Radico Khaitan Limited (RADICO) Q4 FY23 Earnings Concall Transcript

Radico Khaitan Limited (NSE:RADICO) Q4 FY23 Earnings Concall dated May. 26, 2023

Corporate Participants:

Abhishek Khaitan — Managing Director

Dilip K Banthiya — Chief Financial Officer

Sanjeev Banga — President – International Business

Analysts:

Himanshu Shah — Dolat Capital — Analyst

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Harit Kapoor — Investec — Analyst

Vikas Tulsyan — Vision Ahead Services Private Limited — Analyst

Chanchal — Birla — Analyst

Darshan Shah — Multi-Act Equity Consultancy Private Limited — Analyst

Manish Poddar — Motilal Oswal AMC — Analyst

Pankaj Kumar — Kotak Securities — Analyst

Naveen Trivedi — HDFC — Analyst

Rajendra R — Individual Investor — Analyst

Priyam Khimawat — ASK Investment Managers — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Radico Khaitan Q4 FY ’23 Results Conference Call, hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. 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, Recko [Phonetic]. Good afternoon, everyone. On behalf of Dolat Capital, we welcome you all to Q4 FY ’23 earnings conference call of Radico Khaitan. We would like to thank the management for giving 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.

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

Abhishek Khaitan — Managing Director

Good afternoon, ladies and gentlemen. Thank you for joining us on our Q4 FY ’23 results conference call. Our performance during the year was driven by our consistent focus on consumer-centricity, sustained investment behind our core brands coupled with premiumization, agile supply chain and robust distribution network. Our Prestige & Above category volumes remain robust and we registered 17% year-on-year growth on a very high base. This was led by our core brands such as Magic Moments Moments, which crossed 5 million cases sale. Morpheus Premium Brandy and 1965 Spirit of Victory Premium Rum, both of which crossed a million case mark. Magic Moments is now the seventh largest Vodka brand globally.

Driven by our premiumization focus, during the year, we have delivered a strong growth in the top-end of the Prestige & Above brands. Prestige & Above brands have shown 150% growth compared to pre-pandemic levels. This has led to a sustainable improvement in the realization per case, as we have highlighted in our presentation. To capitalize upon the traction of 8PM Premium Black Whisky, during Q1 FY 2024, we have launched renovated addition of the brand into a more contemporary packaging to enhance upon its brand equity and make it more [indecipherable]. The new packaging is focused on differentiating the product by highlighting the [indecipherable] red notes.

During Q4 FY 24, the company unveiled Sangam World Malt Whisky at ProWein 2023 in Dusseldorf. Sangam is a confluence of malls from the traditional European region and the new world. It has been launched in the USA, Europe, UK Australia, Singapore and global travel retail with shipments starting from June 2023. While the raw materials scenario still remains volatile, we are seeing early signs of deflation in certain commodities. In the IMFL segment, we have recently received price increases in the state of Uttar Pradesh, Rajasthan, Telangana, Karnataka, etc. Overall, recent price increases will account for 1.8% of IMFL sales value in FY ’24. With these price increases, coupled with a favorable product mix, we will be 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 are with these price increases in the state of Uttar Pradesh applicable from 1st April ’23 onwards. This will support the profitability expansion in FY 2024. During quarter four FY ’23, we had successfully commissioned the Dual Feed plant at Rampur and also started bottling operations at Sitapur. The distillery operations of Sitapur are expected to start commercial operations from the beginning of Q2 FY’24. As we continue to drive our premiumization journey, the availability of additional grain-based ENA will strengthen our value proposition. The working plant at Sitapur positions us strongly to capitalize on the future growth opportunity in the branded business.

Radico Khaitan is progressing firmly on the part of its exciting premium brand creation journey, which will be further strengthened by the backward integrated manufacturing platform. Going forward, we continue to focus on our long-term plant of premium IMFL portfolio expansion with new brand introduction in both white and brown spirits, and leveraging the benefits of our capital investments. Despite the near-term [Technical Issue] pressure, we are confident that we have all the levers in place for FY’24 and expect to build on the current momentum and deliver a broad volume-led growth along with improvement in profitability.

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 Banthiya — Chief Financial Officer

Thank you, Abhishek. Thank you everyone for joining us on this call today. During Q4 of FY ’23, we reported total IMFL volume of 7.24 million cases, which is relatively flat on Y-o-Y basis. Prestige & Above category volume grew by 17.4%. Including the royalty brands, our P&A volume growth is around 35%. In value terms, the Prestige & Above category registered 18.2% growth. Our Prestige & Above category volume represent at double-digit CADR 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. Prestige & Above category now account for 40.2% of the total IMFL volume compared to 30.5% in Q4 of FY ’22. The percentage expansion has been higher due to the decline in regular volumes.

In FY ’24, we expect that our Prestige & Above category volume will continue the high double-digit growth. With recent received price increases in certain key states, regular volume shall also return to their mid single-digit growth rate. Our gross margin during the quarter has been under pressure due to the continued commodity [Technical Issue] particularly in non-IMFL business where we have recently seen price increases. Even a favorable product mix impact of the cost push on the gross margin of IMFL business was mitigated to a large extent. We have experienced inflation in ENA and glass. Glass costs increased by around 12% from middle of Q3, the full impact of which is visible in Q4. However, certain other commodity such as PET and paper have seen early time of softening. In near-term, we expect raw-material pricing situation to remain volatile.

We expect our margins to improve from current level as we have multiple levers of profitability improvement into FY ’24. Our Rampur Dual Feed plant has already become operational and Sitapur plant is expected to be operational from the beginning of Q2 of FY ’24. With CL and UPML price increase, our non-IFML margin will also improve. We expect strong P&A volume growth with already received price increases in IMFL segment. We will have a higher-volume contribution from luxury brands Rampur Indian Single Malt and [indecipherable]. We have a strong financial position, comfortable liquidity, 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 the line for Q&A. Thank you.

Questions and Answers:

 

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Thank you. Our first question is from the line of Vaibhav Gupta from Bowhead Investment Advisors. Please go ahead.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Hello sir, good afternoon. Am I audible?

Abhishek Khaitan — Managing Director

Yes, yes, very much.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Yes, sir. Sir, as we have mentioned that for P&A category the growth including royalty sales is 35%, so similarly, can you share the same number for full-year and for regular segment also for the quarter and full-year?

Dilip Banthiya — Chief Financial Officer

So royalty brands is included. You are right that it is in the range of — for full-year also in the range of 35% to 37%.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Okay, okay sir. And what about the regular category, sir?

Dilip Banthiya — Chief Financial Officer

Regular category has seen — one minute — for regular categories, we take out the royalty, we add the royalty brands, in the Q4, the decline would be about 16% against 23% that we have reported. And for the full year it’s about 7% against the 13% that we reported.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Got it, sir, got it. And sir, similarly like the growth in exports and CSD for the quarter and full-year, like, would you have the number in hand?

Dilip Banthiya — Chief Financial Officer

So as far as the growth in export as well as in defense is concerned, the P&A category is growing in double-digit in export and as well as defense and certain civil markets, where the input cost pressures were high, we cut down on certain brand sales. And this is the reason that the regular category has degrown in this year, but given the price increases which we have received in certain states as well as the international trade prices coming down, we expect back the regular category to mid-single-digit.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Okay sir. Got it, sir. Thank you.

Operator

Thank you. Our next question is from the line of Harit Kapoor from Investec. Please go ahead.

Harit Kapoor — Investec — Analyst

Yeah, hi, good afternoon. Just had a couple of questions, one was on the popular segment itself. So, from a run rate perspective, do we expect a similar kind of a run rate on volume the way we can attract the quarterly numbers or do we see that there will be an acceleration within that some of the volumes will be restricted because of inflation, start to fund back. I just wanted to understand what’s the way to look at it for F ’24?

Abhishek Khaitan — Managing Director

Your voice is very, very heavy. So can you repeat this on regular category, please?

Harit Kapoor — Investec — Analyst

Yeah, is this better?

Abhishek Khaitan — Managing Director

Yeah, very clearer.

Harit Kapoor — Investec — Analyst

Okay, so no, my question was on popular. I just wanted to get a sense of this quarter, ex the royalty brands we’re at close to 4 million cases. I just wanted to understand, how do you look at FY ’24 on this base, given that some inflation — you are seeing the inflation in certain pockets cool off, you’ve got some price increases. So do you start to increase — you have restricted the growth, do you start to increase the — pickup the volumes there? And do the royalty brands, which is about million [Phonetic] case a quarter now, does anything happen to that portfolio? Do you take it back, or are they — want to do your contracts? So just wanted to get a sense of how that mix will work?

Dilip Banthiya — Chief Financial Officer

So as far as the ’24 volume is concerned, we are on our course, continued to deliver, P & A category growth of high-teens within 15% to 18%, the rival [Phonetic] category becomes viable now in certain states. So we will be back in from Q1 onwards in single-digit — mid single-digit kind — 4% to 5% growth kind of thing. Overall growth we expect to be in the range of around 10% for full year with a topline growth of 15% to 16% on IMFL business.

Harit Kapoor — Investec — Analyst

Okay, got it, got it. And on the — I just had a question on the balance sheet, seems to have been a sharp increase on the inventory days. I just wanted to get a sense of what’s happened there, is it kind of bunching up or could you give us any — what’s happening trading at 80 plus days for the year?

Dilip Banthiya — Chief Financial Officer

So as well — as we have already Intimated and informed that our Sitapur bottling operation also got started, at the same time, in the season, we started procuring certain raw materials and fuel there, so the inventory in that part is also gone up. As far as the inventory number of days of the IMFL business is concerned, we are monitoring it continuously and in corporation and other markets number of inventory days are in line with what our business plan.

Harit Kapoor — Investec — Analyst

Got it, but then this should normalize to some extent, right, because these are kind of —

Dilip Banthiya — Chief Financial Officer

Next year when the top-line grows, things will normalize.

Harit Kapoor — Investec — Analyst

Got it, got it, okay. I have a few more, I’ll come back in the queue. Thanks.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Vikas Tulsyan from Vision Ahead Services Private Limited. Please go ahead.

Vikas Tulsyan — Vision Ahead Services Private Limited — Analyst

Sir, my question is what is the response for this ready to drink Vodka, which we have launched in the Indian market and what response you foresee for your three International brands Rampur, Jaisalmer and Ranthambore? And my third is how that UK free-trade agreement comes into picture, how it will affect you positively or negatively?

Abhishek Khaitan — Managing Director

So first question, I’m ready to take. So first of all, the trend of RTDs in India is just catching up and growing. Vodka cocktail is launched by Radico is the first-of-its-kind. In the category, there is no Vodka-based cocktail drink available other than Radico. This response in Karnataka where we have launched first to start with is very encouraging and that is pushing us to extend the launch now couple of more states in the next quarter, which is Maharashtra, Daman and some states in the North. So the product has responded very well and we hope to make it a national product in the course of the next one year.

Sanjeev Banga — President, International Business

In terms of our luxury portfolio Rampur and Jaisalmer, the international response as well as domestic response continues to be extremely positive. As we’ve always said, Rampur still remains on allocation. But we increased our malt capacity couple of years ago. So we will start having more malt available this year onwards and going forward there will be substantially more malt that will be available, which will make us [indecipherable] expansion of our footprint both in the global market as well as the Indian market. Jaisalmer again tripled gin distillation capacity to cater to the demand, both from an international as well as domestic market. So we are positive our luxury portfolio.

Vikas Tulsyan — Vision Ahead Services Private Limited — Analyst

And sir, Ranthambore?

Sanjeev Banga — President, International Business

So Royal Ranthambore as a product has been launched in 13 states and there are more states which are planned to be launched during the new fiscal year. The product has received unprecedented positive response. And the unique thing about Royal Ranthambore is that it has been pitched against some of the popular international brands higher in terms of price and it has been very well accepted. This goes to prove that the consumer is accepting good products now made from India against any other international brands. So we are very optimistic and the new year — new fiscal year will delight us.

Vikas Tulsyan — Vision Ahead Services Private Limited — Analyst

Okay. And sir, how this UK free trade agreement if it comes into picture, how it will affect, sir?

Abhishek Khaitan — Managing Director

See, let me tell you what. When the Indian economy was largely based on product selling below the Prestige segment — Prestige & Above segment, then it would have been a reason to worry, but now most of the products that we’re selling in India, especially Radico, which sells more than 40% of its sales in the Prestige & Above segment. We don’t have any reason to worry. Secondly, we have seen out of experience that the India and Australia FTA has gone very positive protecting the interest of the domestic players and we hope the Indian — that the Indian government is going to look the same way as far as the UK FTA is concerned, but in terms of price positioning, now, India has breached the quality and price standards of international brands and therefore we don’t see a lot of issues around it.

Vikas Tulsyan — Vision Ahead Services Private Limited — Analyst

Okay. Thank you, sir.

Operator

Thank you. Our next question is from the line of Chanchal [Phonetic] from Birla. Please go ahead.

Chanchal — Birla — Analyst

Hi. Am I audible?

Abhishek Khaitan — Managing Director

Yeah, yeah, very much, Chanchal.

Chanchal — Birla — Analyst

Thank you. Thank you. Let’s say if I look at your gross margin. Now, you are almost at a 16 quarter low. The mix has improved. I mean, your premium portfolio has been doing very well if I look at 3-year CAGR and the new plant is starting — Rampur plant is starting and Sitapur will start shortly. Now going forward. I mean we heard that the ENA prices and the bottling prices will hurt you, what’s the kind of gross margin the company can go to, I mean, I’m sure you will cross your peak gross margin given the mix we are improving on, and how will this happen quarter-after-quarter, some guidance in next two to three years, how this gross margin can look — can be there?

Dilip Banthiya — Chief Financial Officer

So Chanchal, first of all, the inflation in the commodity has been high, very high in all the commodities which we use as a raw material. So the impact of the commodity [Technical Issue] we have around 850 basis point, all of which we have mitigated in the IMFL business to a large extent, we got the price increase last year, which is on weighted average basis on IMFL business is 300 basis points. The non-IMFL continues to add that which also we have received prior increase effective from 1st April ’23 onwards. So from a negative EBITDA, it will also turn into a positive single-digit EBITDA. As far as the margin drag on gross margin drag, out of 850 basis points, we have been able to mitigate roughly around 450 to 500 basis point by price increase as well as product mix and you will see that our realization per case in P&A category has improved by INR100 per case. So this is an improvement in the quality of product mix in the category we are selling. So in ’23-’24, there are multiple levers, will improve our margin consistently quarter-after-quarter. And Rampur Dual Feed and Sitapur greenfield project backward integration will give us the additional leverage on that, then the price increase which we got in certain states in coming year also. in ’23-’24, the impact of that is approximately 180 basis-points. Increase in the P&A category, which we are confident to deliver 15% to 18% growth and with the Rampur Indian Single Malt and Jaisalmer volume ramping up, in domestic as well as in international markets, I think we are on course to deliver during the year that our margin will be in mid-teens and that’s how we will mitigate and thereafter with be kind of product portfolio and new launches coming in, we will be able to deliver better margin in coming one, two, three years [indecipherable]. So I think our journey is continuing, our product profile is strengthening and we have seen these headwinds which we have been able to mitigate, roughly around iNR 210 crores, INR220 crores of cost push we have handled and despite of that, we were at margins.

Chanchal — Birla — Analyst

So, thank you. This is useful. So. I think mid-teens margin will go this year, and going forward, your margins will improve further because I’m saying that the peak margin was FY ’21 —

Dilip Banthiya — Chief Financial Officer

I said that quarter after quarter we will improve on our margin expansion trajectory here onward. During the quarter, we will reach mid-teens and thereafter in coming years with the kind of product profile and with premiumization going on, the margin expansion in next two to three years will again be back on teens kind of thing — high-teens kind of thing.

Chanchal — Birla — Analyst

Sure, thank you. The second question is on the balance sheet, if I may. So the debt level is almost INR600 crores plus now, is this the peak debt or you think because I know that the plant has started, your debt should start coming down going forward.

Dilip Banthiya — Chief Financial Officer

So we have debt of around approximately INR800 crores in Q2 of FY ’24, thereafter, it will continue to decline by free cash flow and by ’25-’26 as such as such as we guided, we will be. I think positive on our cash flow.

Chanchal — Birla — Analyst

Thank you.

Operator

Thank you. Our next question is from the line of Darshan Shah from Multi-Act Equity Consultancy Private Limited. Please go ahead.

Darshan Shah — Multi-Act Equity Consultancy Private Limited — Analyst

Yeah, thanks for the opportunity. I have just one question. So what is the share of defense CSD segment in overall revenues in FY ’23 and what was it, let’s say, five years, right?

Dilip Banthiya — Chief Financial Officer

Defense segment volume-wise is around 9% to 10% of the overall volume of our branded business.

Darshan Shah — Multi-Act Equity Consultancy Private Limited — Analyst

And what was it, let’s say, five years back?

Dilip Banthiya — Chief Financial Officer

It remains actually between 10% to 11%, because actually the growth in the civil market is much better on volume side, much faster and better. So it used to be between 11%, 12%, now it is 9% to 10%.

Darshan Shah — Multi-Act Equity Consultancy Private Limited — Analyst

Okay. Thanks.

Operator

Thank you. Our next question is from the line of Manish Poddar from Motilal Oswal AMC. Please go ahead.

Manish Poddar — Motilal Oswal AMC — Analyst

Hi, just one question, sir, how much debt sir we capitalized?

Dilip Banthiya — Chief Financial Officer

Pardon, how much debt capitalized?

Manish Poddar — Motilal Oswal AMC — Analyst

Yeah, because if I look at —

Dilip Banthiya — Chief Financial Officer

Long-term debt, we have actually contracted for is for INR500 crores, out of which we agreed as on 31st March INR320 crores.

Manish Poddar — Motilal Oswal AMC — Analyst

Because if I look at the quarterly run rate of interest outflow, it is roughly INR9 crores and I think you had INR610 crores On debt on the balance sheet. So I’m just trying to understand why the interest cost very low?

Dilip Banthiya — Chief Financial Officer

So the interest on the capital project, which is actually Sitapur greenfield project till it is a commercial production start may intervening period interest is being capitalized.

Manish Poddar — Motilal Oswal AMC — Analyst

So, yeah, that is — how much is that amount?

Dilip Banthiya — Chief Financial Officer

I think it is INR6.5 crores.

Manish Poddar — Motilal Oswal AMC — Analyst

INR6.5 crores on a quarter basis.

Dilip Banthiya — Chief Financial Officer

Yeah, no, not quarter basis, I’m talking about in 23. I’m not — capitalized that much for the whole period till 31st March ’23.

Manish Poddar — Motilal Oswal AMC — Analyst

Okay, sir. Hi, I’ll take this offline. I think I’m just —

Dilip Banthiya — Chief Financial Officer

Our weighted average interest cost on working capital and term-loan put together is in the range of 7.5% to 7.6%.

Manish Poddar — Motilal Oswal AMC — Analyst

Okay, okay. So this number iNR 600 crores, you said it will go to peak at INR800 crores by Q3 or Q2 end? Can you come out again?

Dilip Banthiya — Chief Financial Officer

Yes, yes.

Manish Poddar — Motilal Oswal AMC — Analyst

That is what you’re saying, right? Okay. And just one more thing, when is this plant expected to commence because it is still showing in CW, so I’m just trying to understand when we’ll just commercialize?

Dilip Banthiya — Chief Financial Officer

Beginning Q2, we are expecting to have really drive and commercial production by July end or something.

Manish Poddar — Motilal Oswal AMC — Analyst

Okay, okay, fair enough. Thank you so much.

Operator

Thank you. Our next question is from the line of Harit Kapoor from Investec. Please go ahead.

Harit Kapoor — Investec — Analyst

Yeah. I just had a follow-up. In this quarter, realization growth —

Operator

Harit, may we request you to use your handset please.

Harit Kapoor — Investec — Analyst

Yeah, hi, sorry, so just kind of follow-up, in this quarter, the realization growth had been fairly muted on P&A and popular. I think on the popular there might be some changes, but on P&A, they’ve been fairly muted, so would it be that the lower-end of the Prestige segment this quarter has done, probably better 8PM Black, etc, is that the way to look at it?

Abhishek Khaitan — Managing Director

So. I think you’re right, if you compare Q3 versus Q4, the higher-end of P&A was better in Q3 because of the festivities etc. And in Q4, that’s not the case, so that’s only reason because we haven’t had any differential in terms of pricing etc in Q4, so that’s the only reason.

Harit Kapoor — Investec — Analyst

Okay, understood, understood, and the other thing was on, you know, this quarter — this year actually, in spite of increasing capex, you’ve been fairly — you have increased your payout ratios to about 20% even — this is a high capex here. Just wanted to get a sense that obviously it is on the call as well. Do we expect this ratio to continue to improve. I think maybe next year is the peak out debt year, but post that, is that the right way to look at it, things should improve from here in terms of payout ratios?

Dilip Banthiya — Chief Financial Officer

Yeah, because the kind of cash the company will throw out after like because the debt will keep reducing, so our dividend will keep going up and the payout ratio will increase.

Harit Kapoor — Investec — Analyst

Got it, got it, got it, okay. That’s it from me. Thanks.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Satyaki Bhattacharya, Individual Investor. Please go ahead. The line for Bhattacharya is unmuted please go ahead with your question. Satyaki Bhattacharya, may we request you to unmute your line from your side. May I request the management members we move to the next participant.

Abhishek Khaitan — Managing Director

Yes please.

Operator

Our next question is from the line of Pankaj Kumar from Kotak Securities. Please go ahead.

Pankaj Kumar — Kotak Securities — Analyst

Yes. Sir, thanks for taking my question. Sir, on the volume growth that we are guiding, say, around 15% to 18% on the P&A side and mid-single-digit in the regular category. So how do we see that — this includes the royalty brands as well or —

Operator

Hello, Mr Pankaj Kumar, may we request you to use your handset as the audio is not clear.

Pankaj Kumar — Kotak Securities — Analyst

Yeah, so my question was more on this volume growth that we are giving. So this volume growth guidance that includes our royalty brands as well or —

Abhishek Khaitan — Managing Director

So the guidance which we have given about the P&A and other regular category is including royalty. But the full-year ’23, this run-rate of 800,000 boxes to 900,000 boxes will be actually equal in the next this thing. So is it like-to-like basis. This is a growth, including royalty.

Pankaj Kumar — Kotak Securities — Analyst

Including royalty. So net of royalty, how do you see that —

Abhishek Khaitan — Managing Director

As I said that this year we had a run rate of [Technical Issue] boxes per quarter. So this continues with the same this thing. On this base, the growth of P&A will be 15% to 18%, and regular will be in the mid digit, single-digit, including royalty.

Pankaj Kumar — Kotak Securities — Analyst

On the new brands that we’ve talked about, we will be launching in this royalty category as well as in the brown. So what are the plans and in this category segment that we are looking at?

Abhishek Khaitan — Managing Director

See, the new brands what we are looking at, one of the brands will be in the luxury segment. And the other will be in a — it will be a mid luxury or super premium.

Pankaj Kumar — Kotak Securities — Analyst

And sir, on this non-IMFL business, now we’ve got the price hike, so decent volume growth on that side as well?

Abhishek Khaitan — Managing Director

Yes, there will be a volume growth on the — because how we see that by in a couple of years that might be converted into IMFL. So that is what the trend, because that is where the green plant has been put up adding plus for the luxury segment and all our brands. So the volumes will increase.

Pankaj Kumar — Kotak Securities — Analyst

And the margin in this non-IMFL category would be at what level?

Dilip Banthiya — Chief Financial Officer

So it is actually now 7% to 8% after the price increase.

Pankaj Kumar — Kotak Securities — Analyst

Okay, sir. Thank you.

Operator

Thank you. Our next question is from the line of Naveen Trivedi from HDFC. Please go ahead.

Naveen Trivedi — HDFC — Analyst

Hello, am I audible?

Operator

Clear.

Naveen Trivedi — HDFC — Analyst

My question is again on the margin side, can you just explain about what is the gross margin difference between the P&A and the regular portfolio for FY ’23?

Dilip Banthiya — Chief Financial Officer

So overall margin in the IMFL business. EBITDA margin has been ranging between 15% or so, you are talking about gross margin, gross margin on the P&A category will be around — above 55% to 60%.

Naveen Trivedi — HDFC — Analyst

Sure, sure. And what about the regular portfolio?

Dilip Banthiya — Chief Financial Officer

Regular portfolio had been in the range of around 15% to 20%.

Naveen Trivedi — HDFC — Analyst

15% to 20%. So that gross margin sir you’re expecting this will become around 25%, 30% total next year.

Dilip Banthiya — Chief Financial Officer

Pardon.

Naveen Trivedi — HDFC — Analyst

I’m saying the gross margin expansion in the regular portfolio will be close to 20% next year?

Abhishek Khaitan — Managing Director

We are not actually looking at — we have done [indecipherable] where the prices — we have a comeback. It’s a matter [Technical Issue] and everything. So I can’t give you. But overall, as I said, that mix of P&A and regular category will have an improvement in margin in the gross side, our margin on the gross side used to be in the range of around 48 to 49-something, which has come down to 41%, there has been a knock of 800 basis points. So this will be mitigated by these all the levers of profitability, which we have talked about and the margin on — the gross margin will again go back on this but still volatility of raw material and other things are there. On the EBITDA side also, we are confident to achieve our margin on the mid-teen kind of thing during the course of this year.

Naveen Trivedi — HDFC — Analyst

Sure, sure. Just one thing I want to understand, the plant benefit impact on the gross margin side, apart from assuming there is no further volatility in the on the RM basket, how should we look at the benefit of the plant on the gross margin side?

Dilip Banthiya — Chief Financial Officer

We said earlier also that taking your own ENA versus buying out from outside gives a delta of around — now around INR10 to INR11. So now ENA, which we are going to use whether for our UPML or for the IMFL business, we are going to get that. As for the time being, we will export or sell in domestic market, but in three years’ time, all the ENA will be used for our captive consumption basis.

Naveen Trivedi — HDFC — Analyst

Sure sir. Thank you so much sir. That’s all from my side.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Rajendra R, who is an Individual Investor. Please go ahead.

Rajendra R — Individual Investor — Analyst

Yeah, hi, thanks for taking my question, so I had one kind of a broad organizational level question here. So your competitor, the market leader has separated. Prestige & Above brands and they’ve sold out or they are deprioritizing the popular branch. So. I mean, in your own case, the trend is very clear, we had 30% volume contribution from P&A that has gone to 40% and probably this year it will be 50% or above that. So do you have any thoughts on separating out the non-IMFL business or the popular branch that seems to. We bring a lot of volatility into the metrics?

Abhishek Khaitan — Managing Director

We don’t have any plans of separating out the business, because it’s all integrated, the plants are there. So there’s lot of GST implication in everything, so. There is no plans of separating it out. And what do we see UP is such a large state, 20% of the India’s population in Uttar Pradesh and the way the industry is galloping and we are the market leaders, we control, we have a market-share of close to 30% in the IMFL business. And if you see UP alone in the next five years, the way the growth is happening, the industry can go anywhere.

Rajendra R — Individual Investor — Analyst

Okay. Fine sir. Yeah. Just wanted to pick your brain on that one. So thanks for answering.

Operator

Thank you. Our next question is from the line of Mr. Himanshu Shah from Dolat Capital. Please go ahead.

Himanshu Shah — Dolat Capital — Analyst

Thank you, sir, thanks for the opportunity. That’s one question. In lower Prestige category, which brand we are having and is it available pan-India or what are the plans and for that particular category lower Prestige category?

Abhishek Khaitan — Managing Director

You’re talking about, Himanshu, the popular category, regular category, lower Prestige is all — we have the flagship brands like 8PM, Old Admiral Brandy and Contessa Rum. That’s all launches in last 15 years has been done P&A and above only, so we are continuing wherever these brands are stronger, and we make some money after the price increases. In that from — from that only, we plan to have a mid-single-digit growth in the coming year.

Sanjeev Banga — President, International Business

And we have in our presentation also highlighted the growth on each segment and also the key brands within that segment.

Rajendra R — Individual Investor — Analyst

Sorry sir. I was talking about low prestige as a category in McDowell’s No 1 and Imperial Blue kind of category.

Abhishek Khaitan — Managing Director

So, see, we have so far. really been unrepresented in that category, primarily because margins were not enough but from now with the positive response of various state governments on the price line, we have just introduced a brand called After Dark Blue and. It has started responding very well. We started it from Uttar Pradesh and some other states and we hope to make it big in this segment as well. But we will be confined to those states where it is profitable and the margins are healthy.

Rajendra R — Individual Investor — Analyst

Sure. And sir, just one more if you can help, what would be the volume size of the industry in this category — low Prestige category?

Abhishek Khaitan — Managing Director

Lower Prestige volume in the industry —

Dilip Banthiya — Chief Financial Officer

Will be about close to 50 to 60 million cases.

Rajendra R — Individual Investor — Analyst

Sure sir, thanks. That is very helpful, sir. That’s it from my side. Thank you.

Operator

Thank you. Our next question is from the line of Priyam Khimawat from ASK Investment Managers. Please go ahead.

Priyam Khimawat — ASK Investment Managers — Analyst

Yes. Hi team, thanks for the opportunity. Just wanted to understand post our greenfield commercialization of Sitapur and Rampur Dual Feed, what would be total ENA capacity in crore liters — grain-based capacity?

Dilip Banthiya — Chief Financial Officer

Capacity will be in a range of around 21 crores liter.

Priyam Khimawat — ASK Investment Managers — Analyst

So when we talk about the INR10 to INR11 delta per liter, can we expect INR200 crore improvement in FY ’25 on the gross margin basis?

Dilip Banthiya — Chief Financial Officer

See, first of all, you must understand that Rampur Dual feed plant had been converted because of the reason that first of all the industry is migrating from the molasses base to grain-based alcohol. And the dual feed, molasses availability in due course of time will continue to be declining and most of the molasses will be used for the ethanol blending. So to cater to the growing market of UP in UPML as well as in IMFL, we converted it it will give a delta of 1.5 crore liter per annum and the impact of that will be around INR10 per liter, but on the on the additional capacity being created that flight [Phonetic], earlier we were also utilizing on molasses, but in order to safeguard ourselves we converted on dual feed.

Priyam Khimawat — ASK Investment Managers — Analyst

Got it, got it.

Dilip Banthiya — Chief Financial Officer

Yeah, Sitapur, capacity will be additional, as it is we are buying 7 crore liter of grain alcohol for our IMFL business sourcing from various this thing, in due course of time, that will be used captively and we were constrained to increase our volume on P&A category without these expansions.

Priyam Khimawat — ASK Investment Managers — Analyst

Got it. Sir, and when we talk about the mid-teens kind of EBITDA margin, we are talking about exit run rate in Q4 FY ’24, not entire year FY ’24, am I correct?

Dilip Banthiya — Chief Financial Officer

So it will be achieved during the course of the year, start improving from Q1 onwards. But during Q3 and Q4, you will see that.

Priyam Khimawat — ASK Investment Managers — Analyst

Got it, got it, that’s all from my side. Thank you sir. All the best going ahead.

Operator

Thank you. That was the last question of our question-and-answer session. I now would like to hand the conference over to the management for closing comments.

Abhishek Khaitan — Managing Director

So thanks for joining us today on this call. We are confident of maintaining our long-term margin expansion given the premiumization of our portfolio. We recently received price increases both in IMFL and non-IMFL and backward integration. Further, the operating leverage will also start kicking in from FY’24. We look-forward to interacting with you on our next earnings call. In the meanwhile, if you have any queries for follow-up, please feel free to write to us. Thank you.

Operator

[Operator Closing Remarks]