Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Globus Spirits Ltd (BOM:533104, Financial) reported strong traction for its brands across key markets, with several new brand launches in strategically chosen segments.
- The company witnessed robust growth in its Prestige segment, with sales volume increasing by 152% year-on-year for the quarter and 104% for the half-year.
- The launch of Doab India Craft Whiskey and other premium offerings has positioned the company well in the luxury segment.
- The company has successfully received ethanol orders as per its capacity utilization targets, indicating strong demand in the manufacturing segment.
- Globus Spirits Ltd is expanding its market presence by entering the Uttar Pradesh market, which is significantly larger than its current markets, offering substantial growth opportunities.
Negative Points
- The manufacturing business is facing margin pressure due to high raw material costs, impacting overall profitability.
- There is uncertainty regarding future price increases in key markets like Rajasthan, which could affect margins in the regular and other segments.
- The company is experiencing volatility in ethanol margins, with current margins being lower than historical averages.
- The entry into the Uttar Pradesh market may initially result in reduced profitability due to the lack of backward integration and higher initial costs.
- The company is making significant capital expenditures for technology upgrades and market expansion, which could strain financial resources in the short term.
Q & A Highlights
Q: What are the expected margins for the consumer regular and other segment after entering the UP market?
A: Paramjit Gill, CEO of Consumer Division, stated that while it's difficult to provide exact margin indicators for the next year, the company aims to maintain momentum and expects margins to remain in the current range of 15-18% in the short term. Long-term margins will depend on price increases and market conditions in Rajasthan and UP.
Q: Can you provide insights into the growth and future plans for the prestige segment?
A: Paramjit Gill highlighted robust growth in the prestige segment, with sales volume up 152% year-on-year. The focus is on stabilizing recent launches like Great Times and Brothers & Co. in key markets. Future growth will depend on market acceptance and strategic expansion.
Q: How is the company addressing margin pressures in the manufacturing segment?
A: Shekhar Swarup, Joint Managing Director, explained that margins are expected to improve in Q3 due to lower raw material costs and technological upgrades. The company aims to achieve an average margin of INR7 per liter by optimizing production processes and increasing storage capacity.
Q: What is the company's strategy for entering the UP market in the regular segment?
A: Paramjit Gill mentioned that UP is a significant opportunity, with a market size about 3.5 to 4 times that of Rajasthan. The strategy is to become a strong player among the smaller competitors, aiming for a substantial market share over time.
Q: How will technological upgrades impact the company's ethanol production?
A: The upgrades, including corn oil extraction and process optimization for maize, are expected to add INR4 to INR5 per liter in margins. These changes will enhance efficiency and profitability, particularly in ethanol production.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
