Radico Khaitan Limited (RADICO) Q3 FY23 Earnings Concall Transcript

Radico Khaitan Limited (NSE:RADICO) Q3 FY23 Earnings Concall dated Feb. 15, 2023.

Corporate Participants:

Abhishek Khaitan — Managing Director

Dilip K Banthiya — Chief Financial Officer

Sanjeev Banga — President – International Business

Amar Sinha — Chief Operating Officer

Analysts:

Himanshu Shah — Dolat Capital — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Ajay Thakur — Anand Rathi — Analyst

Sonaal Kohli — Bowhead — Analyst

Nikhil Chowdhary — Kriis Portfolio Management — Analyst

Vikas Tulsyan — Vision Ahead — Analyst

Krishna Agarwal — Niveshaay — Analyst

Anurag Jain — an individual investor — Analyst

Dhiraj Mistry — Antique Stock Broking — Analyst

Sumit Agarwal — an Individual Investor — Analyst

Gaurav Lohia — Bullhead India — Analyst

Pankaj Bobade — Affluent Assets — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Radico Khaitan Limited Q3 FY ’23 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] [Operator Instructions]

I now hand the conference over to Mr. Himanshu Shah from Dolat Capital. Thank you, and over to you, sir.

Himanshu Shah — Dolat Capital — Analyst

Thank you, Inbha [phonetic]. Good afternoon, everyone. On behalf of Dolat Capital, we welcome you all to Q3 FY ’23 earnings conference call of Radico Khaitan. We would like to thank the management to give us the opportunity to host the call. On the call, we have with us Mr. Abhishek Khaitan, Managing Director; Mr. Amar Sinha, Chief Operating Officer; Mr. Dilip Banthiya, Chief Financial Officer; and Mr. Sanjeev Banga, President, International Business from the management team.

Let me now hand over the floor to Mr. Abhishek Khaitan for his opening remarks. Thank you and over to you, sir.

Abhishek Khaitan — Managing Director

Good afternoon, ladies and gentlemen. Thank you for joining us on our Q3 FY ’23 results conference call. I hope you are all doing well and keeping safe. Radico Khaitan has delivered another quarter of consistent financial performance driven by a robust brand portfolio and excellent execution capabilities. We are pleased with the performance of our premium brands.

During the nine months of FY 2023, our Prestige & Above category brands have shown robust growth, including the core brands such as Magic Moments Vodka and Morpheus Brandy, where year-to-date volumes has surpassed the full year FY 2022 numbers. In January 2023, Morpheus Brandy achieved safe volume of 1 million cases and entered the prestigious millionaire brand’s club. This becomes our sixth brand to sell 1 million case annually.

I would also like to highlight that 1965 Spirit of Victory Rum, which we had launched five years ago is also likely to batch 1 million case sales volume in FY 2023. During the year, we launched After Dark blue in contemporary packaging and positioned in the deluxe category. It is doing extremely well, and is going to be one of the core premium brands going forward.

During the last quarter, we discussed the launch of a new expression of Rampur Indian Single Malt Jugalbandi, a series of eight Indian single malt cask strength whiskies. We are very excited about the response. It has received in the international market. Retailing at US$400 per bottle, the first two expressions of the series are sold out. We recently placed Jaisalmer Gold Gin at the Dubai Duty Free and are receiving very good consumer response. Radico Khaitan will continue to expand the Jaisalmer brand equity in the domestic as well as the international market.

While the raw materials scenarios still remains volatile, we have seen early signs of deflation in certain commodities. We have recently received price increases in the state of Kerala, Rajasthan and pursuing some sudden states. With the recent price increases, coupled with a favorable product mix, we were able to mitigate margin headwinds in the IMFL business to a large extent. The impact of the cost push has been much severe in the non-IMFL business where we have received price increases in the state of Uttar Pradesh. This will support the profitability expansion in FY 2024.

We are pleased to report that during January 2023, we have commissioned that will be planned at Rampur and also started bottling operations at Sitapur within the committed time line and estimated capex budget. As we continue to drive our premiumization journey, the availability of additional grain-based E&A will strengthen our value proposition. The bottling plant at Sitapur positions us strongly to capitalize on the future growth opportunities in the branded businesses.

Radico Khaitan is progressing firmly on the part of its exciting premium brand creation journey which will be accentuated by a strong backward integration manufacturing platform. Going forward, we continue to focus on our long-term plans of premium IMFL portfolio expansion with the new brand introduction in both white and brown spirits, and leveraging the benefits of our capital investments.

I would now like to hand over the call to our CFO for a detailed operational and financial review. Thank you, and over to you, Dilip.

Dilip K Banthiya — Chief Financial Officer

Thank you, Abhishek. Thank you, everyone, for joining us on this call today. During the third quarter FY ’23, we reported total IMFL volume of 6.99 million cases, which is a flat on Y-o-Y basis. Prestige & Above category volume grew by 14.1%. In value terms, the Prestige & Above category registered 19.1% growth. Prestige & Above category accounts for 42.4% of the IMFL volume compared to 33.3% in Q3 of FY ’22.

Our Prestige & Above category volumes represented double-digit CAGR compared to the pre-COVID level. We have rationalized volume of regular category brands. This is a conscious strategic decision to mitigate input cost pressure. Had it not been done, our volume growth would have been higher. Furthermore, we have also seen some RTM changes impacting the industry volume temporarily. Net revenue from operation during Q3 of FY ’23 was INR792 crores, representing an increase of 4.7%compared to Q3 of FY ’22.

During this period, IMFL sales value increased by 2.4%. Gross margin during the quarter was 41.3% compared to 41.6% in Q2 of FY ’23 and 45.5% in the Q3 of FY ’22. On Y-o-Y basis, continued commodity inflation resulted in gross margin compression, particularly in non-IMFL business, even a favorable product exchange impact on cost push on gross margin of the IMFL business was mitigated to a large extent.

On Q-on-Q basis, margins have remained relatively flat. The compression is due to the full impact of gas price increase given in Q1 and going — ongoing inflation in ENA costs We’ve experienced inflation in ENA and glass. On Q-on-Q basis ENA price have increased by 5%. We’ve also seen a 12% increase in glass costs from the middle of Q3 of FY ’23. However certain commodities such as PET resin, paper etc have seen early sign of softening in the near term. We expect raw material pricing situation to remain volatile.

In near term, the EBITDA margin is expected to be range bound. In long term, we are confident of continuing our margin expansion trajectory given our portfolio premiumization and backward integration. During the year company had spent INR472 crores on Rampur greenfields [Phonetic] and Sitapur greenfield projects. Therefore, the total capex of INR541 crores incurred since interaction. We have a strong financial position, comfortable electricity and during these times, we are taking all necessary steps to sustain our financial strength, maintain robust business model and grow consistently competitively and profitably.

With this we’ll now open lines for Q&A. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentleman, we will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yes, so thank you for the opportunity. Sir I had one question, if you could give us the gross margin bridge, or the loss in gross margin of about 400 basis point in the quarter. And let’s say 400 basis points in nine months, considering the fact that the Prestige and above is now almost 60% of our business, and has moved about 8% 9% in nine months, and has moved us – 8% 10% swing in as a percentage of sales in the quarter three. So, this 400 basis point loss in gross margin, if you could give the bridge as to where this 400 bps gross margin loss is coming. And if you would portion it out to IMFL, non-IMFL, within IMFL, regular and others if you could just give that bridge.

Dilip K Banthiya — Chief Financial Officer

So, first of all, as we said that the main reason for the gross margin compression is the inflation and the input cost. The compression in the three months and nine months is almost 400 basis points. We have received the price increase with the various states, eight, nine states put together roughly to the tune of around 300 basis points. So, as the overall macro, the gross margin has impacted by 700 to 900 basis points looking at the premiumization and other things.

However in non-IMFL which was the main reason of the drag, we have received recently in the UP excise policy the price increase, which will make the non-IMFL business from a negative EBITDA to a positive EBITDA and that will support us in the future to retain our margin back to mid-teens kind of things. As far as the regular and the premium portfolio is concerned, since the premium portfolio and this quarter has been a little exception from the point that there has been various reasons for a D growth in the regular category, some of them attributes to the RPM change, some of them rationalization of the portfolio in view of the cost pressure.

And this has been a temporary I think, when the cost pressures come back to a normal level. I have — we will, again, regain our volume in the revenue category as well. So, I say that with this price increase in non-IMFL, which was negative to positive, we will be able to get back to mid-teens kind of thing and then as we have already guided that we will in three to four years with the kind of premiumization luxury portfolio and lot of other levers for ’23, ’24, we will be back in two to three years time in the late-15 kind of EBITDA margins.

Pritesh Chheda — Lucky Investment Managers — Analyst

So within that, when you shared, you got 3% price hike, what was the corresponding cost inflation that you saw?

Dilip K Banthiya — Chief Financial Officer

As I said that when gross margin compressed 400 basis point, this has an impact which has been compensated by 300 basis comes from the IMFL business and rest. So, I can’t quantify exactly but it should be around 900 basis point or so on the gross margin side. It’s a compact — complex with so many things, because ENA have price continuously. Year-on-year the impact of the ENA prices 20%-plus, glass prices have increased by 25%-plus or 30% on some of — first came in the first quarter of the current financial year, the second price increase came in the middle of this quarter. Hence to quantify — but this is reflected very much in the gross margins.

Pritesh Chheda — Lucky Investment Managers — Analyst

So, for sale price increase that you bought the corresponding cost increase was 9%, that’s what you mentioned?

Dilip K Banthiya — Chief Financial Officer

I say that, in IMFL business to a large extent able to mitigate the cost push by product premiumization and this price increase which ever been done in IMFL, but in non-IMFL it will be reflected in ’23, ’24.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yes, that I understood sir. If your first observation is that to a large extent, the price increase plus product mix has mitigated the impact then which means a gross margin correction is largely then relevant to the IM — non-IMFL portfolio, right?

Dilip K Banthiya — Chief Financial Officer

I say that it has been partly compensated this year by price increase and product premiumization.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay.

Dilip K Banthiya — Chief Financial Officer

That’s all, yes.

Pritesh Chheda — Lucky Investment Managers — Analyst

And how much price increase have you bought in non-IMFL and when will it start flowing. It will start flowing from quarter four or it will start flowing from next year?

Dilip K Banthiya — Chief Financial Officer

Delta that is around 15% and from a negative if it that too it will come in single-digits.

Pritesh Chheda — Lucky Investment Managers — Analyst

So, there is a 15% price hike which will, right?

Operator

It looks like the management line is got disconnected. Requested to please remain connected, Mr Chedda. We will just reconnect the management.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yes.

Operator

Thank you. Participants please stay connected. We are rejoining the management line. Please, do not disconnect. Ladies and gentlemen, thank you for your patience. We have the line for management reconnected. So, I — you may go ahead sir.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah. So, you said that delta is 15% swing and when will this price increase flow into your numbers quarter four or next year.

Dilip K Banthiya — Chief Financial Officer

So, it will be effective the first month of the new fiscal, which is April. 1st April.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Okay, understood. So, yeah, thank you. I am done with my questions.

Operator

Thank you very much sir.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah.

Operator

We will take our next question from the line of Vaibhav Gupta from Bowhead Investment Advisors. Please go ahead.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Hello sir. Sir, I just wanted to understand if we take a…

Operator

Mr. Gupta, could you speak a bit louder? Your volume is really very low sir.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Is it better now?

Operator

Yes. Thank you.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Sir, I just wanted to understand, if we take into account the royalty volumes and back calculate the growth rate, it seems that adjusted volume growth in ENA segment is 30% plus Y-o-Y. So just wanted to understand what led to this type of growth? And which brands are the major contributor?

Dilip K Banthiya — Chief Financial Officer

So you are absolutely right. If you add back the royalty, brands which is in the base, so it will come to 30% plus. You’re absolutely right. And the flagship brand, Magic Moments, Morpheus, 8PM, 1965 Rum, Rampur everything is growing. And it’s just well spread out across India, in all regions.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Okay, sir.

Dilip K Banthiya — Chief Financial Officer

But in terms of royalty that you’re talking about, it’s largely Morpheus Brandy, the 8PM Premium Black and Magic Moments.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Okay, sir got it. And sir which brands can we expect to be in the millionaire’s club in 2023 and 2024, like apart from Morpheus and 1965, is there any other Rum, which is in the running.

Dilip K Banthiya — Chief Financial Officer

2023, 2024 we will actually assess again, the situations, but definitely, as Andy said in the first opening remarks, one brand which is close to this will cross this year 2023.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Okay, sir. Thank you so much.

Operator

Thank you. We take the next question from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Yeah. Good afternoon, sir. Thanks for giving me the opportunity. So my first question is on your earlier comment about the changes in trade margins affecting the volumes of the regular brands. So, can you just elaborate that point at what kind of changes have been happening in the trade margins which led to this, you know, volume moderation, in quarter three?

Abhishek Khaitan — Managing Director

I read that two things. One is the changes in RTM of certain states, where the supplies were affected in this quarter, and these are three, four states which is in the public domain itself, Delhi, this Punjab etc, and all that. Second is consciously as a strategic listing, because of the input pressure, there are certain brands which are not making money, and that has been curtailed. So this is another factor.

So, once we see that either price increases happen in those price segments, and the RTM phase is just a temporary phenomena, I think in a month or two, it will come back to the normalcy. So we will index TSB [Phonetic] back on some growth in the regular segment though our focus is restoration of our category, but this is an exceptional new growth in this quarter.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Okay. And so, my second question is on margins. You mentioned that once this price increase in [Indecipherable] segment, you know, that’s true. You see margins coming back to mid-teens till — maybe in first half of FY 2024. But when can we see also the benefit of this new, you know, faculties serving them, because that was also supposed to, you know, add to your benefits from quarter four. So, can you just give us you know, some kind of guidance in terms of when can we see those benefits coming in? And how you will help — how it will help your margins to shape up in the quarters a ahead?

Abhishek Khaitan — Managing Director

We said that there are various factors, one is the backward integrated facility will come into stream and that will support the branded business. The Rampur Indian Single Malt and Jaisalmer volumes are rising and I think next year, because at this point of time, it is on allocation and global as well as in Indian markets. We already rolled out Rampur Indian Single Malt in defence also that will get momentum because we are not able to supply at this point of time.

The natural growth in our premium portfolio will happen. UPML and CL will also reflect in the single EBITDA margin. So all put together will play a combined role in making the margin next year in mid-teens to better as we were earlier in 16% kind of category before 21. So, we will be back on those stream and in due course of time our target to achieve in high-teens will should definitely be on course.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Right, sir. And one last one on the Prestige & above brand volume. If we look into this quarter, we have achieved a volume growth of 14%. Last quarter it was around 22%. So, there is a bit of moderation in the volume growth. So any particular reason for this? Or this is like a phaseout effect from — you still maintain the guidance of volume growth of around 18% to 20% in this space?

Abhishek Khaitan — Managing Director

So P&A growth continues to be heavy. This quarter, it has been 14%. But you see, as we said that there were certain markets in Q3, where we deliberately tempered, moderated our volumes, because there was a route to market change that was happening. So it’s purely because of that. But the quarter-to-quarter, the variation is a little — it’s something that we don’t look at. We maintain our mid and long-term guideline of maintaining more than 15% growth on P&A.

Kaustubh Pawaskar — Sharekhan by BNP Paribas — Analyst

Got it, sir. Thank you. Thanks for the opportunity.

Operator

[Operator Instructions] Next question is from the line of Ajay Thakur from Anand Rathi. Please go ahead.

Ajay Thakur — Anand Rathi — Analyst

Hello sir. Thanks for taking my question. Sir, just wanted to understand a bit more on the volume growth. If I adjust for the RTM changes, what would be the volume growth we would have in the overall portfolio?

Dilip K Banthiya — Chief Financial Officer

The impact of that is roughly 600 basis points.

Ajay Thakur — Anand Rathi — Analyst

Okay. And sir, secondly, just wanted to check on our employee cost, which has actually risen by almost 20% plus during the quarter. So I want to check, what would be the run rate going forward for margin purposes?

Dilip K Banthiya — Chief Financial Officer

So the normal increase will be between 11% to 12%, 13%. But this quarter, there has been an incentive also, which can’t be worked down in advance. So this has been charged in this quarter.

Ajay Thakur — Anand Rathi — Analyst

Okay. Thank you, sir. Thanks. That’s all from my side.

Operator

Thank you. We’ll take a next question from the line of Sonaal [Phonetic] from Bowhead. Please go ahead.

Sonaal Kohli — Bowhead — Analyst

Congratulations, sir, on healthy growth in volume.

Operator

I’m sorry, Sonaal, we can barely hear you. Can you please switch to handset and speak?

Sonaal Kohli — Bowhead — Analyst

Am I audible to you now?

Operator

Yes. Thank you.

Sonaal Kohli — Bowhead — Analyst

So firstly, heartiest congratulations on volume growth, which seems to have been accepted from also the consumer companies. I had two queries, sir. Firstly, the volume which you have lost in the regular category. How easy would it be for you to get these back as and when you choose to — as and when the inflation is in the controller you get by hikes? Secondly, I also wanted to understand your long-term guidance is 15%, but you’re growing 30% this quarter.

So I mean 15% — 30% equivalent to two years of growth would be to a 30% kind of growth. So I wanted to understand, like is this 30% growth an exception? Or is 15% a more conservative kind of guidance? Or how do I read when I see your numbers? And lastly, you mentioned something about the incentive. So while incenting may be a yearly phenomenon, but is there any seasonality in this, like this is a Q3 number, it may not come in Q4 or Q1 of next year? How do I read this increased implied cost? Thank you.

Dilip K Banthiya — Chief Financial Officer

So Sonaal, first thing first, as far as the regular category is concerned, as we have already explained and I again reiterate that, there has been a couple of factors, RTM cost pressures and all that. But in normal course, it should be in the range of 3% to 5%, normal — when normal situation. And we will regain demand, this thing, because our brands and revenue category also robust. So, the point is that, new launches and all that are being done in P&A category, but the existing brand will be able to take that much of growth.

As far as your second question is concerned, as we guided, that we will be having a 15% CAGR growth next year, when the base impact of the royalty will also stabilize on the YoY basis. So, the 15% is what we guide for. If the industry and other things also grows in that, which is a structural phase, then we will see that it can be higher even. You’re absolutely right that, this quarter it has been better, because all brands.

And you see, the vodka, which was growing in single digit and all that, in the premium vodka, there has been a good growth and mainly driven by Magic family in the whole industry even. So we’ve seen a fantastic growth in vodka. Morpheus has been going very well. 1965 is the brand which is growing very well in civil market as well as in defense. 8PM Premium Black. We — in two years, we have three — three, four years, we have crossed 2 million and again, growing by a very good margin. Expect close to 3 million cases kind of things by 2023. So I think it’s a robust brand portfolio.

Sonaal Kohli — Bowhead — Analyst

Sir, just one comment on this, if you allow me, this vodka growth you mentioned about, so is vodka growth much higher than this 30% and is it because of the base impact, because vodka is used more in pubs or — if you remove the vodka, also the growth remains healthy in Q3. Secondly, what would have been your growth in exports in the first nine months and in Q3? Thank you.

Abhishek Khaitan — Managing Director

Yes. As far as the vodka segment, if you see, like, post-COVID vodka is more of day drinking and going out and drinking and everything. Now, with the economy opening up, vodka has grown a lot, because the outdoor drinking and going out has increased. And as far as export goes —

Sanjeev Banga — President – International Business

Well, as far as export goes, in terms of volume, we’ve been kind of stable, like last year. But in terms of value we’ve grown. In terms of volume growth, despite all the headwinds that were happening in Africa, which is a very large market for us, especially in the regular brands that we have. There have been N number of problems be it in terms of the devaluation of their currencies, availability of ForEx. Also, the freight rates, this ocean freight rates increased tremendously.

So, because of that, we had to hold back a lot of shipments, especially into the African market or the Central American markets. But now, the freight rates have more stabilized. The currency still remains a bit of an issue in Africa, but we do expect growth to come back. Meanwhile, what has happened is the European and US market, where the on-trade opened up. So our luxury portfolio is doing exceedingly well in all those markets. So value term, profitability wise, we are much healthier last year. But volume, yes, we’ve taken an impact on the lower range of our export offerings.

Sonaal Kohli — Bowhead — Analyst

Sir, minus the vodka would you still be growing at a healthy growth rate, or the entire growth rate of 30% was driven by vodka? Or if I remove the vodka, can I still say that you would have grown at 25%, 30% for Q3 specifically? And secondly, my question regarding the employee cost and your outlook for exports, do you expect exports to grow now, considering the freight rates have fallen by almost 90% on some groups?

Abhishek Khaitan — Managing Director

See, on your question whether — if you leave aside Magic Moments Vodka, whether we would still continue to maintain the growth rate, the answer is absolutely, yes, because all our Prestige & Above brands are growing at a very, very healthy rate. And the response from the consumer in the marketplace is unprecedented. So, this clubbed rate with the launch like Royal Ranthambore, Dazzle, Morpheus Brandy, 8 P.M. Premium Black, all taken together — After Dark the newly launched brand, all taken together, we see these brands responding extremely well in the growth rate to be maintained.

Sanjeev Banga — President – International Business

In terms of export, we see the growth coming back very soon because the freight rates, you’re absolutely right, have stabilized. The only issue is a bit on the currency, but that’s also getting more and more stable now. So, we do expect our volumes to come in very soon back to the growth trajectory.

Sonaal Kohli — Bowhead — Analyst

And employee cost?

Dilip K Banthiya — Chief Financial Officer

And as per your question about employee cost, it’s concerned this is will be — again, the growth will be in the range of 10% to 12% kind of things.

Sonaal Kohli — Bowhead — Analyst

Sir, when you take a base, you mean this quarter employee cost, does it have one-off incentive? Or this number, what incentive was in this quarter that should come also in Q4 — Q1, Q2, Q3, Q4 of next year?

Dilip K Banthiya — Chief Financial Officer

So, this is actually cumulatively being given in this quarter.

Sonaal Kohli — Bowhead — Analyst

Okay. Understood. So, there’s an element of one-off.

Dilip K Banthiya — Chief Financial Officer

Last year, which has been paid out in Q3. So, you should look at YTD number for the base.

Sonaal Kohli — Bowhead — Analyst

Thank you so much.

Operator

Thank you. We’ll take a next question from the line of Nikhil Chowdhary from Kriis Portfolio Management. Please go ahead.

Nikhil Chowdhary — Kriis Portfolio Management — Analyst

Hello. Thank you for the opportunity. Most of my questions have been answered. Sir, just probably confirming, like you alluded the regular and other category growth will be coming back in the coming quarters, right? As soon as the — you said the [indecipherable] will be resolved in a month or two. So, probably, we will start seeing the growth from the coming quarters, right?

Dilip K Banthiya — Chief Financial Officer

As I said, this also depends on the inflation and the contribution we can make. So, this growth has been consciously being strategically done that we have degrown in certain markets. But we feel that with the cost impact and all that, when we are able to have the positive contributions in certain percentage, we will be able to cater with these brands. The brands are robust. It is not because of the brand saliency, it is because of the contribution being made. And as RTM, it is very temporary phase, the phenomenon.

Nikhil Chowdhary — Kriis Portfolio Management — Analyst

Got it sir. Got it. Thank you so much sir. That’s it from my side.

Operator

Thank you. Our next question is from the line of Vikas Tulsyan from Vision Ahead. Please go ahead.

Vikas Tulsyan — Vision Ahead — Analyst

Thank you for the opportunity. Sir, when is your ready-to-mix vodka will be launched? Or it has already been launched? If it’s already been launched, what is the response and what does the management expect from this product?

Abhishek Khaitan — Managing Director

So, what we are talking about is what vodka cocktail. So, first of all, it has been launched in Karnataka, and that too in premium outlets of Bangalore. The response has been extremely encouraging and seeing the response, we are now planning to extend it to Maharashtra, Daman and Goa. And the brand is in fact corresponding more than what we had expected.

Vikas Tulsyan — Vision Ahead — Analyst

It will take some market share from there also that I am expecting the little bit?

Abhishek Khaitan — Managing Director

I’ll tell you, I’ve understood. See let me explain one thing. We are not – the purpose of launching vodka cocktail is very simple. One, because cocktails have traditionally been made out of vodka in our country and nobody had taken the first move, has so far taken the first mover advantage. We are the vodka cocktail available right now. So that’s one.

Secondly, the purpose of launching this product category is to build an aura around the Magic brand, you see this brand in the hands of youngsters, the new generation. It will have wide spread distribution and it will only strengthen the brand equity of Magic. So here, we are not looking at big, huge volumes, but we are looking at value. And that’s what we are finding from the response that we have received in Karnataka.

Vikas Tulsyan — Vision Ahead — Analyst

Okay. I think it will be a big product. And sir, since that the FDA has been signed with the Australian government will you also target the Australian market?

Sanjeev Banga — President – International Business

We are already in Australia. Our brands are already there in both Australia as well as New Zealand.

Vikas Tulsyan — Vision Ahead — Analyst

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Krishna Agarwal from Niveshaay. Please go ahead.

Krishna Agarwal — Niveshaay — Analyst

Hello?

Operator

Yes. Please go ahead with your question.

Krishna Agarwal — Niveshaay — Analyst

So my first question –

Operator

Krishna, we can’t hear you clearly. Please switch to handset mode and speak, please.

Krishna Agarwal — Niveshaay — Analyst

Hello. Is it better?

Operator

Yes, please, go ahead. Yes, please go ahead.

Krishna Agarwal — Niveshaay — Analyst

Yeah. So my question is on the raw material side. So can you give us clarity on, like what’s the trend you are looking ahead on the raw materials especially ENA?

Dilip K Banthiya — Chief Financial Officer

So we actually, at this point of time can’t predict beyond. Basically, this has been seen as an inflationary condition on account of the grain prices, the fuel prices, etc. But there is definitely a check on that, because simultaneously there is ethanol prices being fixed by the government looking into these grain, etc, and all that. So otherwise, if you say that, we don’t foresee big inflation from here onwards. But I can’t predict because the situation at this point of time is also volatile.

Krishna Agarwal — Niveshaay — Analyst

So from the capex that we were doing the backward integration, so do we see additional benefit because of that because of the situation?

Dilip K Banthiya — Chief Financial Officer

Yeah. Capex backward integration benefit will definitely arise and accrue. Because basically, as you see, the current producer, whosoever sells ENA and all that, these inflationary things is being reflected in ENA prices.

Krishna Agarwal — Niveshaay — Analyst

Yes.

Dilip K Banthiya — Chief Financial Officer

So that differential margin should continue to be there.

Krishna Agarwal — Niveshaay — Analyst

So what kind of margin improvement we expect from the backward integration?

Dilip K Banthiya — Chief Financial Officer

This has been ranging between INR12 a liter to around INR16, INR17 rupees a liter

Krishna Agarwal — Niveshaay — Analyst

Okay, so INR four gap, so we will benefit by INR four from the bank?

Dilip K Banthiya — Chief Financial Officer

No, I am talking about in general producer versus buying from outside.

Krishna Agarwal — Niveshaay — Analyst

Okay. Okay, so I’m glad to thank you. Thank you.

Operator

Thank you. Our next question is from the line of Anurag Jain, an individual investor. Please go ahead.

Anurag Jain — an individual investor — Analyst

Good afternoon, sir. Am I audible?

Operator

No, Anurag. We can’t hear you clearly.

Anurag Jain — an individual investor — Analyst

Good afternoon. Am I audible now?

Operator

Yes, it’s a bit better. Please go ahead.

Anurag Jain — an individual investor — Analyst

Okay. Basically, my question relates to the macro side, the imported scotch whiskies have become cheaper significantly in last few years. For example, as a illustration, if I take the State of Haryana, Royal Ranthambore sells for INR1600 a bottle at some premium to Red Label or an Irish whiskey like Jameson. So if my question is, you know, how is the tax? How much is the tax incidence on these whiskies? How does the total taxation combined for at the central level and state level compare for these three as an illustration? Basically, what – my question is to understand you know, what is the value generation in local manufacturing for a higher value alcoholic drink? Thank you.

Amar Sinha — Chief Operating Officer

See, one of the points that need to be understood is that for companies like Radico, particularly, where the mix is skewed towards prestige and above premiumization, the reduction of price by a BIO brand really does not affect us so much, because now brand from Radico are being positioned at prices higher than market leader, even higher than scotch whiskies, and your example is absolutely correct.

Royal Ranthambore is a burning example, it’s India’s finest whiskey now positioned much above 100 Piper’s, so what I’m trying to say is that these small aberrations in some states, where they reduce prices, it does not really affect us so much. And we are aware constantly upscaling our selling prices and consumer prices.

Dilip K Banthiya — Chief Financial Officer

Well, just to add on to what Amar said, you know our brands today, the quality is comparable to the finest in the world. Just to give you an example Royal Ranthambore were here you comparing to say a Red Label or Jameson. In US market, it’s cross-line with Johnnie Walker, Black Label, that’s the strength of the liquid that goes into Royal Ranthambore.

Anurag Jain — an individual investor — Analyst

Okay, so basically sir what you’re saying is that the taxation as such does not impact – impact you reduction in taxation not impact for the higher value alcoholic drinks?

Dilip K Banthiya — Chief Financial Officer

Luxury and super premium brands, where we are competing in all the international markets also, just to give you an example, the minimum price of say Rampur is about $100 a bottle, which is way ahead of all the normal single malts 12 year old or a 15 or 18 year old single malt and we are competing in all those markets and still can’t meet the requirement of the market. There’s so much demand for our brands. So, we would not be too worried about the price positioning or the competition over there. All that we need to focus on the brand building and that is happening with Royal Ranthambore.

Anurag Jain — an individual investor — Analyst

All right, sir. All right, sir. And sir, if I take the same question to the popular drinks category, which are price lower, and my question is one reason for my question is, it appears that the competition, they are giving up the popular category. So is there a disadvantage now in manufacturing the popular drinks, which have a lower price?

Abhishek Khaitan — Managing Director

See, I’ll tell you what basically, the things that we have in our portfolio, in the popular on the regular category are robust brands, which have withstood the test of time. For example, 8PM is a 10 million cases plus family brand. So it has a consumer pull. And when there is a consumer pull, we need to continue to serve our consumers that we’ve done over the decades. So we will continue to do that. It’s just that for the time being, the economic pressures, the cost pressures are humongous and therefore, we are moderating our values. But yes, in the times ahead, depending upon economic situation, we will get back.

Anurag Jain — an individual investor — Analyst

All right. So basically, what I wanted to clarify is that amongst these all these cost pressures, is taxation also a factor that the taxation for an imported drink versus what is locally manufactured has reduced so much that taxation provides no barrier as such for local manufacturing in the lower price drinks category?

Abhishek Khaitan — Managing Director

See imported — the duty is 150%. That has not changed. There are some states where the local excise duties have changed on BIO products. And it doesn’t matter. It doesn’t bother us because we are on a premiumization journey. Just to reiterate the point, in Maharashtra, Royal Ranthambore sells at a price of INR2,700 a bottle whereas Red Label and Ballantine sell it for INR2,100 a bottle. So it doesn’t bother Radico because our journey is different, and we are continuing to upscale our premium offering to the consumer with the best in India.

Anurag Jain — an individual investor — Analyst

Thank you, sir. This is some good insight into the branding for Radico Khaitan. Thank you.

Operator

Thank you. We’ll take a next question from the line of Dhiraj Mistry from Antique Stock Broking. Please go ahead.

Dhiraj Mistry — Antique Stock Broking — Analyst

Yeah. Thank you. Thank you for the opportunity. So my first question is related to raw material prices. So given that if raw material prices remains at current levels, when do you expect your EBITDA margin will reach to 15% plus or 15.5% margin? And what kind of price hike would be required?

Dilip K Banthiya — Chief Financial Officer

So first of all, really, the premiumization, product premiumization and price increase, which has happened in the non-IMFL should take us back to the historical margin level. So ’23, ’24, I think we will be at the historical margin level of 15% plus. So this — and if the raw material prices stays where it is, some price increase will definitely happen in the popular category as well because the representation is a continuous process by the industry forum with the various state governments. It’s a pain for everybody.

Dhiraj Mistry — Antique Stock Broking — Analyst

Yes. And my understanding is correct that in Q4 also, the margin will remain subdued that given that the effective price hike for non-IMFL business is from April?

Dilip K Banthiya — Chief Financial Officer

You are right, it will remain inbound.

Dhiraj Mistry — Antique Stock Broking — Analyst

Okay. Okay. And sir, what would be your effective tax rate for this year and next year

Dilip K Banthiya — Chief Financial Officer

25%

Dhiraj Mistry — Antique Stock Broking — Analyst

25%. And any capex guidance for FY ’24.

Dilip K Banthiya — Chief Financial Officer

What guidance.

Amar Sinha — Chief Operating Officer

Capex.

Dhiraj Mistry — Antique Stock Broking — Analyst

Capex.

Dilip K Banthiya — Chief Financial Officer

Capex as we have already taken these projects and there are — the projects taken on increasing that tripling the diversity on gin capacity and all that those capex will be met and basically as we have guided that these capex will be funded out from the internal accrual as well as taking the loan. So, in next year the company should be back on the negligible debt or zero debt kind of level.

Dhiraj Mistry — Antique Stock Broking — Analyst

Oh Okay, thank you. If any other further question, I will come back.

Operator

Thank you. Our next question is from the line of Sumit Agarwal, an Individual Investor. Please go ahead.

Sumit Agarwal — an Individual Investor — Analyst

Congratulations for a good set of results, sir. Sir my question is, regarding…

Operator

Sumit Agrawal, could you speak a bit louder, we can’t hear you or use your set mouthpiece.

Sumit Agarwal — an Individual Investor — Analyst

Am I not – am I audible now?

Operator

Yes, please go ahead.

Sumit Agarwal — an Individual Investor — Analyst

Yes, my question is regarding the volume share of different liquids like Rum, Brandy, Whisky, in the in the total capacity and which sect — and which segment is getting more traction.

Amar Sinha — Chief Operating Officer

So, you will be amazed, let me tell you, we are in times that after having crossed the pandemic era, first of all the volumes in India on alcoholic drinks have come back to the pre-COVID and they are growing at a CAGR of approximately –

Dilip K Banthiya — Chief Financial Officer

On a 11%.

Amar Sinha — Chief Operating Officer

Yes, and let me tell you what is more amazing is that every category and every segment in India is growing, the consumer is looking forward to his triple drink eagerly and every segment every category is growing at a very healthy rate. Whisky, for example, is growing at a 17% growth rate. And that’s one of very heavy base as well. So, I think what we need to see is that there are good times ahead for the drinks industry, we only need to overcome the cost pressures, and there is no looking back.

Dilip K Banthiya — Chief Financial Officer

So, I will add further to that, that for last six consecutive year, we have been outsmarting the industry growth and that we will continue in the P&A category.

Sumit Agarwal — an Individual Investor — Analyst

Perfect, sir. And my question is that in the Delhi NCR region, because that’s a premium market and a lot of influence on other markets as well. So, are these new launches which are very, very promising like Royal Ranthambore, are these also being extensively marketed and advertised and distributed in Delhi NCR region? Because I haven’t seen so much of that.

Amar Sinha — Chief Operating Officer

So, no, I’ll tell you what, we are extending all these brands into the Delhi market, the Delhi route to market is fairly new, it’s still settling down. And we have great hopes from this market in the next six months. So yes, the distribution – bit of distribution is being expanded, the brand will be present.

Sumit Agarwal — an Individual Investor — Analyst

Perfect. Thank you, sir.

Operator

Thank you. Our next question is from the line of Gaurav Lohia [Phonetic] from Bullhead India. Please go ahead.

Gaurav Lohia — Bullhead India — Analyst

Thank you, sir, for this opportunity. Couple of questions. Firstly, I wanted to understand Royal Ranthambore is now present in how many states and in next to one year, by end of 2024. How much further can we increase our distribution in that? Secondly, you had plans to launch some whiskies, gin and some more products. Do we see any of those launches in FY 2024 or in Q4 of FY 2023?

And lastly, you mentioned that certain price hikes could happen, either in Regular category or in some other states. Is it fair to assume that, by end of Q1 or Q2, whatever price hikes were supposed to happen would have happened by then? This is my third and fourth. When would you get your for example, you’re supposed to get eight Alcohol, by when do you think you should be able to get that in FY 2024? Would it be second half, first half?

Dilip K Banthiya — Chief Financial Officer

So, on the first — on the question relating to Royal Ranthambore availability, we are currently launched in 12 states. The distribution is taking place in primarily A-class outlets, but it will seem the response are going to expand the width of distribution in the new fiscal FY 2024 and we will expand all India during FY 2024 as well.

On the issue relating to price increase, let me tell you, the Indian market and different state governments have been quite receptive on the issue relating to cost pressures. And in the last one year, almost about 17 states have given price increases. So, we this is a continuous process of representation. And I think in FY 2024 as well, some states will — where we are continuing to represent will respond favorably.

Gaurav Lohia — Bullhead India — Analyst

Sir, lastly, these two questions regarding new launches of Whiskies and — maybe Gin, they likely to happen in Q4 FY 2023 or in FY 2024? Or some broad, how many kinds of products are you looking at? What is the size of the pie of these products could cater to? And on the Ranthambore the old alcohol, when do expect that to happen, on an incremental basis? Will it happen in the second half of FY 2024 or first half of FY 2024?

Dilip K Banthiya — Chief Financial Officer

Okay, so first of all, I want to tell you that we always maintain that new product development is a 40 of Radico. All our brands have been developed organically. So it’s a continuous process. New products are being worked upon. There is one white spirit and one brown spirit on which we are working very actively. And hopefully, in FY 2024, they should see the light of day.

Amar Sinha — Chief Operating Officer

In terms of Ranthambore we expect the additional volumes to start trickling in, from second half of FY 2024. And then, it’s an ongoing process. We need to understand, we mature our model for a very, very long time. And it’s been aging. So, we will see the impact coming in from second half of 2024 onwards to the next few years. And we already tripled our Malt capacity couple of years ago. So, all that Malt will also start flowing in a few years.

Gaurav Lohia — Bullhead India — Analyst

And sir, as far as the Whiskies are concerned this plan to launch only one whiskey in financial 2024? Did I hear you correctly?

Dilip K Banthiya — Chief Financial Officer

Actually as Amar said, that the pipeline of product development continues to be there. So what he said is one white spirit in the higher rate and one brown spirit. But the point is how much can, the sales team also will have to get the launch and all. So this one-plus-one is in the in the planning state?

Gaurav Lohia — Bullhead India — Analyst

Understood sir. Thank you.

Operator

Thank you. Our next question is from the line of Pankaj [Phonetic] from Affluent Assets. Please go ahead.

Pankaj Bobade — Affluent Assets — Analyst

Thanks a lot for taking my question. Sir, as I understand, earlier, even now, our products are available back [indecipherable].

Dilip K Banthiya — Chief Financial Officer

You are not audible.

Operator

Pankaj, could you please switch to handset mode and talk?

Pankaj Bobade — Affluent Assets — Analyst

Hello? I am on handset itself.

Operator

Okay. Please go ahead.

Pankaj Bobade — Affluent Assets — Analyst

Am I audible now?

Operator

Yes.

Pankaj Bobade — Affluent Assets — Analyst

Okay. As I understand the products, our products are available by allocation, either both domestically and overseas. Just wanted to understand by when we would have it available freely off the shelf?

Dilip K Banthiya — Chief Financial Officer

I don’t think, sir, we will have that freely available off the shelf in any time soon, because the demand is outstripping what we can supply. Just to give you an example, our brands are currently available in about 88 countries, but Rampur is only available in 30-odd countries. So, we’ve not even expanded to all our existing markets. Similarly, in the domestic market, we are only available in NCR, in the defense and one or two other states. So we’re not even pan-India available over here. So it will remain on allocation for the next couple of years, but the volumes will substantially grow year-on-year. So the demand, the way it is and the feedback that we keep getting from our consumers as we would never be in an oversupply sort of situation in times to come.

Pankaj Bobade — Affluent Assets — Analyst

So would that be your strategy to maintain the brand pool or it’s otherwise?

Dilip K Banthiya — Chief Financial Officer

Not as much as we would like to supply and meet the entire demand. It is also a question of the aging and the time that is required for a malt to be ready to be bottled. So we would not look at a short term. This is a brand which will be there for generations. And we have to maintain consistency of the quality.

Pankaj Bobade — Affluent Assets — Analyst

So, as I understand it takes around two to three years for aging of the liquid.

Dilip K Banthiya — Chief Financial Officer

No my friend. It is much, much longer than that. But unfortunately, we don’t make any hedge statement. So Rampur has matured for a fairly, fairly long time.

Pankaj Bobade — Affluent Assets — Analyst

Okay. Sure. So there will all a cap at which we would be able to supply, right?

Dilip K Banthiya — Chief Financial Officer

Yes.

Pankaj Bobade — Affluent Assets — Analyst

Okay, sir. Thank you. Thanks a lot.

Operator

Thank you. Ladies and gentlemen, we take that as a last question for today. I would now hand the conference over to Mr. Dilip Banthiya for closing comments. Over to you, sir.

Dilip K Banthiya — Chief Financial Officer

So, thanks for joining us today, and we have continued to deliver on our premiumization strategy, which reflected in strong P&A volume growth during the quarter. All our core premium brands are seeing strong growth. The traction of our luxury brand in single malt, which we have said that on allocation basis and Jaisalmer [indecipherable] is above expectation.

Next year onwards, Rampur allocation will increase, and we have already expanded in distillation capacity to cater to the growing demand. There has been near-term margin pressure due to the community inflation, but we are confident of maintaining our long-term margin expansion given the premiumization of our portfolio and backward integration. We look forward to interacting with you on next earnings call. In the meanwhile, if you have any queries or follow-ups, please feel free to write to us. Stay safe and healthy. Thank you.

Operator

[Operator Closing Remarks]