Globus Spirits Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from Globus Spirits Limited (GLOBUSSPR) Q3 FY22 Earnings Concall

 Q&A Highlights:

• Prithvi Raj with Unifi Capital asked about the kind of volume run rate that can be expected from Q422 onwards in the ENA sales. Shekhar Swarup, Joint MD stated that from a production of ENA plus ethanol point of view, GLOBUSSPR is now running at 670 KL per day of capacity, which is its installed capacity, running 100%. So on a 90-day kind of basis, one should assume over 95% of installed capacity as the capacity utilization.

• Prithvi Raj with Unifi Capital also asked about margins going forward and how much of the cost increase is passed on to the customers. Shekhar Swarup, Joint MD replied that the company’s targeted EBITDA margins, the company expects should be around 4Q21, and is in line with that.

• Kaustubh Pawaskar from BNP Paribas asked about the revenue and volume loss due to closure of Bihar Plant and the Haryana plant during 3Q22. Shekhar Swarup, Joint MD answered that days of loss for Bihar was 72 and Haryana was about 40. And Haryana, the capacity is about 150 KL per day. And in Bihar, it’s around 85 KL per day.

• Kaustubh Pawaskar from BNP Paribas asked if there is any constraint to the company’s sourcing of inputs. Shekhar Swarup, Joint MD replied that plenty of raw material is available in India. However, since it’s agri commodities, it is dependent on the crop cycle. GLOBUSSPR added that there is plenty of raw materials available with FCI and in the open market between maize, millet, and broken rice.

• Vivek Gautam of GS Investments asked about the quarter being a dampener and the tax expense that lead to it. Shekhar Swarup, Joint MD replied that there are two types of events that took place in 3Q22. One is unavailability of capacities in Haryana and Bihar, which led to an EBITDA loss of INR25 crores. The other was increase in costs. And third was an increase in fuel costs. However, GLOBUSSPR said, these events does not impact its business fundamentals.

• Vivek Gautam of GS Investments also asked about the situation currently.  Shekhar Swarup, Joint MD said the increase in costs on fuel has stopped, the fuel costs have sustained at a certain level. The company has received price increases in ethanol, which has compensated for that. Packaging costs, there was some inflation, but that has been arrested. There’s no further inflation. So GLOBUSSPR added that all of this inflation has been factored into its business where price increases could happen.

• Vivek Gautam of GS Investments enquired about capex plan. Shekhar Swarup, Joint MD answered that according to the conservative projections, which is below the levels told earlier, GLOBUSSPR’s paybacks on these projects is around 3 years. And considering that the company has debt available at the rates it does, the return on equity is very attractive.

• Vivek Gautam of GS Investments enquired if in UP the land has been finalized for the capex plan. Shekhar Swarup, Joint MD said that the company has identified the land and is working on the land acquisition, in central UP.

• Anshul Vaidya with Edelweiss Wealth Research asked if the price hike would be enough to offset the raw material cost inflation. Shekhar Swarup, Joint MD replied the company believes that this price increase will lead to profit growth is what it’s expecting.

• Anshul Vaidya with Edelweiss Wealth Research asked about animal feed prices normalizing and what was the average realization in this quarter on DDGS front. Shekhar Swarup, Joint MD said that earlier it was mentioned that AFS prices have gone up dramatically in the quarter. Currently, the prices are around INR30-32 a kilo versus about INR45, which was the average for Q2. This level the company believes is very sustainable going forward.

• Anshul Vaidya with Edelweiss Wealth Research also asked about reason for volumes being flat in 3Q22 compared to 2Q22. Paramjit Gill CEO Consumer said that the company is expecting the value segment to open up in Haryana and West Bengal. Both these markets are going to add to the growth from company point of view. Additionally, GLOBUSSPR is also expecting its IMFL business to start kicking in from February. Therefore, the company is fairly comfortable that it can continue on its upward growth trajectory.