Globus Spirits Limited (GLOBUSSPR) Q4 FY23 Earnings Concall Transcript

Globus Spirits Limited (NSE:GLOBUSSPR) Q4 FY23 Earnings Concall dated May. 29, 2023.

Corporate Participants:

Shekhar Swarup — Joint Managing Director

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Nilanjan Sarkar — Chief Financial Officer

Analysts:

Prithvi Raj — Unifi Capital Pvt. Ltd. — Analyst

Unidentified Participant — — Analyst

Kshitij Saraf — Tusk Investments — Analyst

Nitin Awasthi — InCred Equities — Analyst

Sarvesh Gupta — Maximal Capital — Analyst

Imran Khan — Longbow India — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Globus Spirits Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions] And 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, Joint Managing Director. Thank you, and over to you, sir.

Shekhar Swarup — Joint Managing Director

Thank you. Good morning, everyone. Welcome to our earnings call. As we’ve been keeping you informed in our previous interactions, over the last few years, we, at Globus Spirits, have focused on creating steady growth through well-entrenched distillation business as well as laying a foundation for growth in our consumer business. With this as our platform, we have been able to report strong results in Q4 FY ’23. Amongst the key highlights of the year that’s gone by were the additional capacities that became fully operational. In Jharkhand, we announced the commissioning of our greenfield 140 KL ENA and ethanol plant, which has contributed well for about six months of the year. FY ’23 was also the first full year of operations for the expanded capacity at West Bengal. The installed capacity of the Company at the end of FY ’23 was at 765 KL per day, of which 335 is dedicated to ENA, and the balance is fungible between ENA and ethanol. As we go ahead, we will attempt to convert more capacity to fungible, as it allows us additional optionality.

Our second expansion in West Bengal and our first expansion in Jharkhand are expected to be commissioned in late Q1 FY ’24, and once complete, our total capacity will be 905 KL per day. We also now look forward to starting construction at Odisha in Q3 FY ’24. The capacity for this plant is targeted at 200 KL per day. However, it will be finalized in the coming months. The target capex for this capacity is around INR160 crores, and with access to interest subsidy, we will be financing this project with around INR120 crores from debt and balance from internal accruals. Our interest subsidy loan is at around 4% rate of interest. On the UP project, we have started construction of the bottling plant at Lakhimpur Kheri, and we hope to start bottling our entire range of brands for the UP state by the end of Q3 FY ’24.

In the last few quarters, Param and I have spoken to you about all the work that has been happening in the Premium+ space. I’m very happy to inform you that, this quarter, the segment of Premium+ Brands has brought in 6% of our consumer revenue. This is a small but important step as we gather more steam towards getting to our first milestone of 20% consumer segment revenue share. With many new and innovative product offerings and expanding distribution presence, we are very excited about the prospects of these products.

I request Param to talk a little more about this.

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Thanks, Shekhar. Good morning, everyone, and I hope you all are keeping well. In the overall consumer segment, the aggregate sales in Q4 of FY ’23 came in at 3.25 million cases, which was lower on account of a fall in Value and Value+ segments, and this was due to the short-term environment intervention in the Value+ segment.

Average realizations saw a robust 20% increase from INR451 per case in Q4 FY ’22 to INR540 per case in Q4 FY ’23. Going forward, with our product mix improving towards the Value+ and Premium segments, we believe realizations will continue to remain robust. The Premium segment is showing very promising prospects. Our revenue in Q4 clocked almost INR11 crores against INR1.8 crores same time last year. On full year basis in FY ’23, it was up by almost 700% to INR37.4 crores.

West Bengal, UP and Delhi markets have settled well, having completed one full year of operations in these markets. We entered Haryana towards the end of Q3 FY ’23. We are going to be further entering a new state of Punjab in early Q2 FY ’24. This gives us confidence to expand our offering portfolio, and we will be launching some exciting new products in this calendar year across selective markets.

Mountain Oak, which is a deluxe whiskey, was launched in West Bengal in Q4 FY ’23 and SNOSKI, a premium vodka in two variants, during April ’23 in UP. We will now be taking these brands to other states selectively. Our premium rum is to be launched in Q2 of FY ’24, and we will also be entering the single malt whiskey segment later this year.

Our flagship product in gin, which is the Terai craft gin, is going strong, and we have decided to widen distribution with Terai than the previous year. We are aggressive towards growing the Premium business, and towards that, we are now building capabilities with digital marketing initiatives as well as key account distribution.

Coming to the Value and Value+ segments. Our overall revenue in this segment took a dip due to seasonal changes, RTM changes, and excise policy impact, which we have discussed in previous calls. However, in Rajasthan RML, the Value+ segment continues to demonstrate our brand strength at the marketplace. This was supported by our Black Lace Rum, which, in its second year of launch delivered a double-digit market share in this segment in the quarter gone by.

Globus Green, our second whiskey brand in the state, is also in its second year and is gaining consumer acceptance. We have also launched the kewra flavor in the Value segment last year, and we will continue to work increasing our product offerings to the ever-evolving consumers in this space. I’m glad to say, because of our innovative product offerings, our market share in Rajasthan improved in Q4 FY ’23 and FY ’23, over 50% in RML and 33% overall.

In Haryana, our strategy to creating a sustainable business model is playing out. We have maintained our increased contribution and we will continue to build brand strength. Consistent efforts on Metro liquor, which is in the Value+ segment, have helped stabilizing the volumes. We see continued momentum in this segment as we go forward.

In West Bengal, as mentioned earlier, there is again a market change in the Value and Value+ segments, which led to some disruption in our service by the industry. The good news is the introduction of the Value+ segment is the way for building a profitable runway in this segment. We are servicing this segment with two brands and plan to play a key role in growing the segment as well as our role in it. For now, West Bengal market remains a medium-, long-term play.

I will now request Nilanjan to take the lead.

Nilanjan Sarkar — Chief Financial Officer

Thank you, sir. Good morning, everyone. Coming to our margins. As illustrated in the investor presentation, the Q4 EBITDA margins were about 16%, excluding IMFL investments, which was slightly higher than our expectations. The ENA price revisions over this year have been helpful with prices up 15% year-on-year to INR61 per PL.

This quarter saw a softening in fuel costs by 27% Q-on-Q. However, grain costs remain elevated. Commodity and fuel prices generally start increasing at the end of Q1 with the onset of monsoons, However, with the work that has taken place on shifting raw material base to FCI, converting more capacity to ethanol, better fuel efficiency and higher inventory of fuel, we expect that the margins will continue to remain at the current level of around 15% in the next one or two quarters.

The Company has generated a net cash flow from operations of INR122 crores in FY ’23. Our return ratios, ROE and ROC, are 14% and 17%, respectively. The Board has recommended a dividend of 60%, that is INR6 per equity share for the FY ’23 as against INR3 per share of FY ’22. Since all the results and the investor presentation have been published in advance, I will not take more time and we’ll open the floor to questions. Thank you.

Questions and Answers:

Operator

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

Prithvi Raj — Unifi Capital Pvt. Ltd. — Analyst

Shekhar, hi. I do have a couple of questions. The first one is on the consumer business. So for the last few quarters, I guess, we are regularly seeing somewhat other kind of disruption here. So I just wanted to get a sense what exactly happening and how do we see it going forward?

Shekhar Swarup — Joint Managing Director

Sure. So there are two parts to this. One is the Value and Value+ segment and the other is the Premium+. On the Premium+ side, things are more or less going according to plan. There are some end of year excise policy changes that take place, which is a part of the business. So I wouldn’t say there is any disruption or any extraordinary disruption there per se.

But in the Value, Value+ segments, there’s been two or three sets of disturbances. In Rajasthan, earlier on in this year, we had spoken about how there is a new base in the Value+ categories and the whole year has played out according to that. We are now seeing growth come in from this new base. So it is a disruption that took place. It’s now behind us. What’s very interesting in Rajasthan is that our brands has continued to gather strength. They are now at an overall 33% market share, but in the Premium+ — in the Value+ category, it’s over 50%. I believe, last year, it was around 40%.

In West Bengal, things have been extraordinarily disrupted. There’s been several route to market changes that have taken place, and frankly, it’s left the entire industry a little bit flummoxed. So like Param said that we are monitoring this and we remain hopeful on stability here, and therefore, allowing brand owners and market operators and other stakeholders to go about their business. Haryana is playing out the way we expected. We’ve taken a certain call on reducing our trade spends over there and focusing on margins. So that is playing out. We will become more aggressive here. We’re monitoring the environment and we’ll become more aggressive here in the times to come. But for now, the business is playing out as planned and was informed to everybody earlier on in the year. So I hope that gives some clarity to you.

Prithvi Raj — Unifi Capital Pvt. Ltd. — Analyst

So given this context, so how are we looking at volume growth here? Is it possible for us to do a high single-digit volume growth or it might [Speech Overlap]

Shekhar Swarup — Joint Managing Director

I think so — I think so very much. West Bengal is, obviously, at a very low base. Haryana, we have to see how the market shapes up before we can — I can comment on that. But Rajasthan is growing very well, and that is the largest chunk of our Value, Value+ business. So yes, high-single-digit growth is something that we expect.

Prithvi Raj — Unifi Capital Pvt. Ltd. — Analyst

And my next question is on the margins. Obviously, we have seen an improvement in this quarter. So how are we looking at exit of FY ’24? Can we go back to 15 to 17 percentage kind of EBITDA margin?

Shekhar Swarup — Joint Managing Director

So we are roughly in that range now. We look at this ex IMFL, you see, because IMFL, obviously, needs to reach a certain scale before it starts contributing profit. So ex IMFL, we — and Nilanjan said, we’re at about 16%. I had indicated around 15% in the last call as well. So we are in that range. I do have visibility for up to one to two quarters. The biggest element in this is, it’s fuel pricing, it’s price of coal. I think what we did very well is bring in energy efficiency across our plants as well as we’ve been able to secure good contracts of coal, which will see us through most of the monsoon period, and as a result, I believe that these levels of margins can be sustained for the next one to two quarters. Beyond that, it really depends on how coal supplies continue in the country. If the current levels remain, then I do believe that this level of margin is sustainable for the rest of the year. But I have visibility for one to two quarters, which is what Nilanjan also mentioned.

Prithvi Raj — Unifi Capital Pvt. Ltd. — Analyst

And my final question is on the income tax rates. When are we expected to move to the new tax regime?

Shekhar Swarup — Joint Managing Director

I think it’s planned. Nilanjan, can you take this?

Nilanjan Sarkar — Chief Financial Officer

Yeah, we are contemplating to go in this current financial year. We will see in the first quarter and decide, but our plan is to go in this financial year.

Prithvi Raj — Unifi Capital Pvt. Ltd. — Analyst

Thank you. That’s all from my side.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Shlok Dave from CAO Capital. Please go ahead.

Unidentified Participant — — Analyst

Yeah, hi. Am I audible?

Shekhar Swarup — Joint Managing Director

Yes.

Operator

Yes.

Shekhar Swarup — Joint Managing Director

Please go ahead.

Unidentified Participant — — Analyst

Shekhar, bhai, thank you for the opportunity, and congratulations. Finally, it looks like the ship is turning around. Sir, I had asked you a question last quarter on coal prices and we had a fairly detailed chart on that. Sir, can you again quantify the exact things that you are seeing on the ground now? Is there no parity with the international prices in the domestic supply? And you mentioned that you have tied up some contracts for the next one or two quarters. Beyond that, how do you see things moving? What are your hopes and expectations there?

Shekhar Swarup — Joint Managing Director

Sure. So frankly, unlike last time, I haven’t looked at the international pricing of coal in the last 30 days, so it’s difficult for me to say what happened right now. But suffice it to say, what we’ve seen in — between Jan and March is that there’s been an increase in coal supply. Coal India and its subsidiaries have been doing a lot more frequent auctions of coal for the open market. The size of auctions have also increased year-on-year.

We’ve recently participated in the coal linkage auction that’s taken place for the non-regulated sector, and basis all of this, we’ve been able to secure our fuel prices for this monsoon period, not 100% of our requirement, but well over 50% of our fuel requirement. In North India, we are not able to purchase coal. These — the North Indian boilers are based on agri waste, such as rice husk and other wastes, and it’s very difficult to store this for a very long period due to the volume — low density of fuel, and therefore, the volume.

Unidentified Participant — — Analyst

Right.

Shekhar Swarup — Joint Managing Director

So what we’re seeing is that coal supplies are good, they are strong with the NRS auction and linkage that we’ve gotten, a large part of our requirement will get covered going forward. So it brings in a little bit of stability in our coal prices and our fuel cost. And with the added storage that we’ve been able to create, we’ll be able to sort of reduce the volatility in this going forward.

Unidentified Participant — — Analyst

Right.

Shekhar Swarup — Joint Managing Director

In future, really where coal prices go is very difficult for me to say. It’s a function of supply. Really demand in India, we all know how it moves, but supply is something that we don’t know how it moves. So it really is based on how good are the supplies from Coal India.

Unidentified Participant — — Analyst

Right, right. So for your reference, coal prices internationally are back to Jan ’22 levels, just before the war started, they’re back to $150, $160 range. Sir, next question is, you mentioned — you give a rough guidance on the consumer Value, Value+ volume growth. Can you do a similar thing for the ethanol volumes? Because there have been a couple of shutdowns, plus one of the facility was not fully operational for the year, the Jharkhand one. So what do you expect this year in terms of ethanol volume growth?

Shekhar Swarup — Joint Managing Director

We — I don’t think we are prepared to give that number right now on this call, but I think it’s a good point. What we can do is create a sort of a waterfall [Speech Overlap]

Unidentified Participant — — Analyst

Yeah, sir, I would really appreciate it, sir.

Shekhar Swarup — Joint Managing Director

Yeah, I think we can do that.

Unidentified Participant — — Analyst

Great, sir.

Shekhar Swarup — Joint Managing Director

We’ll do it subsequently and add it our investor deck. I think that’s a great idea, yeah.

Unidentified Participant — — Analyst

Sure. Sir, I really appreciate it, sir. Sir, one final question. There were two developments last time over the last couple of quarters. One was, we had a setback in Telangana. So any progress on that side, any resolution there? And the second was those IT department raids. And I know you have not disclosed anything, so nothing incremental would have happened. But have they dismissed the case? Have you received anything saying that, okay, you have nothing to do with the — like we didn’t find anything? Have there been any demands or dismissals?

Shekhar Swarup — Joint Managing Director

I’ll talk about IT and then PSG can talk about Telangana. There’s been no sort of order or demand from the department as yet. And as I mentioned on the last call that as and when there is — there are concrete steps forward, we will keep everyone updated. So as of now, status quo, nothing has been — no orders or anything has been [Speech Overlap].

Unidentified Participant — — Analyst

Sir, no escalation from their side and no dismissal from their side?

Shekhar Swarup — Joint Managing Director

Yes, yes. So it’s status quo. There has been no — we have not received any orders from the department.

Unidentified Participant — — Analyst

Right.

Shekhar Swarup — Joint Managing Director

So that’s a fact, that’s a data point, so I’m able to talk of that.

Unidentified Participant — — Analyst

Sure.

Shekhar Swarup — Joint Managing Director

PSG, can you talk about Telangana, please?

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Yeah, yeah. Thanks, Shekhar. So in Telangana, obviously, what happened was, we — one of our flagship brands, Governors’ Reserve, managed to get excise approval. But as you know that some of these approval processes can be strange. The brand is approved in all other states and simply so. And as a result, we had to pull back on our strategy because the whole business plan for the state has been baked keeping that brand in mind. So as a result, what we did was we have pulled back in Telangana. And as I have mentioned in my presentation earlier that we are entering Punjab. Punjab is the next chosen state and that we will be entering in June. So [Speech Overlap]

Unidentified Participant — — Analyst

Sir, clarification. Punjab is for Value and Value+ or is it for Premium, the entry? I missed that point.

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Punjab is for Premium+.

Unidentified Participant — — Analyst

Sorry, sir. Punjab is for?

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Premium+. The [Speech Overlap]

Unidentified Participant — — Analyst

Premium+, okay. Okay, okay. Great, sir. Thank you very much, sir. All the best. A great quarter this time. Thank you, sir.

Operator

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

Kshitij Saraf — Tusk Investments — Analyst

Hi, good afternoon. Thank you for the opportunity and congratulations on the turnaround. One question on the IMFL business shaping up in terms of the marketing efforts we’ve been putting in. Where do we see, at an overall level, we would be achieving breakeven either in terms of time or in terms of volume? Although it might be a bit hard because their activity is going across the sales. But anything you could share in terms of the developments and where do you see this going forward in the next year or so?

Shekhar Swarup — Joint Managing Director

Sure. Param, could you take that, please?

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Yeah, so I think what we are doing is, we are doing a few things, and then I’ll try and — see all I can say is, at this point of time, our growth will be three digits. So there will — it’ll not be a double-digit growth, it will be a triple-digit growth that we can definitely put on the table. Beyond that, it’s a bit difficult. But let me elaborate a bit for your benefit. See one is, we mentioned earlier in a couple of conversations is, we are building capabilities and right now we are entering digital marketing as we talk and also investing in key account activities for the on-premise segment.

Now, on the brand front, so this will start giving us more work into the marketing and creating brand pull. On the product side, we are, obviously, increasing our portfolio of products, the products are ready and they were waiting, once the route to market has been established, to launch, and these products are getting launched as we have illuminated earlier.

The third thing we are doing is, we are very slowly but in a sure footing way, expanding our geography. And these are all dynamic because some things get preponed, something gets pushed a little forward, and hence, it makes it very difficult to see beyond the quarter as to how things are going. But as I said, it will be a triple-digit growth for sure. So that should give a lot of comfort to the market from [Speech Overlap]

Shekhar Swarup — Joint Managing Director

So I just want to add one thing to what Param said, typically what we’re seeing is, a state takes two to three years, around three years to breakeven, at least two full years of operations, and we’ve — it’s our first full year of operation in three states, plus we’re wanting some more states. So it’s difficult to say exactly by when this profitability that comes in at an overall basis, but we monitor this state by state, really.

Kshitij Saraf — Tusk Investments — Analyst

Got it. That’s very helpful. Thank you. And on the Value and Value+, new base that we have, you mentioned high sort of single-digit growth there. Any additional traction you’re seeing apart from Rajasthan in any other state to significantly scale-up these segments?

Shekhar Swarup — Joint Managing Director

So I think the greatest opportunity there is in Haryana and West Bengal. But both these states have been seeing its set of challenges over the last few years. We remain committed in both the states because we understand the opportunities, but there are a few things from a regulatory standpoint and market standpoint that need to stabilize before we get into advancing our market shares and volumes. Whatever advances we make must be done in a sustainable manner, so we are still waiting for those regulatory aspects to get cleared up before we get aggressive in these two states. So really, for this year, the growth is going to be driven by Rajasthan and the other two states are on wait and watch kind of mode.

Kshitij Saraf — Tusk Investments — Analyst

Thank you so much. That’s very helpful. I’ll get back in the queue.

Operator

Thank you. The next question is from the line of Nitin Awasthi from InCred Equities. Please go ahead.

Nitin Awasthi — InCred Equities — Analyst

Hello, sir, thank you for the opportunity. A lot has transpired in this quarter, and I think the Company has also gone through a lot of things. So hence, I have a long list of questions. But before getting to that, I would just like to make a comment here that, one, it is appreciated from the investor community that the Company has becoming more and more investor friendly. Why am I saying that, I’m saying that because of the relevant data and the inputs given by the investors taken in a positive note by the Company and the proof coming out and every presentation becoming more and more friendly when it comes to data, etc., which is more [indecipherable] in this industry. Moving on to my first question, sir. UP, you said you’re going to set up a bottling plant there before you set-up the distillery. I think this is the first time you would be doing that. Please correct me if I’m wrong. And would you be entering both the IMFL segment and the IMIL segment before the distillery itself through the bottling unit?

Shekhar Swarup — Joint Managing Director

So thank you for your words, Nitin. So as per your question goes, see, UP, as opposed to the other states where we’ve entered, where we’ve seen opportunity in ENA, ethanol as well as consumer, the rationale for the UP investment is largely the consumer business of the state. And as a result, we are prioritizing the bottling plant before we set-up the alcohol production capability there. And UP, yes, will see the entire range of our portfolio. There may be some brands which are not there, but pretty much the entire range starting from Value, Value+ and Premium.

Nitin Awasthi — InCred Equities — Analyst

Understood. So UP IMIL, you are entering that segment, right?

Shekhar Swarup — Joint Managing Director

Yeah, the strategy is to be [Speech Overlap] The strategy is to be in all segments. The timing of each strategy might vary. So after the bottling plant starts, you may have a period of 12 to 18 months where different categories have been launched at different times. But yes, very much, we intend to be in all the categories in UP.

Nitin Awasthi — InCred Equities — Analyst

Understood, sir. When is the bottling plant going to be commissioned?

Shekhar Swarup — Joint Managing Director

So I mentioned that in my opening remarks, it’s around Q3 — end of Q3 of this year.

Nitin Awasthi — InCred Equities — Analyst

End of Q3, okay. Because that opens a very large market for — at least the IMIL segment, which you are saying would grow in the single-digits. This could predominantly push it back into the early double-digits, if I’m not wrong.

Shekhar Swarup — Joint Managing Director

Yeah, but that’s really going to — we’re going to really start seeing that or monitoring that in the next fiscal. In this fiscal, as a first step, we’re going to move our bottling of the Premium brands into UP, so that’s going to add some profitability. UP is very important for profitability of our entire IMFL operation. So the first step is to reduce cost by shifting [Technical Issues]. Next step would be then to look at the Value and Value+ segments. So like I said, 12 to 18 months after a start-up of that bottling plant, we’ll start unlocking some of these opportunities.

Nitin Awasthi — InCred Equities — Analyst

Understood, sir. Sir, one straightforward question, can we hit one million cases in IMFL segment given the geographical addition and the product portfolio addition in the coming fiscal year?

Shekhar Swarup — Joint Managing Director

Yeah, that’s a good question. Param, can you take that?

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

No, no, no. We are still a while away from reaching one million cases in IMFL. We are — yeah, yeah, it’s a step at a time. We’ve — as I said, we’ve had a couple of lakh cases — 2 lakh cases. So, no, I think that’s still going to take us a couple of years more, yeah, yeah.

Shekhar Swarup — Joint Managing Director

Yeah, I don’t think we’re going to [Speech Overlap]

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Yeah, we are all dreaming for it, we are all stemming for it. But yeah, realistically, it’s a bit further down the line.

Shekhar Swarup — Joint Managing Director

So we’re not going to grow five times in this year, Nitin. But Param said earlier that we are very much in the triple-digit growth. So let’s just leave it at that for now.

Nitin Awasthi — InCred Equities — Analyst

Understood, sir. Many excise policy changes coming through, Haryana excise policy. And why I’m bringing this policy particularly up because this state was not getting price hikes for a number of years. Again, in this policy, I don’t see a price hike. However, there has been a lot of tweaks around prices given to retailers and minimum selling price being imposed and all those things. So could you just walk us through, is the net impact positive of this policy on the state on our business?

Shekhar Swarup — Joint Managing Director

Param, could you take this?

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

So the net impact is more or less neutral, but in IMFL, it is definitely giving an opportunity to get some positive impact in the Value and Value+. There is — as of now, not much opportunity seems to be visible. Obviously, we will wait and watch how it goes further in the year. IMFL, definitely, there seems to be an opportunity on a couple of brands to get some more wiggle room in terms of moving up the value chain.

Nitin Awasthi — InCred Equities — Analyst

Understood, sir. More questions from my side. However, I’ll join back in the queue so that everyone has an opportunity. Thank you so much for answering the questions, sir.

Operator

Thank you. We have the next question from the line of Aditya Solana from Niveshaay. Please go ahead.

Unidentified Participant — — Analyst

Hello, sir. Congratulations for the good set of numbers. My first question is on revenue. Can you please provide me the bifurcation between the ENA and ethanol?

Shekhar Swarup — Joint Managing Director

Okay. Nilanjan, do you have that number, the split between ENA and ethanol? I think the way we track that, sir, is just total bulk alcohol because some of our capacities are fungible. We don’t really track how much is — how much share of revenue between ENA and ethanol.

Nilanjan Sarkar — Chief Financial Officer

Yes, sir, I have the number for the entire year.

Shekhar Swarup — Joint Managing Director

Go ahead.

Nilanjan Sarkar — Chief Financial Officer

Ethanol has been 55% and ENA has been 45% of the total sale that has happened in the bulk alcohol.

Unidentified Participant — — Analyst

Okay, sir. Sir, my next question is, which is, which feedstock the Company [indecipherable] and what are their prices?

Shekhar Swarup — Joint Managing Director

Can you repeat that? Your line is not clear.

Operator

Sorry to interrupt. Mr. Solana, can you please use your handset to ask a question?

Unidentified Participant — — Analyst

Hello?

Operator

Yes, sir.

Unidentified Participant — — Analyst

Am I audible?

Operator

Yes.

Shekhar Swarup — Joint Managing Director

Yes, you are. Please go ahead.

Unidentified Participant — — Analyst

Which feedstock the Company [indecipherable] and what are their prices?

Shekhar Swarup — Joint Managing Director

We are using a rice for production of alcohol. We purchased rice for ethanol. This year, we have — our entire ethanol production will be from FCI rice and that is given to us at a fixed price of INR2,000 per quintal, ex FCI depots. And for our ENA, we are using broken rice purchased from the open market. The prices of this are volatile through the year, they go up and down. And in the year, that’s gone by, we’ve seen prices range from around INR1,900 to about INR2,300 per quintal. Currently, we are at the higher-end of that range.

Unidentified Participant — — Analyst

Okay, sir, thank you. Sir, one more question. From the [indecipherable] Odisha and Uttar Pradesh [indecipherable] and what would be the fungible between ENA and ethanol and what would be the total capacity that we can produce and what would be the total projected value?

Shekhar Swarup — Joint Managing Director

So right now, we are not — right now, in UP, we are only setting up the bottling plant. In Odisha, we are setting up a distillery. The tentative capacity of that distillery is 200 KL, and this will be dedicated ethanol for the time being. So after Odisha is complete, you will have about 335 dedicated ENA and about 330 — sorry, 430, which is fungible between ENA and ethanol, and 200 of Odisha, which will be dedicated for ethanol.

Unidentified Participant — — Analyst

Okay, thank you, sir.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.

Sarvesh Gupta — Maximal Capital — Analyst

Sir, thank you for taking my question. Just to clarify first on the grain prices. I think in Q2, you had mentioned it was around 19.5 in Q3 ’21 and now you are saying that the range has been 19 to 23 with us being closer to the higher-end of the range. So in the last two quarters, three quarters, we have moved from 19.5 to 23. Is that the right understanding of the grain prices?

Shekhar Swarup — Joint Managing Director

I think our average prices for the quarter are about 22 — between 21 and 22. But we’ve seen instances of 23 as well, that is what I meant in my last response.

Sarvesh Gupta — Maximal Capital — Analyst

Okay. So like you elucidated for the coal wherein you said that we have the visibility because of our — we sort of locking in for the next two quarters. And thereafter, it will be dependent on how coal prices will be. So what would be your comments regarding the grain prices and what is to be expected?

Shekhar Swarup — Joint Managing Director

So on ethanol, we’ve locked in, based on FCI, as I mentioned, for this entire year, up till September, then the new ethanol year starts. So this year’s ethanol year is from December to October, and then from next year it will be October — to October — sorry, November to October. And for this — for the current year, we’ve locked in our rice prices at INR2,000, and of course, the fuel aspect of it as well, not for the whole year, but for around one to two quarters. On broken rice purchase for ENA, we are not able to lock that in, and however, ENA prices, we have control on the pricing of ENA and Nilanjan mentioned that we’ve grown our ENA realizations by 15% this year. So to that extent, it’s not a very big risk factor. Of course, if there is a very dramatic change, it takes some time to adjust the prices. But with regard to our consumer business, well, that’s a fixed price for one year, so that risk obviously exists in the business.

Sarvesh Gupta — Maximal Capital — Analyst

Understood. And on the IMFL business, I think there were two trends, which we saw. A, there was some softening this quarter, I think, compared to the last quarter in terms of the overall IMFL business, which was a bit surprising given that we are really at a very, very small number as of now. And second is, compared to the losses that we did, which was almost to the tune of 2% of EBITDA. So what is the expectation of an absolute loss coming from this business in this financial year as per your yearly budget?

Shekhar Swarup — Joint Managing Director

No, we’ve — so the volumes have gone more or less as per our plan. It’s — Q4, we were expecting a slightly weaker quarter because of the states that we present in, the changes in excise policy that takes place. So no significant disruption there. It’s more or less as per our plan. But on the investment side, I’ve maintained that around INR20 crore plus, minus a little bit is what we want to invest in the IMFL business. So it’s going to be in that range for this year as well. We’re trying to, like Param mentioned, create capabilities. We have almost all our states are within that three-year — two- to three-year window of being — of getting to the journey of breakeven. So in this period, INR20 crore to INR25 crore is the kind of loss that we will continue to make, and this is an investment into the Company’s future.

Sarvesh Gupta — Maximal Capital — Analyst

So this INR20 crores — INR15 crores to INR20 crores number is a little bit, I would say, in case we have a large ambition to be a large player in this business. It sounds a very small number as such in the grand scheme of things. So I mean, compared to any strategy, which could have been to sort of putting the P&L at a slightly more risk for one or two years, but then going for a very large sort of a number here. How do you compare these two strategies and why are we looking at a very incremental sort of a spend [Speech Overlap]

Shekhar Swarup — Joint Managing Director

I think that’s a great question. I mean, we are at a stage in the IMFL business where we are creating a distribution network. We’ve got back-end capabilities to produce this product. So aside from like UP that I mentioned where we are creating capability on back-end as well, there is no real capacity creation or capex that is planned in the consumer business. So the spends are really on creating teams and capabilities. We’re invest — our teams have the ability to service a much larger volume, and that volume, obviously, takes time to generate, and therefore, there is a loss. We are also, from this year onwards, going to be investing money in marketing these products in the states or rather in the regions that we’ve got a satisfactory distribution presence.

I think the question of putting in more fuel in the tank and going a little more aggressive starts coming in once we have capabilities in distribution. We’ve reached a certain critical mass in terms of contiguous states or number of outlets that we’re present in and we’re still a couple of years away from that. And in this process, we want to invest in a meaningful manner, but also be cautious of our return on investment. I think if we are to put in, say, two or three times that number in this year, I don’t think we’re going to get two or three times the business. So it has to be done cautiously and in a step by step manner.

Sarvesh Gupta — Maximal Capital — Analyst

Understood, sir. Thank you, and all the best.

Operator

Thank you. [Operator Instructions] The next question is from the line of Imran from Longbow India. Please go ahead.

Imran Khan — Longbow India — Analyst

Hi, thanks for the opportunity. My question is on your cash flows. If I assume margins in 15%, 16%, 17%, and if I look at this year and then the years coming, I think we would be close to generating about INR300 crores of operating cash before this capex and all. So what are the plans going forward other than these two facilities that you will put in the future, maybe this year, next year, and after that?

Shekhar Swarup — Joint Managing Director

Yeah, I think that’s a great question. So till now, the Company has — the way we’ve done capital allocation in the last couple of years is that we would deploy this capital first for our IMFL business that gets priority and the cash that was left was deployed in the capacity generation in the ethanol space. The ethanol space, we have identified a few states when we started our expansion cycle two or three years ago, where we believe that there is sustainable return — sustainable, sufficient return on capital available, and in those select states, we have gone ahead and created capacity. Odisha is the last one for that. UP is, of course, a longer-term consumer-based play, which is also part of our capex cycle, and that will come in later on. But on the ethanol capacity generation, Odisha is going to be the last one in this capex plan.

Thereafter, as of now, I don’t see more states available capacity creation has this sustainable and sufficient return on capital available. We wait to see how the country moves towards E20. We really need that to happen now. We’re currently at about E10. We need to see what are the stages to get to E20 and how that ramp-up is taking place before we create another capex plan. So currently, after Odisha, this is the end of this capex plan and there’s no further capex for capacity creation that is envisaged. The capital that we’re able to raise from banks for this capacity creation is very interesting, interest costs at around 4%. And to that extent, we do feel it adds to our returns to use that financing of auction.

Thereafter, you’re going to get to a stage where debt is being paid off for some time because of the cash generation that you spoke about, it’s natural. And also building up some reserves in the Company to try to do something interesting and inorganic in the future. But currently, there’s no inorganic opportunity that I see, but there will be in the future, so keep some fuel for that as well. So that’s the thought right now at the Board for how capital can get allocated in the Company going forward, pay down debt once our capex cycles are complete as well as build reserves for inorganic opportunities in the future.

Imran Khan — Longbow India — Analyst

This is super helpful. The second question is on the Haryana plant. Last quarter, we had some problems. So can you tell us what is the status there? If not already discussed [Speech Overlap]

Shekhar Swarup — Joint Managing Director

Haryana has bounced back in terms of operating to our internal targets. We didn’t have — 95% is our standard capacity utilization targeted for the whole year. We didn’t reach 95% in Haryana in Q3, but I believe it was close to 90% — I think it was 88% or 89% in Q4. And as we go into Q1 this year, we are targeting 95% from Haryana. In fact, in all our plants, the maintenance is more or less complete that we had planned and now we should be firing on all cylinders going into Q1 and Q2 of this financial year.

Imran Khan — Longbow India — Analyst

And last quarter, we had a INR10 crore, INR12 crore hit on the EBITDA. What was in this quarter?

Shekhar Swarup — Joint Managing Director

Could you say that again, please?

Imran Khan — Longbow India — Analyst

So what I was saying is, last quarter, I think we had about INR10 crore, INR12 crore hit on EBITDA because of this facility. What would that number would have been in the last quarter?

Shekhar Swarup — Joint Managing Director

You mean due to lower capacity [Speech Overlap]

Imran Khan — Longbow India — Analyst

Lower capacity or aging of equipment, multiple issues were there, right?

Shekhar Swarup — Joint Managing Director

Right, right, right. So Q3 over Q4, you mean?

Imran Khan — Longbow India — Analyst

Yeah.

Shekhar Swarup — Joint Managing Director

Okay. So I think someone else asked this question earlier on and I promised them a waterfall on capacities in this whole year because there’s been a lot of up and down, new capacity has come up, maintenance closures, etc. So we’ll prepare that and add it to our investor deck. Give us 24 to 48 hours to do that.

Imran Khan — Longbow India — Analyst

Right. All right. Just one more question on the consumer business and then I’ll join back the queue. If I look at your consumer business, you have a very large share in Rajasthan and multiple factors [indecipherable] you in Rajasthan. Now, we are also present in five, six more states. Do you see any sort of replication of what you have done in Rajasthan in any of the states that you are entering based on your experience?

Shekhar Swarup — Joint Managing Director

So consumer business needs to be broken into two to be answered correctly. One is the Value, Value+ and the other is the Premium+. In the Value, Value+, we are present in Rajasthan, Haryana, West Bengal, and Delhi. Delhi is a sticky market, a single — low-single-digit growth. We’ve got 20% to 25% market share in Delhi and it’s been like this for a very long time. It’s also a much smaller market for Value, Value+. Haryana and West Bengal, I think we’ve all covered in quite detail in today’s call. We remain very excited about the prospects there. However, they are slightly longer-term opportunities to unlock, and we remain committed to replicating the Rajasthan level of success in these two states as well. But it is a medium- to long-term opportunity. So it’s not going to happen in this year for sure. This year, Rajasthan will continue to drive the Value, Value+ business. With regard to Premium+, we are present — in addition to the three states I mentioned, we’re also present in UP, and we are launching in Punjab. And here, it’s — we’ve also covered this that it’s going to — it’s a certain journey. We are building capabilities. It takes two to three years to breakeven in the state and we’ve got lots in products in the way and all of this is driving our expected growth of triple-digits in the coming financial year.

Imran Khan — Longbow India — Analyst

All right, thank you.

Operator

Thank you. The next question is from the line of Navneet Bhayav[Phonetic], an individual investor. Please go ahead.

Unidentified Participant — — Analyst

Hi, Shekhar, congrats for a revival in your margins. I have two questions. What are your gross margins in the Premium segment right now?

Shekhar Swarup — Joint Managing Director

Sure. Nilanjan, can you answer that, please?

Nilanjan Sarkar — Chief Financial Officer

So our gross margins in the Premium segment is around 43%. Terai alone is at 71%.

Unidentified Participant — — Analyst

Sorry, I didn’t get the last part. Terai is how much?

Nilanjan Sarkar — Chief Financial Officer

71%.

Unidentified Participant — — Analyst

71%. Okay. So Shekhar and Param, you, of course, alluded to the fact that it takes about two years for a state to turn around. For a business, overall, in the Premium segment, is there a number, say, INR100 crore top line or a INR150 crore top line when you would not be having any more EBITDA losses that you can foresee?

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

So I think that will depend on each state, as we said, in its third year of operation, we are envisaging every state will reach an equal position, and as we are stepping up, we obviously have to — we’ll keep adding new brands portfolio and our portfolio addition will start slowing down and the state growth will continue its momentum. So if we prepone our additional brands on the runway of the state, which starts — when it starts doing well, we will probably extend one more year to putting a huge marketing spend in that state on that brand. So the state P&L with the original brand would be a plus, but with the new brand investment, we’ll again go into minus. So that is the way to look at it, but we are — as I said, we are absolutely, with a hawk-eye, managing the fact that every brand as it goes in the state must start becoming sustainable in its third year.

And we feel that almost all or maybe barring one or two, which may stretch another few months or one more year, they should stop getting into the investment mode from the negative EBITDA point of view and they will stay in the investment mode because we will still accelerate growth depending on what our business objective at that point is. We do have a large larger view today, but we keep tweaking it. So the state on its own, if we don’t keep adding portfolio, it will start generating money, but we are also adding portfolio to exceed. But the losses will start tapering down because when three brands are doing some margin and one new brand takes a hit, the states gets into a far, far healthier position because what we want to do is, as soon as it becomes — we’re not interested in taking a INR1 crore profit in the state, what we want is we want to really get into a situation where the state is profitable in the sense of the word profitable and not the bottom turning from red to black.

Unidentified Participant — — Analyst

Understood. In your Premium segment, would Terai contribute, what, 70%, 80% of the overall turnover or [Speech Overlap]

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

No, no, no, Terai is a super-premium luxury range brand. It has a much smaller contribution. But this is in terms of top line. I think I’m speaking as a correction, Terai would be about in the high-teen [Indecipherable] the correction.

Shekhar Swarup — Joint Managing Director

Yeah, I’ll just comment on this one. Terai contributes on profit about 20% — 20%, 25% of our profitability. In terms of volume, it’s a very small percentage. But in terms of profitability, it’s about 20%, 25%.

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Yeah.

Unidentified Participant — — Analyst

Understood. Okay. Second, I again noticed in your presentation, you are looking to launch quite a few new brands of vodka, rum, as you mentioned. I wanted to know about the initial brands that you launched. Shekhar, I think this was some three, four years back, Oakton, Laffaire, Governors’ Reserve. These — are these doing well as well? Are these are focused or we are focusing more on [Speech Overlap]

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

So this year — yeah, yeah. So the year gone by, the numbers you reported are on the back of the Governors’ and Oakton only. What you are seeing today is Governors’ and Oakton only. The new brands have just started moving in, yeah, absolutely. So the [Speech Overlap]

Shekhar Swarup — Joint Managing Director

So to answer your question, there’s no — we’re not moving away from the brands, we are adding more brands. I mean, creating capabilities like creating that highway, and now in some states, highways are getting ready, so now we need more cars to ply on this highway and that’s the work that’s happening.

Unidentified Participant — — Analyst

Okay. So your results from your earliest launched brands are maybe [indecipherable] or maybe more than Terai, if I were to understand correctly. Am I right on that?

Shekhar Swarup — Joint Managing Director

Can you say that again?

Unidentified Participant — — Analyst

The success that you got from your earliest launched brands, like Governors’ Reserve, Oakton, are they as successful as the results that you’re seeing from Terai or better?

Shekhar Swarup — Joint Managing Director

I mean, success is a relative term and I think we’ll all be happy with even more success. But what’s — we are satisfied with the performance. It’s more or less in line with our plans. We’ve had, in some areas, over-performance, in some areas, under-performance. But that is the nature of the life-cycle that we’re in. As our business grows, we’ll get better at forecasting and budgeting. But as of now, satisfactory performance in most states and in brands.

Unidentified Participant — — Analyst

Okay, understood. That’s encouraging. My last question is, you plan to launch your IMIL, the Value and Value+ segments in the new states that you are adding, like Jharkhand. Odisha, I noticed you said it’s a dedicated ethanol facility. So do you have any plans of making the lower-end consumer segment in these states as well?

Shekhar Swarup — Joint Managing Director

Yeah, we do. We do very much. I think we’ve got a bigger fish to try right now in terms of UP, Punjab, Haryana, which we just launched for IMFL. There are a couple of new categories that are very exciting for us, some we’ve spoken about. And our innovation team continues to work on a few other activities, which we have not yet spoken about. These have been taking a lot of our time and, frankly, are more rewarding for our time and money than getting into Jharkhand. But yes, in the medium-term, Jharkhand is very much on the table. It’s not something that’s planned for the current fiscal.

Unidentified Participant — — Analyst

How long does the regulatory approval take to come to launch your Value, Value+ segments in the new states?

Shekhar Swarup — Joint Managing Director

I mean, not much yet. I don’t have an answer really, but assume 30 to 60 days, I guess.

Paramjit Singh Gill — Chief Executive Officer, Consumer Division

Yeah generally, within a quarter, yeah, yeah.

Unidentified Participant — — Analyst

Okay, fair enough. Understood. Thank you so much, and [Speech Overlap]

Shekhar Swarup — Joint Managing Director

I mean, once we start business planning in Jharkhand, that — the regulatory approval timeframe will be a part of the business plan. So currently, we are not planning it. So that’s why I don’t have a concrete answer.

Unidentified Participant — — Analyst

Understood. Fair enough. Congrats, and all the best for your future quarters.

Shekhar Swarup — Joint Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Nitin Awasthi from InCred Equities. Please go ahead.

Nitin Awasthi — InCred Equities — Analyst

Hello, sir. Thank you for the follow-up. Just one question this time around. Chhattisgarh, as a market, has seen a lot of things transpire over the last few months, especially in the Value and Value+ segment. And that would open a gateway for somebody like you who has alluded to — not alluded, referred rather, to the right to win whenever you enter a state. So this state would be providing the right to win for the established player right now. So would you be looking at the state?

Shekhar Swarup — Joint Managing Director

Which state are you talking about?

Nitin Awasthi — InCred Equities — Analyst

Chhattisgarh.

Shekhar Swarup — Joint Managing Director

Chhattisgarh, okay. No, we have no plans in Chhattisgarh right now. We will — Like I said earlier, we are really busy here, and frankly, at this stage, we got to pick our battles and we picked a few and we are focusing on that right now.

Nitin Awasthi — InCred Equities — Analyst

Understood, sir. Thank you.

Operator

Thank you. [Operator Instructions] Ladies and gentlemen, as that was the last question for today, I would now like to hand the conference over to Mr. Shekhar Swarup, Joint Managing Director, for closing comments. Over to you, sir.

Shekhar Swarup — Joint Managing Director

Thank you. Thank you, everyone, for joining today. Please reach out to us if you have further inquiries, we’ll be happy to answer them. Have a good day and see you again after some time.

Operator

[Operator Closing Remarks]