United Spirits Limited (MCDOWELL-N) Q4 FY23 Earnings Concall Transcript

United Spirits Limited (NSE:MCDOWELL-N) Q4 FY23 Earnings Concall dated May. 19, 2023.

Corporate Participants:

Shweta Arora — Head of Investor Relations

Hina Nagarajan — Managing Director and Chief Executive Officer

Pradeep Jain — Chief Financial Officer

Pradeep Jain — Executive Director & Chief Financial Officer

Analysts:

Abneesh Roy — Nuvama Institutional Equities — Analyst

Himanshu Shah — Dolat Capital — Analyst

Avi Mehta — Macquarie — Analyst

Alok Shah — Ambit Capital — Analyst

Harit Kapoor — Investec — Analyst

Prakash Kapadia — Anived Portfolio Managers — Analyst

Akshay Bhor. — Citadel — Analyst

Akshay Thakkar — Fidelity — Analyst

Jay Doshi — Kotak — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to United Spirits Limited Quarter Four Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations from United Spirits Limited. Thank you and over to you ma’am.

Shweta Arora — Head of Investor Relations

Hi, Samant. Good afternoon, everyone, and welcome to United Spirits quarter-four and full-year ended FY23 earnings call. Today on the call, we have with us, our Managing Director and CEO, Ms. Hina Nagarajan who is joined by our CFO and Executive Director, Mr. Pradeep Jain. Hina will provide you with an update on business performance, while Pradeep will run you through financial performance during the period, post which we will open the call Q&A.

With this, I hand over the call to Hina for her opening remarks. Over to you, Hina.

Hina Nagarajan — Managing Director and Chief Executive Officer

Thank you. Shweta. Good afternoon all and welcome to our call. It’s a real privilege to speak with you again, and provide a comprehensive update on our operations, financial performance and growth prospects. This is the second full year since we launched our new strategy. Our team has been working tirelessly to deliver on our strategic objectives. We’re really excited to share updates on our recent performance and ongoing initiatives with you and as Shweta mentioned, I will cover progress on the three pillars [Technical Issues]. And, Pradeep will provide a deeper analysis on our growth and financial performance. [Technical Issues] performance better and you will find this reflected in the presentation.

After the presentation, we will open up for Q&A to go deeper into areas you want to understand further. So jumping straight into itself. Our mission is to be.

Operator

Sorry, ma’am, there is a break in the audio.

Hina Nagarajan — Managing Director and Chief Executive Officer

Yeah, Can you hear me clearly now?

Operator

Yes. Please proceed, ma’am.

Hina Nagarajan — Managing Director and Chief Executive Officer

Okay. So, everybody, our mission is to be a top-performing CPG company in India, delivering sustained double-digit profitable topline growth, staying true to our margin guidance of mid-to-high teens and delivering long-term value to all our stakeholders.

Next chart, please. As mentioned earlier, during the call, I will walk you through the business update for the year, both which PJ, will run you through the financial highlights of the year ended March 2023 and finally, I will talk about how we see the future.

Business update. Next chart, please.[Technical Issues] is built on three pillars, reshape of our portfolio, creating an organization of the future that will win in the future. That is getting radically redefine d by big societal and our cultural shift. And last but not the least, defining and executing and even more ambitious to doing for the society.

Jumping to the first pillar, let’s talk about portfolio reshape. [Technical Issues] portfolio reshape had called out a number of transformative consumer trends that decided what we should do for our business and portfolio and the mandates we had were to deliver breakout growth on Prestige and above, create new growth engines. And last but not least, value chain efficiency extraction to fund growth and mitigate inflation.

Our portfolio activatated new product offerings during the year. We’re, fully aligned with this strategy and let me walk you through some details.

Firstly, strengthening our play in upper Prestige with our three brands Signature, Antiquity, and Royal Challenge American Pride. Royal Challenge American Pride is available now in 75% plus salience upper Prestige market, it’s the fastest-growing brand and adding absolute incremental market-share gains for Diageo India quarter-on-quarter.

It is recruiting consumers beyond upper Prestige segment and delivering exceptionally well across all key consumer metrics. We received excellent feedback on the liquid. The top box lighting is 79%, that’s quite high compared to any benchmark and we are getting very strong repeats from consumers who have tried it.

Secondly, Signature to become the greenest whiskey for a [Technical Issues] young India, Last year, Signature had the highest growth delivered in the past five years and momentum well ahead of the categories. It has the second-highest equity among Prestige brands. Signature has associated itself with some of the most ecofriendly sustainable festivals in the country like the Ziro Festival of Music, Hills Festival, Open Festival. Our own Signature own festival of music for the Signature Green Vibes with four city additions across India. And we’ve seen a lot of consumer love for that.

And in an effort to sort of serve diverse consumer needs, we are expanding our footprints. So Signature Rare has been launched in the East. And actually Signature Premium has not [Technical Issues], which is a big milestone.

So we are closing the year on a high note on Signature and excited to kick off the next year with [Indecipherable]. If you see, we are really proud to present to you the re-imagined contemporary Antiquity Blue you can see on the picture on the chart. And what the new bottle looks like with that beautiful bird. It is currently launched across West Bengal, Assam, and UP. And we are looking at a national rollout completion by July 2024.

If I can now stop and let’s see a video on Signature.

Coming now to the next category, our mid Prestige and Royal Challenge brand. What you see on the screen is the New Royal Challenge bundle, which is now available in 85% plus salient markets nationally. The brand has experienced national volume growth in very-very high-double digits. Pradeep will talk a bit more about this.

Actually, this brand has grown by 40% plus. And the new brand positioning was brought alive through the song, Naya Sher, which is sung by DIVINE, Jonita Gandhi. It features Virat kohli. It has over 45 million views on YouTube and is available across all leading audio streaming platforms.

Can we have audio tape, please.

Turning next to and our flagship brand McDonald’s. As. I had mentioned last quarter, there is inflation pressure in this category. We have definitely seen that the level of upgrade from popular is slower than previous year, a direct impact of inflation on the consumer, but number one, [Technical Issues] just to grow ahead of the category for three years in a row. It has all the key calendar moments to embed the brands in culture. This year, we started [Technical Issues] with six IPL teams as the official celebrations [Technical Issues] to create a new language to express Yaari under the Number 1 Yaari Cheers [Technical Issues] 2022. During friendship day, McDowell created the anthem of Yaari song Yaro as a tribute to KK. The 360-degree campaign reached 65 million people across three states.

No 1 Yaarijam has given a further powerful musical vibe to our brand’s purpose. The Yaarijam came back post-COVID, it’s basically a congregation, a celebration of music where consumers are looking for a real reason to connect. There were nine big festivals across five states with a reach of 150 million plus across multiple media channels. Can we please have the Yaari video. So, after the exciting performance update on Prestige and above, let me now [Technical Issues] luxury and premium portfolio. We brought a brand-new offering from the house of Johnnie Walker called Johnnie Walker Blonde. It is our biggest ever innovation launch in the premium portfolio. It is now available in Maharashtra, Goa, HP, Uttarakhand, Punjab, Chandigarh and Telangana. Blonde is actually positioned between Johnnie Walker Red and Johnnie Walker Black and plays a strategic role of recruiting the next-generation non-scotch consumer because of a really accessible liquid.The focus in coming quarters will be to enter other geographies and continue to scale up the distribution and visibility in our launched markets.

A video on Johnnie Walker.

What you saw just now [Technical Issues] other than John Legend has sung with Raja Kumari, a very, very popular rapper]. I will talk a little bit more about this in the next chart. But coming now to Black & White. In the financial year ’22-’23, Black & White growth story has continued. India is now the largest [Technical Issues] market globally for Black & White, and this brand is set to cross 1 million cases this year. It is gaining share in all BII scotch category and international whiskeys. We launched Table for Everyone, which is our big play in culture, integrated activation and communications platform.

We brought diversity and inclusion at this table with our very first diversity, equity and inclusion campaign called Cards for Sharing with Black & White. The Hipster format for Black & White is also driving distribution, share and profitability for the brand. Let’s look at the video on Black & White.

[Video Presentation]

Coming now to the powerful U.S. and brand Black Dog. Black Dog is continuing its growth journey for renovation. We’ve seen significant improvements in our business and brand metrics on the brand. The brand now leads the scotch category with the highest brand equity, driven by strong meaningfulness and distinctivity. Our collaboration with global icon, Keira Knightley, saw an impactful activation throughout the year across digital and out-of-home along with the launch of Keira Knightley Limited edition offer [Technical Issues] credentials [Technical Issues]. Let’s see the video on Black Dog.

[Video Presentation]

Coming now to what I talked about, which is — next chart, please. the waters and core platform to celebrate and enable a community of [Technical Issues]. We keep working at the heart of all we do. Our vision is to inspire collaborators to take bold strides towards collective progress. We brought together two iconic creators who championed this narrative, John Legend, the second youngest and the first black man to win all the four big awards, Emmy, Grammy, Oscar, and Tony and renowned South Asian female songwriters and rapper, Raja Kumari. They co-created this inspiring Anthem titled Keep Working. On the fourth and fifth of March, we hosted the first ever Walker’s India store at Mumbai and Gurgaon, an experiential concert of 4000 plus core consumers across the spectrum of culture, art and entertainment to witness this collaboration come alive on stage while experiencing our brand Johnnie Walker in a very immersive format.

Coming now next to Godawan, our exciting new launch in the Indian single-malt category. Godawan continues to be rolled out. It has, in fact, last week been launched in New York in the U.S. I’m very proud to say that Godawan [Technical Issues] awards during the year. It has won the Grand gold and gold award at the Monday selection World Quality awards at Brussels, the Silver at World Spirits Awards, Austria. Superior Taste Award at the International State Institute Brussels. Brand Innovator of the Year for Allied Distillers at Icons of Whiskey, London. Also very pleased to say that our Allied Distillers where Godawan is made is the first distillery in Asia to receive the prestigious Alliance for Water Stewardship certification. And we have tied up with Source Global, a technology that helps us extract water from air. We are building a 200 panel water farm expected to generate 9,000 liters of water from air in the first six months and Godawan will be the first beverage alcohol brand to use soft water.

I can’t leave [Technical Issues] Nao Spirits has grown very strong double digit in the financial year gone by. Their innovation called Broken Bat, which was launched [Technical Issues] quite exciting. It’s an invite-only launch, was posted along with the screening of the World Cup final because this limited edition is dedicated to the 1992 Cricket World Cup. So super exciting. And Nao Spirits continues to power ahead with both their brand [Technical Issues].

I can’t skip the Women’s Premier League acquisition as part of RCB. The four pillars behind this investment are women as a cohort becoming increasingly influential in India. Our narrative on diversity and inclusion [Technical Issues] in India cricket and also creating another profitable business growth stream for the future. RCB is one of the most followed and loved T20 teams and is recognized as one of the most engaged sports teams on social media platforms. RCB has adopted the philosophy of play bold, which resonates both on and off the field. India tennis icon, Sania Mirza, has been appointed as a mentor of Royal Challengers Bangalore Women’s team in the Women’s Premier League, the pioneer in Indian sports for women, a youth icon, someone who has played bold and broken barriers throughout her career and a real champion on and off the field. We are proud to welcome Sania Mirza as the mentor of the RCB women’s cricket team.

In addition to the Godawan Award that I talked about, we have several other awards during the year for our brands. If you look at the left, multiple awards for our marketing initiative, for Johnnie Walker drone show, Signature, augmented reality campaign. Johnne Walker [Technical Issues] bring consumers back to the on-trade after a long shutdown and also a design excellence award for Black Dog renovation. And to the right, more awards for our Whiskey and Scotch brands. So you see Black Dog featured very, very prominently there along with Johnnie Walker blonde. So very pleased with all the awards and recognition for our innovation and renovation.

Coming now to [Technical Issues] 2 pillars. But before I go there, I just want to say our profitable growth is based on the virtuous cycle of driving top line growth through sustained A&P investments and driving improved price and mix and driving productivity to fund those A&P investments, which in turn drive top line growth and give us further ability to invest in our brands. So we think this is a very virtuous cycle. It’s working for us, and we want to continue to sustain momentum behind this model.

For the multiyear supply and extra [Technical Issues] going to unlock numerous benefits across the value chain. A few of the many benefits include conversion costs to enhance capacity utilization, optimize footprint by state enhanced return on capital employed, ESG benefits and co-location with ENA distillation. This program is on track as per our plan. And [Technical Issues] flow down with it. As you know, it’s a multiyear program. So over the next three years, we will make sure that we achieve and implement all the measures that we have taken under this program.

All right, coming now to the second pillar of ours, organization of the future. I’m going to give a very brief narrative on this. We’ve done a lot during the year, right? But a few things, right? We are continuing to focus [Technical Issues] on talent development, many coaching programs, career program. One particular one that I’m super excited about is launching the Diageo Digital Now, which has partnered with Circus Street to create a customized learning plan for each employee in the company to transform our digital capabilities in this very fast-changing and environment of digital. [Technical Issues] side, we continue to do many wellness sessions and also on which help new people who join our organization to learn more and more about our business.

On the culture side, we launched market-leading policies. We launched pregnancy loss guidelines. For those who may unfortunately experience pregnancy loss, we now provide expecting mothers up to 26 weeks and their partners 10 days of paid leave support in case of the unfortunate event of a pregnancy loss. Gender identity, sexual orientation and gender expression, which strengthen our commitment to LGBTQ+. Disability inclusion guidelines and [Technical Issues] women’s network and the rainbow network to reenergize our employee resource groups.

On the simplification side, radical liberation, where we cut 150,000 hours of wasteful work last year is in Phase 2, and we’re being used to continue to liberate our teams to focus on growth. And of course, the other big area for us is footprint and legal entity optimization.

On the digital side, next chart, please. We continue to build thebar.com, which is our platform for all things, social celebration and continue to use technology across the length and breadth of our organization, pave for automation, blockchain-based track and trace, artificial intelligence for image recognition to help strengthen our market presence and reach. Predict the analysis for sourcing and also the Diageo Bar Academy, which is our portal for our customers and bartenders who learn a lot and get education through the year, on various aspects of bartending.

Coming now to the last pillar. [Technical Issues] since the acquisition, we’ve had a strong track record in sustainability, and we wanted to go much, much further. The three goals that we have built in our society 2030 spirit of progress goals is driving ESG from grain to glass, moving India towards drink better or not more and leading inclusion and diversity. I will give you a few highlights of these during the year. On Learning for Life, which is our program for giving people business and hospitality skills, we have enrolled 1,400 students against a target of 1,100, 59% women could have completed the program and 868 placed with an average salary of INR12,000 per month.

On the Water Stewardship side, we continue to replenish — our target is to replenish more water than we consume by 2024. We have launched collective actions in Maharashtra and Rajasthan. And we are targeting to replenish 225,000 cubic meters of water this year. Our water use efficiency metrics are well on track as per the targets of this year. Our carbon footprint, we continue to drive down greenhouse gas emission, and it has reduced from 27,000 tonnes to 2,800 tonnes, an 80% reduction over the F20 emissions and we are sustaining 0 fossil fuel use across our distilleries.

On the positive drinking side, next chart, please. On the drinking side, we have educated 104,000 young people of water consumption against a target of 70,000. We created awareness amongst 172,000 consumers on the risks of drink driving against a target of 110,000. We’ve developed partnership with 25 regional transport offices across India to make drink drive a module before licenses are issued and we continue to spread the message of moderation.

Next chart, please. On the inclusion diversity side — can you go to the next slide, please? Yeah. On the inclusion diversity side, 50% of our India Executive Committee remain women, 35% of [Technical Issues]. Our company has 26% female employee representation now, which is a 2% increase from the last year. 50% of our new hires during this period have been women. We’ve also hired 60 workers and full-time employees who are differently abled working [Technical Issues]. I’m very proud to share that Diageo India was recognized as a silver employer by price circle on their India Workplace Equality Index. This index really measures the level of inclusion and diversity in Indian workplaces. And we are very proud to see the recognition for our ongoing initiatives on being a progressive company.

One very proud [Technical Issues] for us is our [Technical Issues] results. Next chart please. Overall employee engagement survey results we do every year [Technical Issues] score, which is 2% above last year, and this is four points higher than the Diageo overall and 14 points higher than any external benchmark. So it’s a very strong result. We’ve improved all our engagement scores with 95% of our people saying they are proud to work for Diageo.

Since about this call, you see to the right on top 85% which is our psychological safety score where 85% of our employees say they are able to raise ideas, concerns and opinions without fear. This is four points higher than 2022 and nine points higher than Diageo overall and really shows us that our initiatives to make people comfortable to express themselves is working. Our biggest opportunity area, like in adaptability and agility, is the 79% score that you see to the right. And radical liberation is one of the initiatives, amongst others, to — for us to continue to make our company more agile, more adaptable and keep up with the fast-paced environment we are facing.

Next chart please. Just to share with you a couple of recognitions on ESG. So Sustainalytics has rated us as a top-rated ESG company in the list of 2023. And [Technical Issues] about is now AWS certified. We have progressed significantly on our ESG journey from now BB rating to an A-rated organization, which I’m very pleased [Technical Issues] good milestones to have achieved.

Next chart. With this, I will hand you over to Pradeep to take us through the financial performance.

Operator

Sorry, sir, before we just proceed, may I take a minute to reconnect Ms. Hina. There was some site audio break in the line. Just quickly reconnect and then you may proceed.

Pradeep Jain — Chief Financial Officer

I will wait for your prompt.

Operator

Yes sir. Mr. Jain you may please proceed. We have Ms. Nagarajan reconnected.

Pradeep Jain — Chief Financial Officer

Thank you. So thanks, Hina, and a very good afternoon to all of you. As always, it’s a joy and a privilege to interact with this audience.

[Technical Issues] next chart. Yes, so what I wanted to share was, if you clearly look at our annual growth metrics, you see a ramp up growth momentum. And I will cover this in a little more detail in the subsequent slides. Our margins have remained resilient in an extremely inflationary environment. We have improved our performance on the key levers of pricing, productivity and mix management. And to round off, right, there are three or four things that we are extremely proud of during 2022, ’23, progressing the portfolio reshape in line with our strategy and vision, closing out the [Technical Issues] sale and the franchising transaction, launching the multiyear supply chain agility program and at the end of March 31, 2023, we are almost on the verge of wiping out our accumulation losses, and therefore, looking forward to get back to dividend distribution for our esteemed shareholders in the coming financial year.

Next chart, please. Okay. So what you see on the slide on the left hand is our reported NSV growth, less — the strategically reviewed portfolio, we have removed it from the base and the decision that we took of exiting Andhra Pradesh about four years ago, right? So those are the numbers that would be our reported NSV.

And what we have done on the right-hand side is we’ve also eliminated the COVID impact, right? The COVID impact. And therefore, what present on the right-hand side is the right organic growth of the business, like-to-like, right? And this gives a true picture of the accelerated momentum. We can focus on the two right-hand side charts that clearly reflect the momentum in our business. The Prestige and above for five years from ’16 to ’21 was at 8%. In ’21-’22, it moved up to 13%. And in ’22-’23, it has given us 17% growth. And similarly, if you look at the overall portfolio, from ’16-’21, we are at 5%. In ’22, we went to 9%. And in just concluded financial year, we are 15%.

Next chart, please. Okay. So this one is critical. This one is on an annual basis, and this plays to the feedback that we have received from this audience on multiple occasions that you do not have visibility to our growth construct in the Prestige and above segment. And this lays out 2022-’23 financial year, the annual growth construct achieved during the year, right, on our rebased portfolio.

It reflects the premiumization of the category and how we are feeding into it. And it also kind of substantiates the point that Hina and I have consistently made over the last four to six calls of sequential momentum in our Mid Prestige and Upper Prestige performance and that will reflect, right?

So let me just get you focused on the chart. On the left-hand side, you will see each of our subsegments of the Prestige and above segment broken up individually and the growth that we have recorded in each of these subsegments during the financial year.

As we have always said, the popular and the Low Prestige segment are under pressure, driven by the huge consumer inflation impacting the Lower [Technical Issues]c consumer, right? And from there onwards, if you look at our performance, Mid-Prestige have grown 43% during the year. Upper Prestige has grown 32% during the year, and luxury and premium has grown at 37% during the year, giving us a combined portfolio growth of 20% for the financial year ’22-’23,right.

If you focus on the right-hand side, right, I would request the audience to focus on the column in the middle of those three volumes. That gives us that out of the INR1,600 crores of growth that we have recorded in our rebased portfolio, how much have each of these segments contributed. And therefore, we do want to share that almost a third of our growth, actually a little higher than a third of our growth, almost 35%, has come from the Upper Prestige and the Mid-Prestige segments, where our innovation and renovations have been put in the market over the last four to six quarters and where we have been traditionally weak over the years, right?

Next chart, please. So building further on what I shared on the first slide, right? I have already shared the growth construct and how Mid-Prestige, Upper Prestige are improving their contribution into the growth construct. I think this chart now is focused on the value chain efficiency. Pricing and revenue growth management on the top right, enterprise productivity on the left and overall working capital efficiencies to extract free cash flow from the business to the bottom right.

Hina spoke about the virtuous cycle, right? and our proven productivity muscle is a big enabler of the virtuous growth cycle. Next chart, please. Now Hina has already talked about A&P being such a critical component of the virtuous growth cycle. I mean I prefer to loosely refer to it as the only good cost in the P&L. To the point we wanted to make was that we will continue to make A&P investment to drive sustained profitable growth and build brands that are iconic. And looking at the chart, you will see that, that as we kind of step up A&P investments, it reflects in the NSV realization per case on the right.

Next chart please. So this is a directionally visual depiction of our portfolio on the two key financial metrics of EBITDA margins and return on invested capital. I think what we want to convey through this is not only is our portfolio of complementary in terms of offerings and price ladder, but hugely complementary on these two financial metrics, which makes it almost an all-weather portfolio.

Next chart, please. And to round it up, right? Just wanted to finish with the return on capital employed. Now the number is showing a dip. As all of you are aware, that we are sitting on surplus cash on our balance sheet right now. And hopefully, we shall address that as well in the current financial year.

Just wanted to take the opportunity to reassure that we remain committed to create value for our esteemed stakeholders as we reset the portfolio for a sustainable and successful future.

With this, I hand over back to Hina to conclude the management presentation for today, post which we will open up the floor for Q&A. Hina, back to you.

Hina Nagarajan — Managing Director and Chief Executive Officer

Thank you, Pradeep. Just looking ahead, still like to conclude by saying, look, the environment remains challenging. We are seeing continued inflation headwinds over [Technical Issues] end of Prestige. Both of us have reiterated that Popular and Lower Prestige is seeing the impact of inflation for our consumers — inflation on our key commodities is not abating yet, right? So we expect volatility to continue. Also seen during the year that [Technical Issues] quantum of route to market changes has been reasonably high. And every time that happens, business does get adapted to the route-to-market changes, and we have to look elsewhere for growth, but that is business as usual for us.

And in our industry, headline pricing trails inflation. But we feel extremely confident that our strategy is working. We feel very buoyant about the future [Technical Issues] future back strategy that is focused on buoyant macroeconomic outlook for India. Lifestyle changes, premiumization, million new consumers coming into alcohol and India becoming one of the most affluent in the next few years.

We have a very resilient and complementary portfolio right across the price lag [Technical Issues] as PJ said also on the financial metrics. Productivity muscle, we have strong sustainability agenda, something that’s only going to be even more important as we go along and a license to operate actually, and we feel [Technical Issues] in this and last but not the least, our competitive advantage of our people and culture.

So we feel very optimistic about the future, about our strategy. And that strategy is working, and we will continue to perform. So with that we would like to now move on to questions and answers.

Questions and Answers:

Operator

Ladies and gentlemen, before we go ahead with the Q&A since there is still a break in the audio line from Mr. Hina Nagarajan. We would like to reconnect in a different method. So we request all participants to please bear with us for another minute while we reconnect Hina Nagarajan. [Operator Instructions].The first question is from the line of Abneesh Roy from Nuvama Institutional Equities.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Thanks and congrats on strong P&A growth. My first question is on P&A only. If you could give us some clarity on how Upper Prestige has done within this and in FY ’24, would you expect a good double-digit growth trend to continue here, given Diageo is also back and big fat weddings and a lot of the office [Technical Issues] events, travel, etc., is back, but the other hand, when I see other decision in segments like QSR apparels, they are seeing challenging times in terms of demand. So I wanted to do a clarity on FY ’24, how do you see in terms of growth trend?

Hina Nagarajan — Managing Director and Chief Executive Officer

Sure. Hi Abneesh. Good to see you on the call again. So I would say for Abneesh, overall, the trend we are seeing is that the upper middle and the high-income consumers remain resilient, consumption and demand remains resilient in those segments. And the category growths are pretty robust in Upper Prestige and Mid-Prestige. So we do expect consumption demand to remain so going into FY ’24 for the reason that, a, socializing is back with a bang, all the bar, hotels, everything is full, right? We are seeing more and more new consumers come straight into the upper end of Prestige also.

And also travel is reutilized. You’re seeing a lot of tourist traffic. So our outlook for F ’24 remains buoyant for the Prestige category. And as Pradeep had shown, Upper Prestige has done a very robust 24% growth, and that is talking on the back of the renovation of Signature, the launch of Royal Challenge American Pride and now we are rolling out the renovated antiquity, so we feel confident that our innovations, renovations will continue to fire in the market, and we will continue to see very good growth on this category.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Thanks. My second question is on the cost side. So in terms of advertising spend, I understand this quarter is high because Diageo came to normalcy. But you als o mentioned that ad spend is the only good cost in P&L, so I wanted to understand for FY ’24, do you think it will be in the overall 8% to 9% as a percentage of sales. And specifically in first half, because Diageo is still coming back to normalcy. Are there higher actions done in first half, would there be higher action? Because last in fact, it was very low in the first half. So I wanted more sense on that.

Himanshu Shah — Dolat Capital — Analyst

I would say, Abneesh and Pradeep feel free to add after I have spoken. I would say, Abneesh, I think, as we said, it’s a good spend and we do want to create brands for the long term and continue to actually scale up both the Prestige renovation, innovations. And, [Technical Issues] which is largely now normalized in the market, right? So we will look at a normalized spend of the range of about 9% to 10% on an annualized basis.

And clearly, yes, you are right. I mean, normally, the first half tends to be a bit stronger because of the season right? Because we have the festive season, especially in Q2. So we do expect to do a business as usual in a normal year. We would — we do upweight A&P in the second quarter, particularly, I mean, in the third quarter, which is the festive quarter. So I would say that I think you expect an annualized spend now of about 9% to 10%. Pradeep please add if you want to add any other comments.

Pradeep Jain — Chief Financial Officer

No. So nothing really major to add, Abneesh. Hina covered everything, 9% to 10%. And if you see this, that’s by and large the earlier reinvestment rates dropped up for the divested portfolio, right? And just clarified, which Hina has clarified in the latter part of the response. On the Indian fiscal year, our peak A&P typically happens from July to December, right? So as we build into the season, etc, right, this time was a bit of a blip, right? So therefore, hopefully, that will get corrected as we progress.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Sure. One follow-up on the cost was, what is the outlook on, say, glass and ENA and we are seeing deflation in generally in most commodities. So you will also benefit because of the packaging cost and the distribution costs becoming lower. So apart from these and the Telangana price side, is there anything more which can help us in terms of EBITDA margin improvement in FY ’24?

Pradeep Jain — Executive Director & Chief Financial Officer

So let me take that, Hina, if you’re okay. So Abneesh, again, it’s a running set of initiatives, right? As you’re aware, our monocot removal program started sometime in Jan-Feb, so that will reach its full realization as we get into the financial year ’23, ’24, right? Similarly, our supply agility program will also start ramping up on improvement. Having said that to your core question that have the commodities really scaled back on neutral alcohol spirits, I’m afraid, probably no, right? And if you look at it, it’s an election year approaching. The minimum support prices will see higher price increases. We are hearing El Nino, etc. The buffer commodities remain the agri commodities, etc. So therefore, ENA, our sensors will probably remain inflationary. Gas, there has been some green shoots, right? The natural gas pricing intervention made by the government has provided some support. We are in discussion with suppliers if we can get some rollback on account of that.

Abneesh Roy — Nuvama Institutional Equities — Analyst

So one last quick question on the talks with the regulators. We have seen Haryana, for example, allow — corporate 0officers are allowing beer and wine at workplace. So I wanted to understand for spirits, how is the advocacy talks going on with government. I know these things take a lot of time. But is it that now beer and wine are getting a bit more flexibility from regulators? And could this be replicated in more states, you see that because then it will become a challenge for the Spirits business.

Hina Nagarajan — Managing Director and Chief Executive Officer

I mean our advocacy, Abneesh, continues. It’s a regular ongoing initiative for us. It’s not that we stop or start every now and then, right? I think there are many big areas of advocacy related to pricing, can we get sort of inflation indexed pricing, route-to-market discussions, et cetera. I mean Haryana has been relatively a more progressive stage. So they’ve started with beer and wine. I mean we are in discussions with them to see whether we can get Spirits included. I mean, as of now, we don’t see that this will become something across space. Every state has its own policy. But we are watching and working through this space.

Abneesh Roy — Nuvama Institutional Equities — Analyst

So, thanks. that’s it from my side.

Hina Nagarajan — Managing Director and Chief Executive Officer

Thank you, Abneesh.

Operator

The next question is from the line of Avi Mehta from Macquar. Please go ahead.

Avi Mehta — Macquarie — Analyst

Hi, thanks for the opportunity. I just wanted first to understand the Telangana price change. If you could help us understand what is the expected benefit? And how should we look at that?

Pradeep Jain — Executive Director & Chief Financial Officer

Yeah. Let me take that, Avi. So Avi the price increase is effective, right? And it’s about a 6% to 7% price increase, right? So it should give us, hopefully, about INR40 crores to INR50 crores annualized number, but the only thing I would want to caution is like, I don’t think we should look at it as one state, right? There is always a portfolio, right? And we are always trying to balance our margins, as well as our growth, right? So my only guidance will be don’t look at it as one state and layer that on incrementally in your modeling. Multiple things happen, right, in the entire pricing cycle.

Avi Mehta — Macquarie — Analyst

[Technical Issues] — I’m sorry, this INR40 crores to INR50 crores is a given, right? I mean, so it’s logical.

Pradeep Jain — Executive Director & Chief Financial Officer

Absolutely. Absolutely.

Avi Mehta — Macquarie — Analyst

Okay. Okay. Okay. So in this context that you’ve got like a benefit that has come in, and hopefully, it continues in the other states. But you’re kind of focusing on investments. There’s also the input cost headwinds that you highlighted, how should we look at the full year margins for FY ’24 when we take the readjust base of 13.5%. I mean how should we kind of — how are you looking at it internally? And if you could help us understand within the quarters, just from a priority perspective, if you could give us some sense on how do you internally see this?

Pradeep Jain — Executive Director & Chief Financial Officer

Yeah. So Avi, I don’t think I would want to get into quarter-wise, right? As we have shared multiple times earlier, we do manage our business on a full year basis. I think we did spend some time on this in the last quarter. If you look at the two broad one-off impacts, right? And we called it out very, very transparently in our financials, right? There is a one-off credit that we have in that 13.5%. And then there is this inflated A&P for the quarter, right? Neutral life for these two, I think right now, the business is sitting at about a 14% EBITDA margin, right? And as mentioned in the last quarter, our first milestone is to get to about 15%, right? So that is what we will target to achieve on financial year ’23-’24 basis. Once we achieve that, we would want to move on from there, right, back to probably the 16.5%, 17% that we were operating at during the ’19-’20 period. Does that help?

Avi Mehta — Macquarie — Analyst

Sorry, it’s 16% in FY ’24 and not by end FY ’24, just wanted to clarify that.

Pradeep Jain — Executive Director & Chief Financial Officer

That will be our aspiration, right? Obviously, subject to many things happening. But yes, that will be our aspiration.

Avi Mehta — Macquarie — Analyst

Okay, perfect. And just lastly, this gross margin impact is because of a timing impact that is — it was during the year only? Or was it I mean how much was the quantum that was just earlier year period that has come in, is that what you were signaling by the last clarification that you mentioned?

Pradeep Jain — Executive Director & Chief Financial Officer

I didn’t get the question, Avi.

Avi Mehta — Macquarie — Analyst

So that there is a onetime gross margin benefit in the year, which means that this I thought the 4Q impact was just from during the year provisions. It’s not. It’s something that has been going from earlier year.

Pradeep Jain — Executive Director & Chief Financial Officer

It’s for the prior years also, right? So it’s in the quarter. The quarter impact is — we called it out in our [Technical Issues] as well as enough financials, that will give you a good sense.

Avi Mehta — Macquarie — Analyst

No, no, perfect. And I just wanted to thank you for the additional disclosure on the portfolio. It’s really, really helpful. Thanks a lot for this.

Pradeep Jain — Executive Director & Chief Financial Officer

Thanks a lot, Avi.

Hina Nagarajan — Managing Director and Chief Executive Officer

Thanks Avi.

Operator

Thank you. The next question is from the line of Alok Shah from Ambit Capital. Please go ahead.

Alok Shah — Ambit Capital — Analyst

Yeah, hi, thanks for showing this portfolio construct. It helps a lot. My first question was, if I look at this year’s volume growth of 12% and not commenting on the [Technical Issues] in terms of the group rate, especially in the Mid and Upper Prestige and onwards and then when we try to reconcile that with our old transcripts where you guided for about 4% to 5% volume growth. I don’t know, but there seems to be a disconnect. So is it more a function of skewness in terms of volume towards the lower Prestige, etc, or do you revise that guidance of 4% to 5% volume growth.

Hina Nagarajan — Managing Director and Chief Executive Officer

Pradeep, do you want to take that?

Pradeep Jain — Executive Director & Chief Financial Officer

Yes. So Alok, I mean we are sitting in different places today, right? So do pardon us for the lag, right? So if I get your question, your question is that we had deconstructed the broad 10% to 12% growth earlier and the volume growth has come much higher there — much higher than that. And therefore, would we want to revise our guidance. Is that the question, Alok?

Alok Shah — Ambit Capital — Analyst

Yes, yes, absolutely. Because there’s a lot happening in mid Prestige [Technical Issues] strong double-digit growth in terms of value terms. So I thought I’ll just get a sense on that.

Pradeep Jain — Executive Director & Chief Financial Officer

Right. So look, I said are we completely out of the volatile period? I would probably say no, right, the commodities remain on a boil. It’s still a fairly inflationary environment, right? So therefore, I would not want to say, probably on the demand side, we are back to steady state. But on the cost side, we are still not, right. So therefore, we would want to wait a little more. But our aspiration will be to continue to deliver on the momentum that we have generated in the last two years, right? There is no reason why we would not want to deliver the growth that we have delivered in 2022-’23 and maybe a couple of quarters down the line, we should be able to talk about guidance as well.

I don’t know, Hina if you want to add to that?

Hina Nagarajan — Managing Director and Chief Executive Officer

So I would just say that, I mean, as we started making out our renovation — innovations, I mean, we do get that volume uplift, which is a little bit higher than our business-as-usual situation, right? So I can’t say that the norm and absolutely, I think we are in a very volatile period. Route-to-market changes, we don’t know what will happen during the year. So there are so many factors. So I don’t think we can give you a guidance on volume. I mean we will stick to our guidance of double-digit top line growth in terms of value. And at the appropriate moment, we will review this guidance.

Alok Shah — Ambit Capital — Analyst

Sure, sure. My second question was for this quarter. If we see within COGs, the purchase of finished goods has jumped, so this probably means that the sales of [Technical Issues] because it’s also [Technical Issues] has been quite good. So anything to call out over here or going ahead, we should expect this kind of bumped up run rate in that and would that have also lifted gross margin to some extent?

Pradeep Jain — Executive Director & Chief Financial Officer

Yea. So let me take that. So look, our normalization started sometime in mid-November to late November, right? So when we say that this is full normalization. This is the first quarter of 90 days, which were fully normalized, right? And therefore, obviously, a little bit of pent-up demand for our brands, et cetera, leading to higher rotation also during the quarter, very difficult to quantify. We don’t believe there is any pipeline filling impact during this quarter, right? So I would say now it’s pretty much normal and it will pretty much continue like that.

Alok Shah — Ambit Capital — Analyst

Okay. Got it. The last was a bit on the theoretical front, but I just wanted to get a sense if it’s possible. Usually, when a renovation or innovation happens that typically leads to what percent of the volume in the first 18 months. Any sense that you can give in terms of percentage of overall volumes or something of that. So just to understand this piece of launching of [Technical Issues] a little better going ahead.

Hina Nagarajan — Managing Director and Chief Executive Officer

I don’t quite understand the question. What do you mean the percentage of volume?

Alok Shah — Ambit Capital — Analyst

Basically, what I’m saying trying to get is, for example, [Technical Issues] can try it is something that we relaunched or launched this year and going ahead also, there will be new renovations, innovations. So that will initially help because gradually, you go pan-India. So of course, every brand will have a different saliency, but anything just to get a theoretical understanding what is the bump up that we can expect going ahead with the slew of launches that you are planning?

Hina Nagarajan — Managing Director and Chief Executive Officer

Yeah, I think typically, for — I mean, you can — like let me give you an example. McDowell #1 was we launched three years ago, and we continue to see market share competitive performance, right? even after three years. So it’s difficult for us to say that it will grow up to 1.5 years and not grow after that. It really depends on how the proposition is addressing consumer needs, right? And it can be a permanent growth phenomenon.

I mean, as you see, even the regular brands in the market, some of them just grow consistently year after year, even though they don’t have renovation. So I would say that it depends on the strength of the proposition and the connect with the consumer needs, and we are very — actually, our products are performing really well against that, right? So the Signature renovation, the Royal Challenge American Pride they are really addressing untapped needs in the market. So I don’t expect that the result will [Technical Issues] off in 18 months or whatever. We’ll just see. But we expect this to remain powerful over the next couple of years.

Alok Shah — Ambit Capital — Analyst

Okay, perfect. I have a few more questions. I will get back in the queue.

Pradeep Jain — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from Harit Kapoor from Investec. Please go ahead.

Pradeep Jain — Executive Director & Chief Financial Officer

Yeah, hi, Harit.

Harit Kapoor — Investec — Analyst

Yeah, hi, good evening. I just had two questions. One was on pricing growth. I mean, last year, you mentioned FY ’23 that you’ll be happy to take about 1.5%, 2% at an overall portfolio level, given that you’re already 0.5% into Telangana, I just wanted to make your sense about how you look at the pricing growth and what’s your aspiration for that [Technical Issues]?

Pradeep Jain — Executive Director & Chief Financial Officer

Yeah, So again, I will provide a slightly theoretical construct, right? I mean I’ve already shared the numbers in the document this time, right? So we are clocking about between a combination of headline pricing and our revenue growth management interventions. We are clocking close to INR200 crores, right, in the financial year, which on a rebased NSV base of about, let’s say, INR8,100 crores, that comes to almost 2.5%, right? So clearly, it’s one of the best years, one of the best years we have had.

Now to your question, Harit, so on a steady state, broadly, if you take inflation of 4%, we have always staffed ourselves that we should try and neutralize 50% of that 4% inflation through management productivity, right? And the balance 2% right, should ideally be neutralized through a combination of headline pricing, revenue growth management and your mix management [Technical Issues] Right? So that’s the broad consumer that we try and aim for. Now in reality, it varies, right? I mean, on pricing, if you look at our five-year trend that we have shared in the document, you will see that probably for the last three years, we hardly realized any [Technical Issues], right? Therefore, and therefore, you have to press some of these levers a little extra, right? And despite all that, at times, you end up diluting margins that we have done over the last couple of years, right, in this extreme inflationary environment. Does that help?

Harit Kapoor — Investec — Analyst

Yeah, yeah. This is helpful. The second question was on the innovation and renovation plan. I mean you’ve done quite a few things over the last 12 months and specifically over the last, I would say, 3 to 4 months as well. I just wanted to get your sense about over the next, say, six to five months, is it going to be about making sure you execute some of these plans, which you’ve already put out in terms of the Royal Challenge [Technical Issues] side, the Base Royal challenge as well as [Technical Issues] you should expect more from even in the next 12 months on renovation and innovation.

Hina Nagarajan — Managing Director and Chief Executive Officer

Harit, I always say we have an and strategy, not in our strategy. So I mean, clearly, the first priority is to scale up and build what we have launched as renovations and innovations because in our category, I mean, like Royal Challenge is a big renovation. So we are going to build the full muscle behind it, right? But that — our innovation pipeline continues, and you will see more, right? So whether in the existing categories or we are watching momentum in newer categories and we will see, right? When the momentum is right, when the categories mature, we will bring in more. So it will be an ongoing sort of innovation launch plan. So the pipeline is developed and my team is working on that. And we will see more excitement as we go along.

Harit Kapoor — Investec — Analyst

Great. And the last question is on market share. So you have three categories, Mid-Prestige, Upper Prestige, Luxury and Premium, all three have been extremely [Technical Issues] in fiscal year ’23. Would it be safe to think that broadly across these three categories, we would have seen your holding or gaining share.

Hina Nagarajan — Managing Director and Chief Executive Officer

Yes, you can assume that, yes, we have performed extremely competitively across these categories.

Harit Kapoor — Investec — Analyst

Great. Wish you all the best and great presentation with the [Technical Issues]

Hina Nagarajan — Managing Director and Chief Executive Officer

.

Thank you so much, Harit.

Operator

Thank you. The next question is from Prakash Kapadia from Anived Portfolio Managers. Please go ahead.

Prakash Kapadia — Anived Portfolio Managers — Analyst

I have two questions. If I look at historical data, since 2014, last decade, our excise duty was 60% to, I think, 69.5%. And now post the divestment of the portfolio, it is around 57%, 58% last sizing two quarters. So will this stabilize from hereon? Will it improve? And if you could give us some sense how much of state impact does it have on overall excise duty?

Pradeep Jain — Chief Financial Officer

Yeah, sure. So Prakash, we don’t even make an attempt to try and get into this kind of a reconciliation, right? Because unfortunately, there are 29 states and seven union territories with very, very different excise structure, which run into thousands and thousands of [ slabs ], right? But directionally, I think the data that you have shared seems to be passing the [Technical Issues] check, right? Because as you go up the pricing ladder, excise duty as a percentage continues to come down, right? So as a divesture of the portfolio, right? And as we are — our mix is gravitating towards the higher end of the consumer ladder, et cetera, excise duty as a percentage will come down, right? That’s all that I would want to say.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Understood. Understood. And pre-COVID to now, will it be fair to say Maharashtra, Karnataka and Tamil Nadu would be a top three states in terms of value sale?

Pradeep Jain — Executive Director & Chief Financial Officer

No, we’ve never given those kind of breakups. What I can say is Tamil Nadu, we have a very small business. It’s a franchise business. So Tamil Nadu is certainly not. Yes. And on others, we’ve never given the salients. Maharashtra is a big state for us, and that provides you any comfort.

Prakash Kapadia — Anived Portfolio Managers — Analyst

And lastly, Pradeep, if I look at employee cost, is the current quarterly run rate a good base to start with for building FY ’24 and beyond because that has seen a decline both the divestment portfolio even on a sequential basis? Or there could be some further decline as we move forward from this base.

Pradeep Jain — Executive Director & Chief Financial Officer

Prakash, again, I think we did guide in the last quarter also. The good run rate is take a four-quarter ruling run rate, and that’s pretty much, right, the indicator of the right run rate. So if I look at — if you look at our rebase number, I think we’re in that INR595 crores to INR600 crores kind of a range, right? So that INR145 crores to INR150 crores per quarter is a good range. Depending on accounting, there are some pluses and minuses, right? When the actuarial valuations happen, et cetera, et cetera and all that, right? So don’t get too bothered by that.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Sure. Sue. Fine. Fine. That was it. And congrats, Pradeep on the elevation to the ED role.

Pradeep Jain — Executive Director & Chief Financial Officer

Thank you.

Operator

Thank you. Next question is from Himanshu Shah from Dolat Capital. Please go ahead.

Himanshu Shah — Dolat Capital — Analyst

Just one clarification. The Luxury and Premium portfolio, does the entire portfolio, the revenue that satiating in that portfolio has a distribution arrangement? 31%, 32% revenue contribution there from the Luxury and Premium portfolio.

Pradeep Jain — Executive Director & Chief Financial Officer

No, Himanshu, no. That also contains Black Dog. It contains the new kid in the block, Godawan, which we expect to become quite big in the next eight to 10 years. It also includes Smirnoff, which is a royalty model and not the [Technical Issues] pricing model. So there is quite a bit sitting in there also. Right?

Himanshu Shah — Dolat Capital — Analyst

Sir, can you provide some color, like what would be on [Technical Issues] arrangement out of this portfolio.

Pradeep Jain — Executive Director & Chief Financial Officer

No, we don’t do that, Himanshu. I think we’ve made progress towards addressing your core concern about the industrial concerns about the Prestige breakup. This is something that we don’t want to disclose in that level of granularity.

Himanshu Shah — Dolat Capital — Analyst

Second thing, sir, in 1 of the slides, Slide 36, you have outlined [Technical Issues] changes as one of the key constraints basically sales and quantum of our market, so is there any [Technical Issues] change which has also happened or it is something that we are emphasizing because of the election, some talks or discussions undergoing now.

Pradeep Jain — Executive Director & Chief Financial Officer

So let me.

Hina Nagarajan — Managing Director and Chief Executive Officer

Pradeep, you can answer that.

Pradeep Jain — Executive Director & Chief Financial Officer

No, no. So I was just starting Hina, and I would have anyway kind of leaned on you to kind of compete the answer. I think we were reflecting that [Technical Issues] have gone by, yes, Himanshu and kind of crystal ball giving a little into the next financial year. I think ’22, ’23 has been quite volatile, right? The Delhi RTM, which will — we have put in so much of heart mind body and sold into that transition, et cetera. And that being unwinded and then between the Jharkhand, Chhattisgarh, et cetera, right, a lot of RTM and back-to-back changes, et cetera. So I think that’s what was probably reflecting in our minds when we put that comment. But maybe if Hina wants to add anything to it.

Hina Nagarajan — Managing Director and Chief Executive Officer

No, that’s it. I think basically, the year gone by was volatile, and we are saying that, look, route-to-market changes will happen. And — but we have the muscle to sort of when 1 state goes down to look at other revenues of growth and, in general, expand our shares across states. So as you rightly said, [ Pradeep ], it’s a reflection of the year gone by, saying that this is also an element of volatility that we face, and it could continue. We don’t know. But we have seen route-to-market changes every year. So it’s one dimension of volatility along with inflation and everything.

Himanshu Shah — Dolat Capital — Analyst

Sure. Can I squeeze in one more question?

Pradeep Jain — Executive Director & Chief Financial Officer

Yeah, Yeah, go ahead.

Hina Nagarajan — Managing Director and Chief Executive Officer

Yes, please go ahead.

Himanshu Shah — Dolat Capital — Analyst

And lastly, sir, on A&P spend, 10% guidance. So earlier, it was 8% to 9% in Popular was part of base, now that 15% across revenue contribution has gone away. And the luxury portfolio is growing at a much faster pace in that fact. Is there any kind of risk commitment to the 9% to 10% A&P spend guidance, which we are guiding for FY ’24. Will it overshoot that.

Pradeep Jain — Executive Director & Chief Financial Officer

So Himanshu, a lot depends on as our P&L roll up, et cetera. We do continue to make some calibrated calls of investments as well as at times, a little bit of holding back, et cetera. So I think the range is reasonably safe. To your point, only, I think our guidance was 8% to 9% earlier, gross it up for the 15% divestiture and the franchising, et cetera, it automatically comes into the 9% to 10% range, right? So therefore, we are pretty much staying with the same guidance. But yes, I think you make a right point that the top end of the segment is growing at a much faster and we will continue to calibrate that, right? I don’t see a fundamental risk to the ’23, ’24 guidance.

Himanshu Shah — Dolat Capital — Analyst

Right, thank you sir, highly appreciate that. Thank you.

Hina Nagarajan — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Akshay Bhor from Citadel. Please go ahead.

Pradeep Jain — Executive Director & Chief Financial Officer

Hi, Akshay.

Akshay Bhor. — Citadel — Analyst

Hi, Pradeep and Hina for thank you for the opportunity. So, my first question is for you, the margin target for F ’25 the 16.5% to 17%. I just want to understand, Pradeep, if you can qualitatively or quantitatively comment around what the internal initiatives are [Technical Issues] to get there and if you can also talk about how much of this would come from supply chain initiatives that you talked about last quarter? And then [Technical Issues] there are other cases that we should watch out for?

Pradeep Jain — Executive Director & Chief Financial Officer

Yes. So look, what I have called out is our first milestone is about 15%, right? What we’ve also called out is that normalizing for the 1 or 2 outlier shifts in the current quarter that has just gone for which we are discussing. Our steady-state margin of the business is roughly around 14%, so clearly, our first milestone is to get back to 15%, right? And that’s something that we will really kind of go after.

Once we reach that, right, we will have to figure out the next set of alternate next set of initiatives to reach that back to the 16.5%, 17% margin. Now in that, some are long-term initiatives that have already started being rolled out. For example, the supply agility program, Clearly, we have shared the number that we intend achieving out of it, et cetera. That should, on a very broad basis, give us about 1 to 1.5 percentage points of margin, right?

Once it’s completely executed, right, and it’s kind of saved in the P&L, right? And then we will figure out, it’s pretty much the same construct of — if we can manage to negate inflation through a combination of productivity and headline pricing from revenue growth management, on a sustained basis, then your mix management and as we premiumize the category, will provide us the margin kick out.

In some years, hopefully, the commodities, etc., will unwind to some extent, et cetera, that will provide us some additional kicker to grow the margin faster. That’s broadly the construct. I think we have also demonstrated a fairly reliable track record of being extremely disciplined on our organizational overhead cost as well as our — yes, on our organization as well as our overhead cost.

Hina Nagarajan — Managing Director and Chief Executive Officer

Pradeep, I just want to clarify to Akshay. I heard you say that you set a target of 16.5% to 17% for F ’25. I just want to clarify that you didn’t say that. You didn’t say that the target for F ’25 is 16.5%, 17%. Actually, we said our aspiration is to get to 15% first and after that, get to 16.5% 17%, and we are not giving a time of F ’25 for that, but we are saying we look at the initiatives to get there.

Pradeep Jain — Executive Director & Chief Financial Officer

Absolutely. Sorry, I didn’t pick up the F ’25. Thanks.

Hina Nagarajan — Managing Director and Chief Executive Officer

Yes, yes. That’s why I thought.

Akshay Bhor. — Citadel — Analyst

That’s a helpful clarification. My second question was just on pricing. I want to understand, Hina, what are the efforts as an organization you’re doing to get better pricing from the states. And this time around, it’s quite straightforward in a way that your margins show the cost pressure for the cost items are quite clearly a headwind. Just want to understand as an organization or I guess [Technical Issues] industry, what are the efforts that [Technical Issues].

Hina Nagarajan — Managing Director and Chief Executive Officer

I mean, I think this is an ongoing advocacy that we do, right? And it’s done both at the state level and also at the central level. And both individually as companies — all the companies in the industry as well as through the industry association. So we will continue the advocacy. I mean, at the state level, we talk to them and we always showcase the inflation level and request for price increases and have ongoing dialogue on that.

And on the central level, like I had mentioned earlier, we are trying to do — see if we can work with the government on policy intervention. For example, can we have an indexed model to inflation for pricing. So our teams are working on how do we get something like that through. These are long timely — long lead-time exercises. So conversations are on, and we will continue to do that. But in the meanwhile, we will press the levers of productivity, mix, premiumization revenue growth management and whatever pricing we can get, right? to manage year-to-year.

Akshay Bhor. — Citadel — Analyst

Correct, thankyou, and all the very best.

Hina Nagarajan — Managing Director and Chief Executive Officer

Thank you so much.

Operator

Thank you. The next question is from the line of Akshay Thakkar from Fidelity. Please go ahead.

Akshay Thakkar — Fidelity — Analyst

Thank you for the added disclosures this quarter. Really appreciate this and will help us drive the business a lot better. Pradeep,just on the margin commentary that you had for next year. So if I just look through the margin waterfall that you’ve shared for Q4 and full year, there is some operating deleverage because obviously, the business was sold. Does this continue in H1 as well? Or the [ 23 ] number that we are now seeing, that’s a clean one? And we shouldn’t see an incremental one. I’m just trying to understand, in the 14% guidance for next year, is there still a small drag from the transaction or ’24 is like a clean number now?

Pradeep Jain — Executive Director & Chief Financial Officer

Yeah. So Akshay, here is my [Technical Issues] on it. Look, we have to be transparent about the impact of the traditionally reviewed portfolio. Therefore, we share those EBITDA bridges. See, in our mind, what we now have is the business we have, right? And therefore, multiple things will get mixed up in it, right? I mean the 23%, the 20%, whatever the 19% to 20% growth that we have announced this quarter, et cetera, that starts giving us operating leverage, right? So yes, strictly speaking, the operating deleverage will continue for four quarters, right? So therefore, very, very theoretically speaking, until September 30, the operating deleverage will continue, right? But what we are simultaneously also getting is the leverage driven by the growth of the retained portfolio, right? And it’s very — if you look at it in one way, if you knock off what we have lost in top line, I think the additional NSV that we have added in the last 2 quarters is significantly higher than what we have lost.

So in a manner of speaking, that operating deleverage, while theoretically correct, has already been subdued — has already been reduced, right? So that’s the way I would want you to look at it now, right? We have what we have, which is the retained portfolio, and we have to build the margin from here onwards.

Akshay Thakkar — Fidelity — Analyst

Sure. Because I was just looking at the full year bridge, six months to F ’23, I think you’ve called out some INR61 crores as deleverage impact. If I assume that, that sort of goes away next year, then that’s about 70, 80 bps on margins, and you’re already at 14%. So from ’14 to ’15, then effectively, it looks like a large part of it is coming from the deleverage going away. While gross margins one would assume from here has moved up a little bit. And even if A&P on a full year basis goes up, I was just trying to triangulate the margin guidance for next year is conservative or where things stand, do you think it’s a fair ask from the company?

Pradeep Jain — Executive Director & Chief Financial Officer

No, I think it’s fair. 100 bps of improvement is it’s a fairly stretch, but again, achievable task, right? And you’re absolutely right. Our growth gives us operating leverage and operating leverage is a clear component of our margin progression, right? So we do factor that in, right? So I think you’re thinking of it the right way. My only recommendation would be don’t get to bog down by the operating deleverage now, right? That transaction is done, it’s out, right? We have a retained portfolio, and that’s what we need to run [Technical Issues].

Akshay Thakkar — Fidelity — Analyst

Fantastic. One more follow-up question, please. There was a very nice slide that you had on ROIC versus EBITDA margins on how you think about that. I think you’ve looked classified the businesses Premium, Mid-Prestige, Upper Prestige, Popular and Luxury over there, how would sort of Diageo brand set over there? I would sort of — based on the last few calls, you had on earnings you sort of spoke about transfer pricing margins over there, so getting 10%, 12% versus company average of 14%, but I don’t know what the — from an ROIC metrics, is it sort of asset turns are better comparable, how does that sit?

Pradeep Jain — Executive Director & Chief Financial Officer

Yeah, yeah. I think I’ll again call out what I’ve been probably seeing now for at least my 8 investor calls, the global brands fit in two segments. There is a luxury segment, which is almost 100% Diageo Global Brand. And then they also fit in the premium category, right? So Black & White and Vat 69, these are global brands, right?

So all the global brands are margin capped at roughly about 10% right now. But obviously, they rotate because we don’t spend any fixed capital on it, right? They’re routed at a much faster pace, right? So broadly, my sense is that they rotated about 3 to 3.5x, right, close to times x a year, right? And therefore, the pretax ROIC is close to 35%, 40% and the post-tax ROIC will be in the range of about 30%, right? So that’s broadly the construct. And visually, that’s what we have tried to depict on the slide.

Akshay Thakkar — Fidelity — Analyst

Yeah. No, I just wanted to double confirm. Great. And a very last one, if I may, just on the difference between the stand-alone and the consolidated financials on the EBITDA that seemed to be a sharp drop-off on the subsidiary numbers. Would it be largely due to the women IPL sort of.

Pradeep Jain — Executive Director & Chief Financial Officer

Yeah, absolutely. The women’s Premier League since it happened in March, that [ loss ] is incorporated, right, whereas the kicker of the men’s Premier League will come in the subsequent quarters.

Akshay Thakkar — Fidelity — Analyst

Okay, thank you so much.

Pradeep Jain — Executive Director & Chief Financial Officer

Thank you.

Hina Nagarajan — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Jay Doshi from Kotak. Please go ahead.

Pradeep Jain — Executive Director & Chief Financial Officer

Him Jay.

Jay Doshi — Kotak — Analyst

Thanks for the disclosure and presentation. My first question is very impressive that 52% of your incremental revenues in FY ’23 has come from Luxury and Premium, now when I think about the base, the base was COVID impacted FY ’22, but at the same time, FY ’23, you had curtailed supply of Diageo in many states. So going forward, will we see a similar mix where almost 40%, 50% of your incremental revenues will come from Luxury and Premium in a normal environment?

Pradeep Jain — Executive Director & Chief Financial Officer

Yes. So Jay, let me take a shot and maybe Hina can build on it, right? So first of all, this is a value mix, right? So clearly, the NSV per case realizations are very different, right? And therefore, they add a very, very different kicker to the growth salience. Now having said that, you’re absolutely right. The momentum that we have generated on the three subsegments of Luxury Premium, Upper Prestige and Mid Prestige, we would want to continue. Right? Whether we are able to or not that time will tell, but we would absolutely want to continue.

What we would also want to see at some point of time is right, the 1 which is Popular and Lower Prestige, right, that also starts contributing slightly higher, in fact, much higher in the force of growth [Technical Issues], right? And once that punches it weight, right? I think the salience of the other 3 segments will marginally come down. That will make it well distributed across our retained portfolio ladder, right? That’s the only thing. But I don’t think it will materially change, right? But maybe I’ll turn to Hina to add her viewpoint on this.

Hina Nagarajan — Managing Director and Chief Executive Officer

Yeah, I think it will change somewhat. So my only thought is that it’s not in steady state yet. So it’s difficult for us to say where it’s going to end out. I think there will be pushes and pulls. And we are going to try and see that all parts of our portfolio grow. So I think it will take us a year or two to kind of reach steady state and feel that it is now at a ratio where we are pretty certain that growth will continue to be this way year after year. It really depends also on renovations and innovations coming in different categories in different years. So I’m not sure that we’ll see a steady pattern year after year either, right?

Jay Doshi — Kotak — Analyst

Understood. So my question associated follow-up question there was then as analysts, should we also start focusing more on EBITDA per case and how do you track internally, do you target EBITDA margin? Or do you target a certain EBITDA per case, even that Diageo portfolio grows much faster and there is a distribution arrangement, EBITDA per case will be very high. But percentage terms, it optically looks lower.

Pradeep Jain — Executive Director & Chief Financial Officer

It’s a combination of both, Jay, right? We can’t kind of track only 1 metric side, all of you actually keep us [Technical Issues] on the percentage. So therefore, we. We have a number in mind in the way you have 16%, 17% margin aspiration. Do you have an aspiration of INR300 per case or INR350 per case EBITDA on our drawing board as well. Jay, it’s a little dynamic now because the NSV per case also continues to go up, right? So I think what keeps us honest is the NSV growth is one number, right? And then as we have mentioned many times, we are value obsessed — more value obsessed than volume obsessed, right? So therefore, NSV value growth is something that we are clearly obsessed. We are obsessed with market share, et cetera. And then I think right now, we gravitate a little towards percentage margin, right, and managing the multiple metrics, right, that kind of allow us to land to balance the number, et cetera. But EBITDA per case is also something, right, that we keep a close watch on. I don’t know, Hina, whether you want to add something to it.

Hina Nagarajan — Managing Director and Chief Executive Officer

No, no. Nothing to add.

Jay Doshi — Kotak — Analyst

One more on your pricing strategy. So when I look at this quarter’s numbers, there’s a significant increase in realization in the Popular segment, but my set of look at Maharashtra as a state, you have reduced prices for [Technical Issues] and even Royal Challenge by INR20 in an inflationary environment. So could you please explain how you’re thinking about essentially, is this specific to Maharashtra as a state? And what has prompted you to drop prices?

Hina Nagarajan — Managing Director and Chief Executive Officer

Yeah. So let me take that. I mean, basically, look, we don’t — as a company, we would ideally never let go of any headline pricing opportunity. And that’s the philosophy we follow. But I must say that we also have statewide strategies for remaining competitive and managing the dynamics of every state. Our competition has been taking some sort of measures on value erosion in some states. And in order to protect growth and to protect segment growth, I would say, we have taken these calls. So yes, you’re right. To that extent, it’s state specific. In response to competitors created dynamics, but not a philosophy that we want to follow proactively. Jay, we may request to join the key for any follow-up as we have several participants waiting for their term.

Pradeep Jain — Executive Director & Chief Financial Officer

So I think we are done, we’ll just have to probably. We are past the time and Hina has to go for an external appointment. We may have to close the call now. Then ladies and gentlemen, that would be our last question for today. I would now hand the conference over to Ms. Hina Nagarajan for closing comments. Thank you, and over to you, ma’am.

Hina Nagarajan — Managing Director and Chief Executive Officer

Yes. Thank you. And I would really like to thank all our investors for joining this call for your questions, and I’m glad that we’ve been able to come back and respond to your feedback. Thank you for your trust in our company, and we look forward to our next call. Have a nice day.

Pradeep Jain — Executive Director & Chief Financial Officer

Thank you. Thank you all.

Operator

[Operator Closing Remarks]