Radico Khaitan Limited (RADICO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Radico Khaitan Limited 2Q FY '21 Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashit Desai from Emkay Global. Thank you, and over to you, sir.

Yes. Thanks, Nirav. Good afternoon, everyone. We'd like to welcome the management of Radico Khaitan, and thank them for giving us this opportunity. From the management, we have with us today Mr. Abhishek Khaitan, Managing Director; Mr. Dilip Banthiya, CFO; Mr. Amar Sinha, COO; and Mr. Sanjeev Banga, President, International Business. I'll now hand over the call to the management for opening remarks. Over to you, sir.

Good afternoon, ladies and gentlemen. Thank you for joining us on our Second Quarter FY '21 Results Conference Call. Hope you have had an opportunity to review our earnings presentation and results announced yesterday. During this call, I will discuss the current industry environment, followed by an operational overview and outlook, then I'll hand over the call to Dilip Banthiya, our CFO, for a detailed discussion on the quarterly performance, followed by the Q&A. During Q2 FY '21, we saw a sharp recovery in Radico Khaitan's performance. The industry growth, however, was uneven across states and still muted. Some of the larger liquor consuming states such as U.P., Karnataka and Telangana, et cetera, have returned to growth trajectory during the second quarter. We have done well in these states and gained market shares. Although there is still a lot of uncertainty due to the pandemic, we believe that with the upcoming festive season, industry will return [Audio Gap] during the second half of the year. Raw material pricing scenario has been benign during Q2 FY '21 with ENA prices declining 2.5% quarter-on-quarter and 6.5% on year-on-year basis. We believe that ENA prices should stay at stable to benign levels for the rest of the fiscal year. Radico Khaitan is focused on various brands, including new brand development, rationalization of cost base and further strengthening our sales and distribution network. We continue to make investments behind our brands with a particular focus on social media and digital activities. This enables more targeted marketing. Our objective is to continue to outperform the industry growth. Our performance during the last quarter is a reflection of the hard work that management has put in over the last decade to build a strong operating platform and robust business model. We reported highest-ever quarterly EBITDA of INR 107 crores with 16.9% margin. During the first half of FY '21, we reduced our net debt by over INR 129 crores. Our current net debt is INR 253 crores only. Since FY '16, we have reduced the net debt by over INR 694 crores. We have recently launched Asava, the newest expression of our Rampur Indian Single Malt. This is the first of its kind whiskey matured in American Bourbon barrels and finished in Indian Cabernet Sauvignon casks. Rampura Asava is an exciting addition to Rampur's Indian Single Malt whiskey range. This currently includes Rampur Select, Rampur Double Cask, Limited Edition Rampur Sherry PX and the ultra-exclusive Rampur Signature Reserves. I'm very confident that we are taking the right strategic steps that will enable us to continue with our growth trajectory and market share gains, along with margin improvements. With this, I would now like to hand over the call to our CFO for a detailed discussion on the operating financial performance. Thank you, and over to you, Dilip.

Thank you, Abhishek. Thank you, everyone, for joining us on this call today. During this quarter, we reported IMFL sales volume of 6.04 million cases, representing an increase of 4.6% on Y-o-Y basis. Our business operations have normalized during the second quarter. Net revenue from operation during Q2 of FY '21 was INR 630 crores, representing an increase of 10.5% compared to Q2 of FY '20. During this period, IMFL sales value increased by 6.1%. As a percentage of total revenue, the IMFL sales account for 79% of the net revenue from operations. Gross margin during the quarter expanded by over 90 basis points from 48% to 48.9%. During the half year, the gross margin expanded by 318 basis points from 48% to 51.2%. Margin expansion during the YTD period was due to the improved realization, better state mix, strong export and price increase in one of the key liquor-consuming state. Price increase in the state of Telangana had a net impact of 90 basis point on our IMFL sales. EBITDA margin during the quarter expanded by over 180 basis points to 16.9% due to the gross margin expansion and cost rationalization. During Q2 of FY '21, A&SP expenses declined by 24.2% to INR 29.85 crores. However, on Q-on-Q basis, it has increased by 52%. As a percentage of IMFL sales, A&SP expense was 6% as compared to 7.1% for the full year FY '20. Given the COVID-19 scenario, A&SP expense during the period were relatively lower than last year. The company continues to make judicious marketing investments, which has enabled us to continue market share expansion. Finance costs for Q2 FY '21 decreased by 29.2% on Y-o-Y basis from INR 7.68 crores to INR 5.44 crores. The company cost of borrowing has declined from 8.6% to 6.4% in Y-o-Y basis due to the declining interest rate scenario, coupled with company's stable profitability, strong capital structure and improved liquidity position. As on 30th September 2020, the net debt was INR 311 crores. Cash and bank balance were INR 59 crores, resulting into a net debt of INR 253 crores versus INR 382 crores as of 31st March 2020. Gross debt consists of INR 311 crores of working capital loan and INR 81 lakhs of long-term loans. During the period, we saw a strong overdue receivable collection resulting in net debt reduction of INR 129 crores. As you are aware, the nature of our industry is such that has a very high working capital requirement. It's important to note that Radico Khaitan has strong liquidity position and therefore, able to fund a large portion of working capital through its internal accruals. Our current working capital is over INR 900 crores as compared to a net debt of only INR 253 crores. We have a strong financial position and a comfortable liquidity. During these difficult times, we are taking all necessary steps to sustain our financial strength, robust business model and grow consistently, competitively and profitably. With this, we will now open the lines for Q&A. Thank you.

[Operator Instructions] First question is from the line of Chirag Lodaya from Valuequest Investment Advisors.

Yes. First of all, congratulations team for the great set of numbers and strong improvement in balance sheet. Sir, I have a couple of questions. So first on gross margin. So if you look at Q-on-Q, there has been 550 basis points decline in gross margins. So if you can just help us understand what led to this? And how one should look second half in terms of gross margins? There is also a news of ethanol price being taken upwards by almost INR 3 per liter. So how it may have impact on ENA prices in coming months? So your view on that?

So as far as the gross margin is concerned, as we mentioned in our Q1 quarterly results call that the first quarter was skewed and a couple of states which came on normalcy faster than the states which have been laggard. And there, the realization were better. So in that scenario, we had a gross margin of 53%, 54%. However, we have guided that the margin for Radico is between 50% to 52%, which we have acquire through as per our business model and the composition of our premium brand. So the gross margin will remain in that whereas the price increase, which has been in one of the states also and some cost rationalization. Second question is regarding the ENA prices. The ENA prices are already higher than the ethanol -- prevalent ethanol prices. And we are also hearing from media that there can be some increased -- marginal -- moderate increase in the ethanol prices. We don't foresee that will -- because the -- one is the crop is good; two, because of the monsoon both in Maharashtra and rest of India and U.P. The sugarcane crop is very good, the grain crop is good, the availability of this will be high. And we see the benign scenario as MD has said in his opening remarks, so I think the ethanol price increase will not have any impact on future ENA prices.

Got it. Sir, second question was on selling and distribution expense. So if I just remove A&P from that number, then other than A&P, numbers have gone up substantially, INR 50 crore versus INR 35 crore, which is almost 200 basis points increase. If you can just help us understand what has led to such sharp increase in selling and distribution expense?

You see, we have been having the S&D -- this quarter and first half, you see that our exports have also gone up substantially. We had a 70% kind of growth in our export, where the outward freight and all that is little -- is more than that. And that is becoming a substantial portion, now is 8% to 9% of our top line on IMFL basis. So the reason is that. Otherwise, the S&D expenditure, as we've said, is within control. And I think 13%, 13.5% these are the normal S&D expenditure of net sales which we are targeting.

Because I was just wondering, I mean, if you just normalize our A&T expenditure in coming months and if the S&D run-rate would be similar, then there will be almost 150, 200 basis point negative impact on our margins going ahead. So how one should look at it? Is there any one-off sitting in this quarter? Or this is a new normal run-rate now you have?

No. The business between domestic market and exports, there are various permutations and combinations. I think we are more working on our operating margins, which has improved 180 basis points in this quarter also. So the point is, as we have been guiding and we are trying that we take it to the late teens in the next 2 to 3 years. So our purpose is that if there is an expenditure, there is a corresponding better realization also.

[Operator Instructions] Next participant is Vishal Biraia from Aviva Insurance.

Sir, congratulations on a good set of numbers. Could you elaborate a bit more on the market share gains in the states that you oversee?

See, overall, we have gained market share everywhere in practically all the states. But as I said in my opening remarks that specifically Uttar Pradesh, Telangana, Uttaranchal, Karnataka, these are the markets where the sales have become normal or there is a growth in sales compared to the [Audio Gap] COVID levels. And in these states, our market share has been much higher compared to the other states. That is why the -- in spite of the market de-growing by 9%, Radico has posted a 4.6% increase in volumes.

Okay. And you expect this gain -- market share gain trend to continue? And -- number one. Number two, on the -- on Karnataka, could you elaborate a bit more as to what would be the extent of market share gains, some point -- could you -- would you be able to quantify it?

See, in Karnataka, -- our market -- Karnataka is a large market, and our market share gain there has been about 1%. And compared to the last year, we've grown more than about 25% in volumes.

Okay. And on the receivable side, as to how is the scenario when you talk to states, are they comfortably paying you? Or -- because, I mean, on a year-on-year basis, there is a small dip. But -- I mean, so from March, there's a small dip, but -- I mean, some views over here?

Yes. So receivable position is quite comfortable. As you know, this is not a concern area for the company as we are giving this credit to the, first of all, the state corporation. Secondly, we have already had our internal checks and balances that how much credit is per state-wise. And you've seen that from 31st March '20, we have collected these receivables. There are no overdue receivable beyond a point. So however, there are a couple of states in South, which are a little slow in their payment. And I think with passage of time and whatever is being done between center and state. And secondly, I say that this is a product where the state gets the highest revenue. And when they pay us, then only they get these volumes and all that. So they are also actually aware about it. They are taking care. And then the receivable, though sometimes time delay, but are coming.

Safe money.

Safe money. Yes.

Okay. And last question on Andhra Pradesh, what was the market growth over there? And what was your growth?

So as far as Andhra Pradesh is concerned, the market, because of the exceeding the high tax rates, they imposed post-COVID, the market has suffered a setback. But in the recent times, in the last 3 months, they have been progressing and the market is recovering. They have now reached a level of 20 lakh cases, which had gone down to 12 lakh cases. And we are the only company right now because of our connection with the ground and the brand equity, we are the only organized company, which is doing well.

Next question is from the line of Naval Mehta (sic) [ Dhaval Mehta ] from ASK Investments.

This is Dhaval Mehta here. Congratulations teams for a decent set of numbers in a challenging environment. Sir, my first question is, sir, you told U.P., Telangana, Karnataka are the key states, which are now back to pre-COVID levels or are seeing even growth compared to last year. So which are the key states are still, let's say, seeing tepid growth or much lower than the pre-COVID levels? Can you just highlight that?

See, the states which are not -- have de-grown are Rajasthan, then Andhra Pradesh, Kerala, Assam, Orrisa, Maharashtra, Pondicherry, these are the states.

Okay. So out of this Rajasthan, A.P. and Maharashtra are the actually a sizable state, so what will be the extent of de-growth in such states, as a ballpark number will be fine, sir?

See, Maharashtra -- one sec. Maharashtra has de-grown by about close to 6.5%.

Sorry, this is for the industry or for you, sir?

For the industry.

For the industry. Okay. And how about Rajasthan?

Rajasthan has de-grown by 20%.

Okay. Okay. Okay. So my second question is with respect to online delivery. So now we are a few months where many states started online delivery. So I understand that our presence in that states are relatively low, but how the online delivery is striking? And any, let's say, progress on the same? So if you can just highlight on the online delivery sales?

So let me tell you, some states have started the online delivery mechanism. But still, it's too much -- it's still at the nascent stage. People are still trying to cope up with the challenges of delivery. So it has really not had a great impact on sales for the industry as such. But in the times ahead, it will make the industry -- it will have a good impact on the industry because of the convenience of ordering. So right now, the effect is actually negligible in terms of sales.

Okay. Okay. Sir, my last question is pertaining to the states which are still seeing a decline compared to pre-COVID levels. So is it because those states has a sizable on-premise revenue, that's why they are seeing a decline or that there is something more to those states? Can you just help me with that, sir?

See in certain states, like say, take example of Maharashtra because Maharashtra still is not fully operational with all -- like now it's getting operational. So the decline is basically because of that. And also, if you see on trade as a total percentage of total -- all India sales would be accounting only about less than about 7%. So it's not that sizable amount the on trade. And certain states like Andhra, where they increased excise duty drastically, there it showed a decline of 50%. But they have rectified that and the industry is coming back to normal now. So I think it's a matter of time. It's a combination -- and we expect that by the fourth quarter, industry should be flat. And next year onwards, the industry should be on the growth curve.

[Operator Instructions] Next participant is Harit Kapoor from Investec.

So I had one question on the IMFL revenue growth, which was at 6%. If you could just help us understand what this would have been ex the export growth? Because exports were very strong for you. So I just wanted to get a sense of what domestic IMFL value growth would have been for you? Would have been -- would it have been close to like flattish or early single digit?

So it will be flattish, Harit. Actually, on value-wise, it will be flattish and -- flattish to 1% to 1.5%. Yes.

Yes, got it. Got it. My second question was on the price increase part. So you spoke about the Telangana increase, which happened. Anything else to talk about on the price increase side, you've seen over the last quarter or so, even last 3, 4 months apart from Telangana?

See, what we foresee because of this COVID and the kind of stress for the excise people have, so maybe 1 or 2 states in the south are considering a price increase. But major price increase will come next year, what we see.

Next question is from the line of Naveen Trivedi from HDFC Securities.

Congratulation to the team for the strong numbers. Sir, my first question is like you mentioned about domestic value growth [Technical Difficulty] hello?

Sir, your voice is breaking.

Hello? Is it better?

Yes, sir.

[Technical Difficulty] domestic IMLF, you mentioned about flat to 1% kind of value [Technical Difficulty] growth in the second quarter. [indiscernible] the volume growth, can you tell me?

The volume growth, I think, for the domestic market would be flattish only, kind of.

Volume growth in the domestic market is flattish.

Flattish.

And if you could talk about how is the situation recovery in July, August, September. So just wanted to know about the -- are the [Technical Difficulty] or higher than [Technical Difficulty].

Your voice is not clear.

My question is the domestic volume was flat in the second quarter. But how has been the trajectory between -- in July, August and September?

See, the trajectory has been on an increasing curve, and we are seeing that month-on-month, the volumes are increasing and normalcy is returning.

Can you quantify the activity growth rate, which you [Technical Difficulty] September numbers where you are seeing some sort of a better trajectory in terms of numbers?

So September, of course, as we said, just said that in July, there is a better improvement in August and then in September. So I think it is on an increasing curve.

Sure. And also wanted to know about the non-IMFL strong growth impact on gross margin side. And if you can also share what is our gross margin in the non-IMFL portfolio? That's all from my side.

As we are -- as you are aware that we are present in only 1 state for non-IMFL, which is country liquor. And basically, we have to supply whatever order are put in on the hotel and that we are supplying. But our focus area is IMFL, the supply of non-IMFL item is not at the cost of the IMFL. So first of all, as a matter of our policy, we don't lose even a single case of IMFL sales on account of any non-IMFL sales increase, okay? So first point is that. As far as the second point about your margin, this thing -- these are actually controlled pricing mechanism. So the margins are very, very thin in that area. It is in a high single-digit kind of margins and the expenditure also is very low on that because it is a kind of commodity. But however, since our brand value is there for a long time, so our sales are happening, and we get orders.

Next question is from the line of Krish Pardeshi from Centrum.

Congratulations on good set of numbers. I have 2 questions. First is, you have launched this Rampur Asava, so could you help us to understand what is the growth or some numbers you would expect 3 years from now? And is that really a good time to look at premium segment at this time? Of course, this is more of a import -- export point of view. But from the domestic point of view, could you elaborate some sense of how we should look at this product next 2 or 3 years?

Well, you know, in any case, we've ramped up our malt distillation capacity a couple of years ago. So there's a huge quantity of malt that is maturing and aging at Rampur distillery. And the response to all the expressions of Rampur have been extremely positive. And to take the Atmanirbhar campaign of the Prime Minister forward, we are soon going to be launching Rampur Expressions in the domestic market as well. The volumes are -- it's a slow burn, but we have adequate allocation and malt aging to cater to the international as well as domestic market.

Could you give us some sense what would be the volume you would expect in 3 years from now?

Well, we'd love to share the numbers. But unfortunately, we don't share the numbers on malt, but the aging malt is adequate enough to cater to the growing response and the demand for Rampur.

So one follow-up here. I have seen that you always try and launch the products in Delhi. Is that the correct understanding that Delhi is a very super premium market or probably the understanding which Delhi market will give you will get expanded across the country?

Well, you see, our initial focus has always been the international markets and the travel retail, which includes the Indian travel retail outlets as well. And then we did launch Rampur Select in the Delhi market. The -- whatever allocation we have made for the Delhi market actually got sold off in 3 months. So before we could expand to the other markets in India, we actually did not have any allocation left for India. Yes, the new expression will also be launched in Delhi, but apart from that, it will also be launched in most of the metro towns.

Okay. Okay. My second question is on CSD business. Could you give us some sense that we have been hearing there is a lot of dispersion in terms of skewness, volatility in the CSD sales. If the things can improve from here in the second half? And what kind of growth or number we would expect?

So the CSD business has maintained a lot of restrictions more than the civil market in terms of social distancing. And they have kept most of their retail outlets under partly open structure and partly closed. So, so far, they have maintained adequate precautions in the defense business. Right now, they are now leveling up with the civil market. They are opening up outlets more and more by the month, and we hope that in the fourth quarter, they should also be at a normal pace of business like the domestic, the civil domestic market.

Would you be able to share first half decline on CSD business? And maybe, I guess, we have about 7%, 8% contribution, which is to come in the part.

So yes, we -- as you know, this quarter, also the CSD industry has been down by around 15%, 17%.

This is in volume terms, yes?

Y-o-Y basis. Yes.

This is the volume term, sir?

Yes, volume terms.

Next question is from Ambar Taneja from Vachi India.

Just a quick question on exports. I think you mentioned that you're doing about 8%, 9% of turnover on exports. I think the last quarter, you mentioned it was 7%. So obviously, that's growing. Just wondering what's the margin profile when you go into exports? Is it higher than domestic?

See, we have exports in 80, 85 countries, right from Rampur Indian Single Malt to Jaisalmer, to the Magic and Morpheus and a couple of brands like 8PM and all that are also going in a big way. Now the margin in exports are much better than the domestic margin. It depends on market to market, but in general, most of the markets has better margin as compared to the domestic margins.

Okay. And any like -- plan on where you see export [Technical Difficulty] compared to sales, let's say, in 3 years. Is there a [Technical Difficulty] to make it a larger part of the business?

Definitely. In fact, export is a bit of a slow burn. And over the years, we've spent a lot of -- in building the infra -- distribution infrastructure in various markets, brand-building activity, pushing the brands into the market, creating a consumer demand for that, which is now showing results. And we still have -- even though we are in 85-plus countries, but there are still more countries where we are not there. We're planning to expand into newer markets as well as strengthen the existing markets where we are. Also, with the launch of more premium, super premium products, our footprint into the developed market is increasing, our presence in the global travel retail is increasing. So we see the growth in exports to continue.

Next participant is V.P. Rajesh from Banyan Capital.

[Technical Difficulty] Regarding the market share gains we have seen in the domestic markets [Technical Difficulty]. So could you just give more color on that? Is it we are gaining [Technical Difficulty] organized sector or some of the organized sectors are -- or organized states are not doing well, if you could just give some commentary around that?

First of all, your voice is cracking. So can you repeat the question again?

I -- sorry, am I clear now?

Yes, please speak.

Yes. So my question is that...

Sir, sorry to interrupt, your voice is still breaking. Can you talk through the handset and come in a better reception area, please?

Okay. [Technical Difficulty]

Sir, are you there?

Yes. No, go ahead. I'll get back in the queue line.

Next question is from the line of Vijay from Pragya Equities.

Yes. Sir, I have a question on receivables. So you mentioned that the receivables are not a concern for us. But it's still pretty significant in terms of the size of INR 750 crores. Sir, can you throw some light as in by when can we expect it to come back to normalcy? Or do we expect this to be the run rate going forward?

See, first of all, if you see our trajectory of the working capital cycle, last year -- half year, we have reduced working capital cycle from 61 days to 36 days on net on -- net working capital basis. As far as the credit policy of the company, we are conscious, we are having a system whereby the credit limits are being monitored and checked. So the outstanding increase, as you know, that this industry is a working capital-intensive industry. While the goods are being dispatched from the plant, the excise duty is being paid, which has a high incidence and the collection of excise duty along with the [indiscernible]. So part of that is because of that. And if you will see that our receivables are in line with the industry norms and better -- some way better also. So we're monitoring it continuously, and that's what our point is that there is no issue and concern because these are to the state corporation. Most of that is of the state corporation.

Okay. Just a follow-up on this, you also mentioned that there are a few states wherein we are receiving slow payments. If you can just tell us which states -- which are those states, and also if there is any more than 6-month receivable pending in our balance sheet?

So first of all, there is no more than 6 months as far as the state corporations are concerned, first of all. There is a couple of states, which I will not name here, but those states actually are having some time delays -- timing delays. And I think in due course of time, because this is a very important subject for them to collect the revenue out of the alcohol sales. So it is going to be recovered, and you must have observed also that the part of our debt reduction in the H1 from March to September has been because of the better receivable collections.

Okay. And also...

And as far as the working capital management is concerned, I think in the industry, Radico is one of the best to handle and control the working capital and control the number of days or debtors as well as the net working capital cycle.

And so far, none of the states have ever defaulted on payments in the last so many years. It's just a matter of time, and receivables are very safe.

Okay. Okay, sir. And I have a second question. So since last few quarters, we have been able to grow significantly with the industry growth, I mean that is very impressive. But can you throw some more clarity, what exactly are we doing different versus the competitors over here to gain the market share? And also for how long do you expect this trend to continue?

See, if you see last 2 years -- last 2.5 years data, in FY '19, the industry grew by 9% and we grew by 11%. And in FY '20, the industry was flat, about 1.4% growth, and we grew by 12.5%. Even in the current quarter with the industry's de-growth of 9%, we are positive 4.6%. So I think it is the hard work we have put behind our brands. And we feel, especially with the launch of now entering into the whiskey segment, which has been the major segment which we have not addressed after 8PM. Our newly launched 8PM Premium Black has been accepted very well in the market in the premium range. And in fact, this year, we are confident of achieving 1 million case in spite of losing the first month, 40 days because of COVID and also the restrictions. So I think in the days to come, we are very confident with our new launches, which are planned. Plus, our existing brands, we should continue to outperform the industry.

Sir, just a follow-up here. This growth will be spread across all the states we are present in or just a few -- couple of states wherein we are seeing the sizable growth?

No, the growth is all across. In few states, it could be more, but overall [Technical Difficulty] and India.

Next participant is Mayur Gathani from Ohm Portfolio.

I just wanted to see whether the volume growth is 4% for this year?

Sir, sorry to interrupt you. Sir, your voice is coming distorted?

Hello? Can you hear me clearly now?

No, sir. Your voice is still breaking.

Hello?

Yes, sir.

And so I just wanted to check on the volume growth, domestic was flat is that what you said? [Technical Difficulty] from exports?

So what we said is, it is between 1% to 1.5% as far as domestic growth is concerned, but the growth in the export market, overall growth is 4.6%.

Next question is from the line of Amit Sinha from HDFC Mutual Fund.

I have 2 questions. Firstly, on your capital allocation policy. Overall, last quarter in the con-call, you had highlighted that going forward, the management will think about buyback or dividend distribution once the debt position is in comfortable scenario altogether. So what is the thought process as of now on the capital allocation going forward?

See, in our last call, we had said that our first aim is that we'll be a zero-debt company. Once we achieve that, we will see what is beneficial for the shareholders, either increase the dividend or buyback of shares, whichever is more good for the investors, we will do that. And also, if you see in the current year also our dividend, we have increased to 100%, and I think our dividend payout is about -- is also higher.

Yes. We've made the higher dividend payout. And we are consistently -- as the MD said just now that as the debt is going to be over in a couple of -- 1 year or so, then the payout of dividend as well as the share buyback will be the option for capital allocation.

Sure. Okay. Secondly, this quarter, your performance in the domestic market looks extremely good and in fact, the difference between you and some of the leading players is significant this quarter. Do you think that this performance is on the back of you being over-indexed in some of the -- I mean I know that you have highlighted some of these points, just wanted to understand that is it more because of the state and on-trade mix compared to your own strategy of doing well in the whiskey market, specifically for this quarter? And a related question is, again, what is the confidence of your portfolio growing significantly ahead of the market going forward as well?

Okay. So first of all, the growth actually is largely coming from the premium portfolio of Radico. The target profile of the premium portfolio is largely young. So what we are really doing is investing on the brands more so in terms of innovative marketing and communication on the social and digital platform. Two, Most of these brands are focusing on the contemporary tools like music, for example. And we have tied up with some of the big music festivals of the world, which we concentrate -- we are continuing to focus on. We are deeply entrenched into Bollywood, which we continue to focus on. We are adding -- our key brands like Morpheus or Magic Moments are adding to the range. They will continue to add more flavors, new variants and therefore, the brand equity being so strong, this portfolio will continue to derive advantage. 8PM Premium Black has had the opportunity of growing in most states where it has been launched. The brand ambassador, Tiger Shroff, is the favorite amongst the youth, he's also working favorably for the brand. So I think in totality, if you see the young demographic profile has favorably accepted all the communication and the brand portfolio as such. So this trend will continue in future, and it will become stronger.

Sure. Lastly, what is your contribution from on-trade in the IMFL segment in on-premise?

Our -- I think from the on-trade would be about in the range of about 5% to 6%. And you can't monitor it so directly because we supply to the wholesaler. So it will be in the range of about 5% to 6%.

Next question is from the line of Saket Somani from RKL.

Yes, Madhu here. Abhishek and the team, congratulation on really good set of number consistently over the last 2 years. So I had a more strategic question as the company seeing strong free cash flow, with the debt position, as Mr. Banthiya mentioned, will get over. So what will be the utilization of cash? If you end up generating, let's say, over INR 1,000 crores of free cash over the next 3, 4 years, how are you planning to do the capital allocation? Whether buyback or will you be open to do more acquisition? Will there be more CapEx? Will you go international? If you can talk a little elaborately on this?

See, right now, what our focus is, once we become debt free and the cash definitely is going to hit the balance. So doing an acquisition overseas, et cetera, [Technical Difficulty] looking at it at all. And even if you see in the domestic market, hardly there are any companies which are premium brands which are available for acquisition. And Radico's strength has been there to create brands organically. We would be the only companies which have created about 13 brands in the last 2 decades, all organically. So I think once we achieve this kind of cash, I think most probably, it will be either a buyback or higher dividend or it will be a combination of both the things, buyback plus higher dividend payout.

Abhishek, can you also talk -- is there a -- whiskey, we are undisputedly the leader in the worked up segment, and we have had a good success on 8PM Black. Are there plans to launch new variants of whiskey over the next 1, 2 years to capture the slightly premium market in India?

See -- if you see that in the vodka, we would be the only company, I think, in the world, where our vodka commands a 60% market share in the total vodka category. And we started our journey with 8PM, which touched 1 million case in 1998 when I first launched it. And last year, we -- as a bouquet of 8PM, we have crossed 10 million cases and our premium whiskey 8PM Premium Black also is supposed to cross 1 million cases. And this is a segment where we were weak, and we have already lined up and about 3 to 4 brands in the whiskey range in the next 1 to 2 years and all will be in the premium and super premium range. In fact, we'll define the price category. And we also now have the experience with Rampur, where a Indian company has launched a brand at INR 1 lakh a bottle. So even after gaining that experience, I think Radico is all set to enter the whiskey space.

Fantastic, Abhishek. Wishing the whole team and you lots of success as you did it -- did for vodka segment. And I'm sure the company will end up creating a lot of shareholder value in times to come. All the way best.

Yes. Thank you, Madhu.

Next question is from the line of Neeraj Prakash from Nepean Capital.

I just had a couple of bookkeeping questions. One is your other expenses have gone up significantly quarter-on-quarter and year-on-year. If you can just explain that? And secondly, in terms of your tax rate, is there a particular reason for the volatility on a quarter-on-quarter, on a year-on-year basis?

So for the first -- to your first question, the other expenditure has gone up because the Uttar Pradesh has put up a policy, which is a very pragmatic policy, of track and trace. So there, they leverage certain amount on each case, which is part of our cost. So that is the reason that this was not there last year, and it has started coming in from this fiscal. To your second question regarding -- yes, tax rate. So the tax rate is 25.2%. However, because of some provisioning earlier, we had a reconciliation and everything done where this was the extra provisioning done in the previous quarters. So that has been written back. Otherwise, the tax rate for company will continue to be because we have adopted the new policy rate, which is 25% without any deductions.

[Operator Instructions] Next question is from Jay Modi from Emkay Investment Managers.

I just had one question around the cash flow. So although we see debt and it reflects on our balance sheet as well, but why can't we see that in our cash flows that we look under the heading of cash flow from financing activities?

So no, this is very much there. Actually, the cash flow is totally nice -- your question, I couldn't follow.

Sir, my question is, sir...

Pardon?

Yes, sorry. Go ahead, sir.

No, I am not able to understand your question that -- what is the question?

Okay. My question is that, when we look at cash flow from financing activities in that net loans repaid or taken we see an amount of INR 20 crores of loans taken, and our balance sheet also should have been paid off INR 119 crores, so there is a mismatch in the cash flow?

No. There can't be a mismatch in the cash flow because cash flow is always tallied, and that shows that INR 129 crore of debt has been paid in the first half. So the balance sheet as far as in the financing activity versus this, there is a cash and bank balance because there is a last days collections, which has been there. Normally, our cash and bank balance remains in INR 25 crores to INR 30 crores. But this quarter, because of the last day collection and dispatches, this has been around INR 58 crores, INR 59 crores.

Next question is from the line of Shubham Sinha from Equirus Capital.

So now the festive season has started. So how is the demand shaping up compared to last year?

See, as we said that month-on-month, the demand is increasing and what we expect that by the fourth quarter, the industry should return back to normalcy. And now I think November onwards, the season starts. So we expect it to be better month-on-month.

Okay. And my question on CSD is already partly answered. I just want to know what is the current revenue percentage coming from CSD out of -- from the total?

So our top line in the saliency is around 9% to 10%.

9% to 10%, okay. And on the recent ban on import of scotch, foreign scotch, do you see any improvement happening here?

I think it's a great opportunity as our Prime Minister has always emphasized on Make in India, so I think there is a huge opportunity for the Indian brands to come and fill the gap like, especially like the Rampur Single Malt and everything -- Jaisalmer Gin and everything. So I think it's a great opportunity for the Indian brands to fill that gap.

Ladies and gentlemen, due to time constraint, we will take the last question from the line of Soniya Varnekar from Equentis Wealth.

Most of my questions are answered. I just want to have some data-related pointers. One is, what is P&A mix in our IMFL sales for this quarter, what percentage. And second is exports volume growth in this quarter?

So the P&A mix in our total, this thing is around 28.5%, and value-wise, it is around 49%. Okay, what is your second question on export?

Export volume growth for this quarter?

So this quarter, export growth is more than 60%, 65% on Y-o-Y basis.

Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing remarks.

So thanks, everybody, for joining us on this call today. As Radico has always emphasizing that our focus area is the premiumize in the portfolio and curiously up-trending, and we will continue to do more drifting on with our bouquet of brand which we have launched. The company is also investing behind the brands to gain market share. So in the years to come, we will get more market share, and I think we'll continue to do better and good on the financial front as well as on the business front from brand saliency point of view. So I think the good work being done by the management for the last decade or so will continue to yield results. Thank you.

Thank you very much. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.