nail the number down because we are in an evolving launch situation at any point of time. And we are busy launching Mountain Oak in West Bengal as we talk now, which is in preparation for next year. So there is a lot of overlapping between this year’s strategy as it undergoes into next year’s strategy. But yes, the numbers that you are indicating are in the range.

Shekhar Swarup — Joint Managing Director

The other overall guidance I’ve given earlier on, not today, is that we expect to invest INR20 crores to INR25 crores a year — this year in the IMFL. So we’ve invested INR14 crores already, invested INR8 crores, INR10 crores more. So yeah, we’re in the zone.

Jatin — InvestSavvy — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Nikhil Agarwal from Tusk Investments. Please go ahead.

Nikhil Agarwal — Tusk Investments — Analyst

Hi, thank you for taking the question. It’s on the Consumer business. On the next couple of quarters before we get into the next festive season, what’s the outlook like for the overall Consumer business?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

In terms of what the top line, bottom line or the trend? What exactly are you looking for?

Nikhil Agarwal — Tusk Investments — Analyst

In volume terms and then, the trends there now.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

So as I have said, we are intending to volume, obviously, in this quarter because it’s the yearly closing, Haryana will continue to build up. UP faces renewal policies. We will not overdrive top line in UP. West Bengal will continue normal. Delhi depends whether the policy is extended or not. So there will be that slight push or holding in the last quarter of each year. But otherwise, we are expecting to more than double [Phonetic] our top line and bottom line next year, I had said earlier on this call, without narrowing down the numbers, to sort of give you a sense of the aggression that we are intending to bring in. So that will translate obviously among the quarters and will keep getting aggressive as we keep moving further into the next year.

Shekhar Swarup — Joint Managing Director

So Nikhil, at this stage of the business, it’s very difficult to say one quarter to another, our performance is shaping up. But the trends are very clear in the business. And Param’s target of doubling in the next financial year is something that I firmly stand behind as well.

Nikhil Agarwal — Tusk Investments — Analyst

Okay. Just a follow-up on that, so when you say doubling, you’re talking of the IMFL?

Shekhar Swarup — Joint Managing Director

Yeah. So we are targeting to close about 2.25 lakh cases this year, so doubling on that.

Nikhil Agarwal — Tusk Investments — Analyst

Okay. Okay. And with regards to the IMIL, what should we expect for the coming year?

Shekhar Swarup — Joint Managing Director

I think a lower growth rate going forward is something which is reasonable, around 7% to 10% in Value and a little higher, around 15% in Value Plus. These are reasonable numbers to expect.

Nikhil Agarwal — Tusk Investments — Analyst

That’s helpful. Thank you.

Operator

Thank you. We have the next question from the line of Nikunj [Phonetic] Pachisia from SKP Securities. Please go ahead.

Nikunj Pachisia — SKP Securities Ltd — Analyst

Hello.

Operator

Yes, sir. You’re audible. Please go ahead.

Shekhar Swarup — Joint Managing Director

Please go ahead.

Nikunj Pachisia — SKP Securities Ltd — Analyst

Hi, thanks for having me. I wanted to ask this question. Since Calcutta is a big market, West Bengal basically, so what has been done to actually capture the Bengal market so that we can be aggressive, and the sales of either IMIL or IMFL can go up in West Bengal?

Shekhar Swarup — Joint Managing Director

Sir, there’s a lot of work on that. Param, could you please?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Yeah. Yeah. So let me take them one by one. In IMIL, obviously, in West Bengal, till the recent past, it was very expensive to — in terms of transportation cost to service the brand requirement beyond a certain geography. The reason is the route to market made it less and less viable as you travel the distance. That policy has been amended. And as we are going forward, it is going to start playing out where even if we have one distillery, we can service in a much larger efficient way to the larger market, which gives us an opportunity to start building the volume now.

In terms of the Value Plus segment, there are green shoots. The Value Plus segment has started showing some good strong early signs. And in the route-to-market chain, obviously, the industry was not serviced for 40, 45 days when the market was again being changed. And we are now expecting routes to start building up in the Value Plus segment as well. Coming to IMFL, IMFL, we are sticking to our strategy. And as we keep clearing internal benchmarks, our product offerings will keep widening up. And maybe in the medium future, our geographical expansion in West Bengal also will keep expanding. So it is a matter of clearing our internal benchmarks. Does that clarify?

Nikunj Pachisia — SKP Securities Ltd — Analyst

Yes. Yes, that’s good enough. Thank you so much.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Thank you.

Operator

Thank you. The next question is from the line of Sai Narayanan, an individual investor. Please go ahead.

Sai Narayanan — Individual Investor — Analyst

Hi, thanks for the opportunity. I just want to ask the management, what is the return on investment that we have only for the Ethanol division? That is my first question. Are any margins we have only for the Ethanol division?

Shekhar Swarup — Joint Managing Director

Sir, every stage, it varies. So I don’t have a number to give you right now on that. We can conclude something and get back to you.

Sai Narayanan — Individual Investor — Analyst

Okay. Is it seeing the double-digits, the margin for the ROI?

Shekhar Swarup — Joint Managing Director

Yes, very much so…

Sai Narayanan — Individual Investor — Analyst

Okay, okay. What is the debt level currently? And what is the expected EBITDA for this year?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Shekhar?

Shekhar Swarup — Joint Managing Director

Can you repeat the question, please?

Sai Narayanan — Individual Investor — Analyst

What is the current opening debt? And what is the current expected EBITDA we plan to conclude this financial year?

Shekhar Swarup — Joint Managing Director

We are not giving any guidance on total EBITDA expected this year. We’re giving the guidance on EBITDA margin. Nilanjan, what’s our debt level, please?

Nilanjan Sarkar — Chief Financial Officer

Our debt in long term is almost INR150 crores. And short-term borrowing is another INR90 crores to INR95 crores.

Sai Narayanan — Individual Investor — Analyst

Okay. Yeah. Thanks, Shekhar.

Shekhar Swarup — Joint Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Navneet Bhaiya, an individual investor. Please go ahead.

Navneet Bhaiya — Individual Investor — Analyst

Hi, team. Congrats for the good show on your IMFL and congrats for your Jharkhand commercialization as well. Shekhar, I had one question on your manufacturing setup. You mentioned your cost pass on and ENA happens much faster than ethanol. And most of your plants are taken to either ENA or ethanol. So I just want to understand what stops us from shifting from ethanol to ENA, if the price of ethanol is not good?

Shekhar Swarup — Joint Managing Director

Sure. We are producing in each state, the material, which is the most profitable. ENA — so for example, in Jharkhand, we continue to make ENA. We have not yet started production of ethanol. Let’s see how the rest of the year shapes up. We may change that production mix. So we are producing whatever is the most profitable at every state.

Navneet Bhaiya — Individual Investor — Analyst

Okay. So you mean even at current unsatisfactory price hikes that we have got for ethanol, it may still be more profitable than ENA in some states?

Shekhar Swarup — Joint Managing Director

In some states. So for example, Bihar, where there is no ENA market, it continues to be more profitable to make ethanol. Fortunately, in Bihar, rice husk prices are the lowest in the country. So every state has its own nuance. And that is the work we do in the company to make sure that each state is running in the most profitable fashion possible.

Navneet Bhaiya — Individual Investor — Analyst

I understand. Just a — in West Bengal, you would be doing ENA or ethanol right now?

Shekhar Swarup — Joint Managing Director

The mix of both. That’s taking place in West Bengal. Roughly 50% capacity in ENA, and the other half is ethanol.

Navneet Bhaiya — Individual Investor — Analyst

Okay. Perfect. I understand that. A couple of data points that I didn’t see in the presentation. One was your market share across the three states, Rajasthan, Haryana and West Bengal. And second, I think you used to give the breakup between volumes of Value and Value Plus still about two quarters back. You just given the total now. So is the breakup also available?

Shekhar Swarup — Joint Managing Director

Yeah. Sure. We can provide that subsequent to this cost.

Navneet Bhaiya — Individual Investor — Analyst

Okay. And the market share as well, right? In West Bengal, is there any improvement in market share from the 2%, 2.5% that we were at?

Shekhar Swarup — Joint Managing Director

Param?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

No. No, not at this point of time. As I said, there’s not much in the last quarter for the simple reason that route-to-market change was happening in IMIL. So as of now, no change. We are in the same zone. But a new category in Value Plus segment has been introduced, and we are very excited about this category.

Navneet Bhaiya — Individual Investor — Analyst

Okay. It’d be great if you can include these data points in your presentation, which you used to provide earlier as well.

Shekhar Swarup — Joint Managing Director

It will take that feedback. Thank you.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

We will take.

Navneet Bhaiya — Individual Investor — Analyst

Yeah. And one last question regarding your IMFL, so are these IMFL likely to be visible in some of the urban cities in the liquor shops, or where exactly are they distributed, the TERAI India and the other brands that you have?

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

So these are available in premium shops in the state of West Bengal, in Delhi. As we are talking, TERAI has, other brands, our three brands were made available in Haryana a few months ago. TERAI, as we are talking, has been launched a week back. So it should be available in Gurgaon and [Indecipherable] is available in Gurgaon and [Indecipherable] already. In UP also in the main towns, most of our brands, you’ll be able to see across permanent shops. So yes, when we are entering, I’d say, these brands are available and visible, if anybody does tend to take a walk to the…

Shekhar Swarup — Joint Managing Director

Well, TERAI is available in Bombay as well and if you’re interested in…

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

In Bombay and in Jaipur. [Speech Overlap]

Shekhar Swarup — Joint Managing Director

If you are interested in making a purchase, just have a look at our TERAI Instagram page, which has details of availability.

Navneet Bhaiya — Individual Investor — Analyst

Sure. That’s quite helpful. I will definitely want to have a look. Thank you so much and all the best for your future.

Shekhar Swarup — Joint Managing Director

Thank you.

Paramjit Singh Gill — Chief Executive Officer of Consumer Division

Thank you.

Operator

Thank you. The next question is from the line of Udit Gupta, an individual investor. Please go ahead.

Udit Gupta — Individual Investor — Analyst

Good afternoon, sir. Sir, my question is regarding, sir, what are the inputs that we’re using for making our ENA, sir?

Shekhar Swarup — Joint Managing Director

Grain?

Udit Gupta — Individual Investor — Analyst

Yes, sir. I mean, is it rice, wheat?

Shekhar Swarup — Joint Managing Director

Rice.

Udit Gupta — Individual Investor — Analyst

Rice. And sir, is this from the FCI or is it the market rice that we buy?

Shekhar Swarup — Joint Managing Director

Both, FCI is only for use for making ethanol, which is the market we purchase [Indecipherable] for our other applications.

Udit Gupta — Individual Investor — Analyst

And sir, the FCI price of rice is they’re only fixed at INR30 per case, or is it variable, sir?

Shekhar Swarup — Joint Managing Director

It’s fixed for the whole year.

Udit Gupta — Individual Investor — Analyst

It’s more or less like the ethanol price, like it changes every year?

Shekhar Swarup — Joint Managing Director

Yes. Ethanol price is linked to the price of FCI rice.

Udit Gupta — Individual Investor — Analyst

Okay. And sir, like the power cost that we were talking about, sir, all this while, sir, can it be reduced by going into green sources, like solar or wind, or something of the sort?

Shekhar Swarup — Joint Managing Director

No, we cannot do that. We require power to convert this said rice to alcohol or ethanol. We have, as mentioned in my opening remarks, several initiatives that have played out to reduce power consumption, fuel consumption in West Bengal, the potential of further increasing this all the way up to 20% saving, and we are taking these learnings to our other plants as well. So these are some of the things that we do to mitigate cost increases, but going to solar or wind is not an option.

Udit Gupta — Individual Investor — Analyst

Highly different, sir. And sir, one more question is that, sir, what is the processing cost per liter for alcohol? And is it any different for ethanol or so like they’re the same?

Shekhar Swarup — Joint Managing Director

I’m — the number for processing costs, we do not make available publicly. The cost difference between the two is about 10%. Ethanol is 10% cheaper to produce — not 10%, I’m so sorry. It’s more like 5% cheaper to produce as compared to Extra Neutral Alcohol.

Udit Gupta — Individual Investor — Analyst

And sir, the DDGS that comes out of the process is more or less similar for both?

Shekhar Swarup — Joint Managing Director

Yes, it is.

Udit Gupta — Individual Investor — Analyst

Okay. Thank you so much, sir. Thank you, sir.

Operator

Thank you. The next question is from the line of SB Bhaiya, an individual investor. Please go ahead.

SB Bhaiya — Individual Investor — Analyst

Sir, good evening. Sir, I’ve got only one question. When do you expect this income tax metric to be sorted out? Is it this quarter? Is it going to extend to the next pronounced [Phonetic] area?

Shekhar Swarup — Joint Managing Director

I don’t know the answer to that question. We are still awaiting a notice of some nature from the department. So I don’t know the answer to that question.

SB Bhaiya — Individual Investor — Analyst

Okay. And any financial provision due to that? That also you do not have any idea?

Shekhar Swarup — Joint Managing Director

We have not received any notice. As soon as we do, we will inform our shareholders. As of now, there is no financial impact.

SB Bhaiya — Individual Investor — Analyst

Thank you, sir. Thank you very much.

Operator

Thank you. I now hand the conference over to Mr. Shekhar Swarup for closing comments. Over to you, sir.

Shekhar Swarup — Joint Managing Director

All right. Thank you, everyone, for joining us today. We remain available to answer further questions. Please reach us directly on our IR e-mail address or to Stellar, our IR agency. Thank you again, and have a good evening.

Operator

[Operator Closing Remarks]