Radico Khaitan Limited (RADICO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Radico Khaitan Limited Q1 FY '22 Earnings Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashit Desai of Emkay Global. Thank you, and over to you, Mr. Desai.

Yes. Thanks, Nirav. Good afternoon, everyone. It's a pleasure to host the management of Radico Khaitan for their Q1 FY '22 earnings call. 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 the opening remarks. Over to you, sir.

Good afternoon, ladies and gentlemen. Thank you for joining us on our first quarter FY '22 results conference call. I hope you are all doing well and keeping safe. Strong demand momentum, which was seen during the Q4 of last year, continued in April '21, only to be disrupted by a more severe second wave of the pandemic. May '21 was severely impacted as the pandemic hit all parts of the country. After peaking in May, COVID cases started receding in June '21 and situations started to normalize to a large extent by the second half of the month. In July, as restrictions are lifted and normalcy resumes, month-on-month volumes indicate a positive trend, and we are confident of an improved industry performance, led by Prestige & Above segment in the coming quarters. Teams across different divisions came together with resilience and set to ensure seamless operations and continued dispatches. This has enabled us to outperform the industry yet another quarter. Our top priority during this period has been the health, safety and well-being of our employees and partners. We have also arranged for the vaccination of all our staff at the Rampur plant. With the vaccination drive now well underway, we believe the worst is behind us, and we are seeing an improving trend month-on-month led by Prestige & Above segment. In Q1 FY '22, we registered 59% year-on-year growth in our IMFL volumes. After a strong performance last year, I'm proud to report that Radico Khaitan became the largest IMFL exporter out of India during the quarter. Our brands continue to win across internationally. In the Millionaire's Club Magazine 2021 edition, 8PM whiskey was ranked the 9th largest whiskey globally, Magic Moments vodka was ranked the 11th largest vodka, Contessa Rum was ranked the 9th largest sum, and our Old Admiral Brandy was ranked the 2nd largest brandy globally. As discussed on our previous calls, we continue to focus on further strengthening our premium brands portfolio with more premium launches in the brown spirits as well as white spirits space. With situation normalizing now, we are looking forward to introducing new brands in the coming quarters. We are progressing well on our strategic growth agenda and are well prepared to tackle any near-term uncertainty in the industry. Radico Khaitan is confident of delivering industry outperforming growth during FY '22. Before I hand over the call to our CFO for a detailed discussion on the operating and financial performance, I want to bring to your notice that as part of the auditor rotation process, we have appointed Walker Chandiok as our statutory auditors for the next 5 years. Thank you, and over to you, Dilip.

Thank you, Abhishek. Thank you, everyone, for joining us on this call today. We wish you the best of health during this pandemic. After ending the financial year '21 on a very strong and optimistic note, we reported a robust operational and financial performance during Q1 of FY '22. During the first quarter, we reported an IMFL sales volume of 5.61 million cases, representing an increase of 58.8% on Y-o-Y basis. Net revenue from operation during Q1 of '22 was INR 603 crores, representing an increase of 47.3% compared to Q1 of '21. During this period, IMFL sales value increased by 56.3% as a percentage of total revenue. IMFL sales account for 77.7% of the net revenue compared to 73.2% during the same quarter last year. On a sequential basis, gross margin contracted by 87 basis points due to the unfavorable product mix, which was impacted by COVID-induced lockdowns and scattered market timing. Despite the gross margin contraction, EBITDA margin expanded by 54 basis points from 14.7% in Q4 of FY '20 to 15.2% in Q1 of FY '22. Raw material prices overall have been benign during Q1 of FY '22. Toward the end of last year, we saw some inflationary pressure on dry goods, such as packing material, but it has remained stable around those levels in Q1 '22. ENA prices have also been stable during the quarter. Given the ethanol blending policy of the central government, we may see some headwinds in the ENA prices, but that should not be any significant. The company has taken all efforts to optimize cost and to mitigate any margin headwinds. With our portfolio premiumization, we expect our operating margin to trend upwards. We are aggressively investing behind our brands to gain market share and continue the premiumization journey. During Q1 of FY '22, A&SP's expenses increased by 70.5% on Y-o-Y basis to INR 33.48 crores. As a percentage of IMFL sales, A&SP expenses were 7.2% of Q1 FY '22 compared to 7.3% for full year of FY '21. This is in line with our guidance of 7% to 8% of IMFL sales as investment in marketing. In the Prestige & Above segment, we expect this to be in double digits. Finance costs decreased by 29.5% on Y-o-Y basis from INR 6.57 crores to INR 4.63 crores. The company's cost of borrowing is lowest in the industry due to the lower interest rate scenario, stable profitability, strong capital structure and improved liquidity position. We have an efficient working capital management and a very strong credit control system. We have a strong financial position and comfortable liquidity. During these difficult times, we are taking all necessary steps to sustain our financial strength, maintain robust business model and grow consistently, competitively and profitably. With this, we will now put the lines for Q&A. Thank you.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Madhusudan Kela from MK Ventures.

Abhishek and team, congratulation on continuous fantastic performance quarter-after-quarter. So my question today on open forum is a more strategic question. The company is likely to generate significant cash flow since your debt now is virtually zero and whatever you generate will be virtually a free cash. So what will -- what is it there in your mind on a strategic basis from a 5-year perspective? What would you like to do with the money? How much can be absorbed in the business for the capital expenditure? And once the company is left with free cash, can we have some kind of a policy for distribution of cash? Have you given thoughts to all those questions?

So I'll take this question, Madhuji, with your permission of MD. The fact is that we have come a long way. First of all, I would like to just narrate you a lot what Radico has done for the last 5 years. And then I'll take you through what will be the cash generated in future can be used on. So in last 5 years, if you recall, that in 2016, my debt was around INR 950 crores. And as on 31st March, it was sub INR 200 crores. So we have generated in last 5 years operating cash flow of around INR 1,700 crores. Out of that, around INR 750 crores have been used to repay the debt. We have paid INR 250 crores of taxes. We have paid interest of INR 340 crores and dividend of INR 90 crores, the CapEx which has been done and the working capital efficient management and all that, which has taken INR 275 crores. So all put together, the INR 1,700 crores have been utilized to the best rational way. Our resource allocation is very, very judicious. We look at each and every aspect of any CapEx and look at the return on capital employed and do -- then only these resources are being deployed. Coming back to your question regarding the cash flow generated from here onwards because now that -- we are virtually a debt-free company. And the debt is sub INR 200 crores with a working capital of more than INR 1,000 crores. So from coming forward, we will look at the opportunities, which can generate ROCE of more than 20%, 25%, look at that. And the further cash, whichever available in the balance sheet from the cash generation will be utilized to, one, how do we create value for the shareholders, where it can be a bigger dividend payout, it can be buybacks or anything. But at that point of time, what the Board decides, what is the best and tax-efficient manner to utilize those cash to be distributed to the shareholder will be taken by the management.

Yes. So Dilip, as a shareholder, my -- first of all, congratulations to the entire team. There is absolutely no doubt that the efforts have been humongous and the results are there for everyone to see, so congratulation once again. What my point is that, let's say, if you generated INR 1,700 crores in the last 5 years, I can visualize that you could generate maybe double that amount over the next 5 years. So what I wanted to put across is that after you do the CapEx, can we come out with a clear-cut policy, that 30%, 40%, 50% of the net cash generated will be given as dividend buyback? And it is like a policy, whatever you generate, the shareholders get it, and I'm sure shareholders have waited long enough for -- to be deserved for this liberal payout. So that's the point which I wanted to just put across.

Madhuji, this is Abhishek Khaitan. You're absolutely right. So first, our aim was to reduce the debt. And as what Dilip said that we look at opportunities where our -- in certain areas where our ROCE is more than 20% or 25%. And whatever the surplus cash, which will be there, which also we feel can be double the amount of what we have generated in the last 5 years, depending on the Board's call, can be used only for 2 things, a buyback or higher dividend payout.

Sure. So I am...

And we also look at getting out of policy on that in the near future.

Fantastic. Fantastic. I have 1 more question, Abhishek. Since you said in your opening remarks that you have been the largest exporter of liquor from India, what kind of opportunities do you see in the export market over the next 3, 5 years? And what is the company doing to actually capture these markets?

If you see, Madhuji, like -- I would like Sanjeev to answer this, but I'll just give a little -- this thing. The biggest thing was the company did when we launched Rampur Single Malt and the demand for this product is more than what we can supply. And about 3 years back, we had invested a lot of money into tripling our malt capacity and the malt maturation, which I think from 2023 should kick in, and also with the Jaisalmer, in the travel, retail and across the globe. So what we are concentrating on getting our brands with the right distributors and being present in the right places. And as far as Rampur goes, the demand is so much that whatever we produce, it gets sold out.

Madhuji, let me add to what Abhishekji just said. As you are aware, our brands are currently in 85 countries and the opportunity exists across the board, across markets, whether it is for our luxury brands, like Rampur and Jaisalmer, or for our other Prestige & Above brands, whether it is 8PM or Magic Moments and all. So we've seen an upswing across markets, whether it is U.S., Europe, U.K., Far East, everywhere we see. And we are fairly confident as the markets open up, the lockdown restrictions keep coming down, we will continue with this momentum in the overseas market. The other thing that I would like to comment on is liquor is a highly cash product commodity across the world. So we are also exploring possibilities of local bottling in a couple of these markets. As a start-up, we started on a small way of bottling our Morpheus in Malaysian market. The response has been very positive over there as well, and we are exploring possibilities of going into local bottling into a couple of locations as well depending upon the taxation structure, the strength of the partner and the local infrastructure. So we are pretty excited about the opportunities that are available to our brands with the international markets over the next couple of years. And of course, Rampur, Jaisalmer and the newer expressions of our single malt as well as Jaisalmer and a couple of other luxury products that we have in the pipeline should give a big boost to our export business.

Just to finish you know this point, see, as you yourself said that you are present in 85 countries, but our absolute number of exports coming from these 85 countries is still very small. The point which I was wanting to ask is, do you see a 5, tenfold increase in export revenue over the next 5-, 7-year time frame? While giving a specific number is very difficult, but do you see that, that kind of potential does exist and the company working towards it?

As I said Madhuji, we are -- the quantum jump in the numbers would essentially come once we start doing local bottling operations in a couple of markets because of the tax and duty advantages. So we are very actively considering various options on that because export from India will always be plagued by the high taxation in the importing market. So the way forward definitely has to be local bottling in a couple of key markets, and that should give us a quantum leap.

The next question is from the line of Aditya Soman from Goldman Sachs.

So my first question is on the new launches you talked about. Obviously, you've developed a very interesting brand on the luxury side. So when -- can you give us any time lines on when we'd expect these so -- one, the luxury banks to percolate down to the Indian market? And secondly, maybe more affordable variants of those, whether it's malt whiskey or gin or vodka to again be launched in the Indian market? So can you give us any time lines over the next, say, few quarters?

Well, in terms of luxury brands, it's an ongoing process, especially for our Rampur Indian Single Malt. Even the latest expression that we launched of Rampur was Rampur Asava, which again has been very well received. This is the first single malt, which has been finished in an Indian wine cask. So it's an ongoing process. As we earlier also mentioned, we've enhanced our malt capacity a couple of years ago, and we are experimenting with a lot of newer expressions of our single malt to share with the world what India is all about and the Indian taste and profile. So there are lot newer expressions that will be coming out in the years to come. The same thing is with our craft gin as well with Jaisalmer. Now in terms of the domestic launches of that, I'll let Amar address that.

So first of all, addressing Rampur Single Malt and Jaisalmer, we are happy to state that the brands are now in the process of getting listed with the defense services Canteen Stores Department as we speak. And that offers huge opportunity, particularly considering the fact that BIO brands in CSD canteens are facing some reluctance there in terms of ordering. And therefore, there is enough excitement and demand for premium Indian products. So that offers huge opportunity for Rampur Single Malt and Jaisalmer. Having said that, our premium brands that we have in the domestic market, Magic Moments with a 60% market share, is now considering the launch of a very, very premium variant, which would be somewhere parallel to Absolut. So that's a very premium version that's being launched. In addition to that, we are launching 2 superpremium whiskeys over the course of this 12 months, which is about to set in. So these are also going to be the premium most variants in the whiskey segment.

Just in terms of these launches, we've seen, for example, 8PM Black now being more widely available. But even in of some of our key states like Karnataka, at this point, that's yet to be launched. So when do we expect -- I mean you would launch these, say, 2 superpremium brands over the next 12 months. By when would you expect a sort of nationwide coverage or at least in our key states?

So we are right now available in 16 states. And we plan to expand the presence and distribution of this brand over the next 6 months in the balance of the states, which will be another 5 to 6.

Just to add on what Amar has said, our policy in Radico has always been that whenever we launch a new brand, we do it very selectively. For the first 4, 5 months, we concentrate only in a few towns or cities and then take it national. So even if you see our 8PM Black, this is our second year of -- last year was the second year. And the second year itself, we did 1 million cases, and the brand has responded very well and now we are expanding it across. And hopefully, it should be close to 2 million cases in the current fiscal.

That's right.

I understand. That's very clear. And just one last one for me. In terms of working capital, would that increase as your volumes pick up as the situation normalizes? Or do you think this is -- in terms of days, we should not see any meaningful change?

So Aditya to this question, actually, what we have learned in this last 5 years, we have kept the working capital, very, very controlled, and you've seen that number of days, which used to be at 61 number of days from gross sales basis point of view has come down to 33 days. And this is the optimum utilization of our resources with these launches and all that. I think there could be some increase, but it is not significant. It will not be very significant. At this point of time, we don't see that there will be a huge working capital deployment on account of these launches. It will be within limits. The number of days will be also within 33, 34 days only.

The next question is from the line of Abneesh Roy from Edelweiss.

Congrats on growing again faster than the industry, even in Q1. On a quarter-on-quarter basis clearly you have done better. So my question is on home delivery. So in the wave 2 of pandemic, did you again see some signs that the home delivery is picking up? Why I'm asking this is, one, wave 2 should have ideally helped, but we saw the market leader divesting its stake completely in its home delivery e-commerce business, which was very surprising. So what would be your take on -- in your market, how is home delivery panning out?

So first of all, let me tell you that home delivery is there to stay in the long term. Right now, these are very initial stages. And as every business has teething problems, home delivery is also facing one. And that too with the most complex of consumer product category that we are in. So if you look at just Maharashtra, there, home delivery has always existed. Now they have made it official. And Maharashtra has now been thriving on home delivery because most of these bars and permit rooms that are operating there are actually -- basically, they are working on the home delivery model. So there are different states which are still struggling with it. But in the times ahead, we see that this is a model that will settle in and it will offer great -- open up great challenges and opportunities both for the business.

And second, glass prices have been moving up. So if you could tell us how much of inflation you see in glass prices either in Q2 or the balance part of the year. And similarly, on ENA, what would be your outlook?

So as far as glass prices are concerned, see, first of all, you have to understand that new capacities are coming up by the day. And there are huge unutilized capacities already lying with the leader in the glass market -- the glass manufacturer. So in the last 2 years, glass prices have already seen an increase by almost 15%. So we see that it is going to remain stable in the times ahead with the increasing capacities that are being created.

As far as ENA is concerned, actually, at this point of time with good monsoon, the agri income increasing, the crop increasing, the all-time high production crops of the grains, et cetera, I think these are stable levels. But the point is in due course of time as the government blending program is 15% from 8.5% currently to 20%, we might see some headwinds. And those can -- but those are not a challenging ones, should not be significant ones. And there is capacities coming in, there is a 360-degree program of the government how the grains, which get wasted can be utilized for all that. So I think -- and the company's strategy of premiumizing the portfolio and gaining strength in the premium segment of the portfolio, this has a very marginal impact on my gross margin and operating margin. So we are geared for that.

And sir, last question. So your P&A in Q1 has grown slower than your economy and -- so are you concerned? And on sentiment, are you thinking -- because wave 2 was far more deeper and far higher number of vaccines are picking up, which was not the case in wave 1, what would be your take on sentiment?

So first of all, I'll tell you that this quarter has been an abnormal quarter. And this cannot be treated as the trend. Trend is the premiumization and the premium products are swelling in growth higher than the regular category. So I will say this cannot be treated as a trend. From July onwards, we are seeing, again, the Prestige & Above category is growing in double digits.

I would like to add. See, first of all, the P&A segment has grown slower in this first quarter for the entire industry. But the most pertinent point to be made here is that during the second wave, at the retail outlet, the consumer of a premium brand has been not presenting himself. Therefore, by default, the regular and others have gained market share and sales. But the most pertinent point that I wanted to state about Radico brands is, while the industry lost 1% market share in P&A from '18 -- from '19 to '18, Radico, in fact, has increased its market share points in the P&A segment. So the brands of Radico, basically they're in the premium end of the market, and they are buoyed and that is a trend we see in the times ahead.

The next question is from the line of Bharat Shah from ASK Investment Managers.

I have a more -- question, which is thanks for the retrospective for what has happened in the past. And to some extent, therefore, I want to know your views about the future. So when we look at the picture, here is Radico Khaitan where -- in a country where whiskey is the most important liquor segment. And Radico doesn't have many whiskey products to offer at that point of time. And yet Radico has done remarkably well over this time frame. So my -- many answers we know is to how you have gone about, that you've never discounted your products. You have not tried to, say, launch cheaper offerings. You've tried to build quality brands, entered entrepreneurial energy compared to complacent kind of multinationals. But many of them have major brands, global, easy recognition and yet Radico has done remarkably well for itself. So I'm -- it is both a compliment and kind of seeking to know what has made this journey so much more possible and where do you see it over, let's say, next 5 years and more?

Bharat bhai, thank you for your compliments, first of all. We, as a company, Radico Khaitan, we started young in 1998. And that time, even if you look at my balance sheet, we had a loss in the company and the debt was 35%. So I had no money to build the brand. And so gradually knowing -- being an Indian and a proud Indian company, we knew where the gaps are. And that's how we started with our 8PM whiskey, which today is now more than 10 million cases. We identified the gaps. And we would be the only company to be present in all those tiers, that is vodka, whiskey, brandy, rum and gin. In brandy, then we achieved the market leadership with Morpheus. And what we have done is we've always priced our product higher than the competition because we believe that in liquor, the higher you pay, the more image you get. So we've always gone against the competition of not discounting the brands. And luckily for us, it has worked and the latest wins with our Rampur and the 8PM Black. So until now, the journey has been very interesting. But going forward, what I feel that Radico is now absolutely liberated because our balance sheet is very strong. We are virtually a debt-free company. The company is throwing out a lot of cash, and this is the right time to go after segments of really high premium, where your margins are high. It might take a little time, but eventually, it is going to pay us a lot like what happened when I launched Magic Moments Vodka. So we feel that now is the time for our new launches in the whiskey phase, which we are going to attempt in the current year. In the meantime, our old brands have started now gaining momentum, whether it's Magic, whether it's Morpheus. All other brands like Rampur also, it's taken 4 years. But now with the production coming in and Rampur and Jaisalmer getting into the armed forces can be a big thing. So we are quite confident of the future that our premiumization journey has just started.

You didn't choose to comment, but very clearly, the multinationals, which compete have globally recognized decades old brands, which have been known around. And yet here is a young Indian company, which has remarkably built a premium whiskey brand, which is quite an achievement in itself. So what do you put it more to? I mean entrepreneurial zeal of the firm and the team or complacency of the multinationals that compete or both?

To answer your question on this, I think our team is very motivated. Our decision-making process is fast. And being an Indian company, we know the Indian market very well and we are hands down. And everyone's role is very well defined in Radico and the enthusiasm is very high. So I think it's a combination. And most importantly, we come from a blending background because when we -- when I started the branded business, it was my father who had created the distillery. So our blending, which is the heart of any whiskey is the main thing. So I think that is one of our core strength of production coupled with the marketing and innovation, which our team has gotten. So I think it's a combination of everything.

Okay. Would you say that while we have created certain superior growth rate compared to the industry, going forward, in terms of the differential, will the lead get bigger or the gate will get wider?

Bharat bhai, if you see 4, 5 years back, my growth rate had slowed down because we had killed a lot of brands where the profitability was not there. So our aim at Radico is to grow our premium portfolio. Growth will depend on how the market behaves. But our aim is to now kind of take into every sphere of the premium side. So more than the volume growth, I'll be more concerned with my premium growth.

And in -- so measured in terms of the rupee sales, will our growth rate differential widen compared to the past as compared to competition?

See, next 2, 3 years, actually, we'll outsmart the industry, Bharat bhai.

[Operator Instructions] The next question is from the line of Aaron Armstrong from Ashmore Group.

Will you go into some more detail, please, on the Prestige & Above share? So looking at the Q1 numbers, the sales value contribution of Prestige & Above was 46.8%, and then that's down from the Q4 level of 51.8%. Can you talk about some of the factors behind that? I think you mentioned briefly in terms of the impact of lockdowns, if you go into some detail there, please. And then on a forward-looking basis, in terms of recovering to that 51% level or even higher than that, do you think that takes 1 or 2 quarters? Or do you think it could be a little bit more quickly than that? So yes, how do you think the contribution will trend in the short to medium term, please?

So the slowing down of the P&A sales is a very temporary phenomenon. It's happened primarily because of restriction of time and the number of outlets that have operated in the market. It is very natural that when you look at the premium consumer, he doesn't visit the outlets if it is because of the pandemic or because it's too crowded by the people at the lower segment. So that is the reason why the P&A has slowed down compared to the past. However, having said this, now we have already started seeing growth as the markets are opening up and the shops are coming back to business. The growth in the premium segments has started. And as we speak, all our brands, which are in the premium segments in the IMFL space have started growing in the month of July. So this is a temporary phenomenon. I think we should be back to our 50%, 51% in the short term.

That's great. And then second question, if I may, please, in terms of market share. And I think you made a comment about expecting to grow faster than the industry over the next couple of years. Can you talk about how those market share gains will materialize, please? Is that because premium grows faster than the industry? Is it taking share from smaller players? Is it white spirits growing faster than brown spirits? The kind of the key factors behind your market share gain outlook, please.

So Radico's market share is primarily going to come from the increasing presence and strengthening of the whiskey portfolio. Right now, if you look at it, we have 8% of the total market share of the alcohol industry. Now let me explain this a little more. In the vodka, we have market dominance with a 60% plus market share. In the super-premium brandy category, we have a 60% plus market. In the rums category, we have almost a 30% plus market share. Now what is left is the whiskey space where we have a 6% market share of the industry. As Abhishek explained to you, the 8PM brand, which is there in the portfolio hit the 10 million cases mark last year. 8PM Premium Black hit 1.2 million cases last year, and we are going to expand further. So that will strengthen the presence in the whiskey space, but that's not enough. You see, if you look at the way the Indian IMFL market is made, roughly 10% of the industry has been the extreme premium end, whether contributions run at a rate of more than $20 a case. That's the segment where we, as Radico, are planning to peg in our new brands, and that is going to help us not only in terms of volume, but multiply our profit levels. So that's where we are focusing. Obviously, when we become stronger in the whiskey space, in the next 3 years, our overall market share will improve significantly.

Great. And perhaps last question for me, please. In terms of the export markets and considering local bottling partnerships, could you talk about export contribution to revenues today, what the key countries are and the kind of the emphasis on local bottling? Is that something that you'd like to investigate more in the next year or so? And then would that be a capital-intensive or capital-light investment, please?

So I'll just give you a background that export has been -- for the last 1.5 year has been doing very well. We have -- so now we are around 7% of our net revenue coming from exports within -- the contribution and EBITDA side is better. And we are exporting to 85 countries and brand portfolio over the year has matured. I think Sanjeev will speak about the bottling, local bottling or some possibilities and arrangement, which can be looked at in the future, looking at the growth in these markets.

See, in terms of local bottling operations, obviously, the luxury portfolio remains in our mother distillery, so we're not even talking about that, whereas the primarily into the more mass market products on that, and that we are working, exploring with our partners in each of these markets because in some of these markets, our brands are the market leader and the local import duty and taxations are pretty high. So we are exploring all those possibilities where it will be of significant interest and beneficial to the company to go in for local bottling operations. As I said, we've already started in a pilot way in Malaysia, but we are looking at a number of other markets, whether it is the African market or the South American markets as well. So all these are on the drawing board. We are in constant touch with our local partners over there as well. Wherever we feel there is more value addition, we will definitely look at local bottling operations.

Perhaps last question, if I could, please. You mentioned you can be market leaders in some of these markets already. Can you talk about what kind of market position you already have in Malaysia, please, in market share?

Malaysia is very big for us in terms of our superpremium brandy, Morpheus. And we are the largest selling superpremium brand over there, of the Indian products over there. And that's the reason we decided to go ahead with the local bottling operation over there. In a couple of other markets, our whiskey, whether it is 8PM or our vodka, Magic Moments, they are the market leaders. So each market is very different. Each brand is different depending upon the market. And our focus is primarily at the mainstream consumers. So we want to address and provide them with the products that they like and they are looking forward aspirational.

The next question is from the line of Nikhil from SiMPL.

Congrats on a great set of numbers. Just 2 questions, sir. One is you mentioned on the Canteen Stores, the BIOs are finding difficult. Just to understand, what is the size of the market where Rampur and Jaisalmer would be competing, just to get a perspective of? And who would be the other key brands, which we'll be competing on the Indian side or -- if you can just share some thoughts there.

See the absolute superpremium segment in the CSD canteens belongs to brand equivalents of 100 Pipers and Teachers, and then brands like Blenders Pride. Now these brands are constrained today. And we are looking at these premium brands like Rampur and Jaisalmer operating in this segment, which is almost -- I'm sorry, I let out the name of Johnnie Walker. So we are looking at brands in this space, which is less than today 0.5 million case, but the fact is it's a huge market. And it will take away market from the premium end of IMFL as well as the top end of the foreign brands.

Okay. Second question was, sir, I think in the starting of the call, we had a discussion that there is a strong cash generation, which the company will see. You mentioned that we would be probably looking at CapEx. And also, we mentioned we are launching premium whiskey brands. Just to pick your brain on this like we've also seen a lot of key deals which are happening in the premium brands, the local companies tying up with you, would you say -- would you be open for any inorganic acquisition of these premium brands, which can be scaled up because of our strong distribution? Or would you think we would only focus on organic growth? How do you see between these 2 aspects?

See, first of all, what we feel in Radico is like when we have done a landscape study, we don't find any much of any premium brand up for acquisition. And Radico's core strength has been creating brands. So we'll focus on organically growing. We've been working last 3 years on certain very luxury and very superpremium brands, which we are all set to launch in the current year. So we will go organic.

[Operator Instructions] The next question is from the line of Anish Jobalia from Banyan Capital Advisors.

So just wanted to understand in terms of our gaining market share, so how much -- if you could comment a bit on the changes in the competitive intensity, which is helping us to gain the market share? And is there incrementally expected to be any changes over there, which could also become a challenge for us, especially on the white side -- white spirits side? Because one of our competitors has mentioned about gaining more stronger foothold on the white spirits side?

First of all, if you see last 4 years, we have been outperforming the market. And considering we've been outperforming the market, as I said, we are not focused on volumes, but we are focused on premiumization. So we'll continue to drive our premiumization drive. And as far as competition goes on focusing on white spirits, it only will enlarge the campus. So we've been always there for competition. We have delivered good competition. So I think the best product will always pay out.

Okay. And secondly, I just wanted to take the conversation from the last call in terms of Delhi market. So there, we are seeing like excise policy changes as well as the route to market. So just wanted to understand how has been the progress over there. Any comments around that.

See, right now, the bids have been offered and everything. So I think September, October, once it starts, it should enlarge the market.

See, the Delhi market is there now to open up. And new players are going to come in, which obviously means that organized companies will have a fairer and better play. So companies like Radico definitely stand to gain from this market policy.

Okay, but -- okay. So you're saying that these results will be showing from, say, in the H2 onwards.

See, Delhi is a minuscule market, like it's not that which can be a mover or shaker. But yes, definitely, it will help Radico.

And if I may just ask one question in terms of the volumes. I mean, the outlook for FY '22, how are we looking at -- I mean, let's say, in the remaining 9 months, what kind of outlook, because like we did quite well in the last 9 months of FY '21. So are we looking at, say, our double-digit growth on volumes in this year itself also?

See, God willing, if everything remains what it is and it does not happen anything bad, then what we expect in Radico that for the current fiscal, we should have a strong double-digit growth.

The next question is from the line of Sonaal Kohli from Bowhead Investment Advisors.

Firstly, many common congratulations on the appointment of new auditor. I think it's a great step. I had one key question. Can you please highlight how do you see prospects of Uttar Pradesh from a sort of 5-year perspective? I mean there were some policy changes recently. And how do you think they would help you to grow? And are they -- is my understanding correct that there are a large number of pubs, which are going to open in Uttar Pradesh in small towns and cities. And UP market was starved of these kind of pubs and that would lead to increase in socializing and drinking culture. The state had the money, but not the opportunity to spend the money. So I just wanted to know whether my understanding is correct or not.

Okay. As far as Uttar Pradesh is concerned, first of all, with a population of more than 250 million people, I think the per capita consumption is still unexploited. It is still in the process of growing, first. Secondly, Uttar Pradesh has come out in the last 3 years with the most progressive policy of the country in the excise, which is now being emulated by other states. Third, the most important thing is that in the last 1 and 2 years, Uttar Pradesh has been actively working on introducing model shops, premium shops, which is coming up by the year and month after month. So they are opening up the market completely, making sure that all organized brands are adequately available and distributed to the consumer of Uttar Pradesh. In the vision statement of the Uttar Pradesh excise department, they have a target of taking their revenue from INR 32,000 crores to INR 50,000 crores, which means they are just at a 50% level. And therefore, that is the potential, the growth, the possibilities that exist in the increase of per capita consumption and the growth of the market coupled with new brands selling there, I think this is a huge opportunity for companies like Radico to encash where we have more than 30% market share. We are the largest selling company in Uttar Pradesh, and we hope to maintain our market supremacy.

This is helpful. Another question and one follow-up on this one, as far as Uttar Pradesh is concerned. You said you have the largest market in Uttar Pradesh, which is the second largest, and what is that market share? Secondly, as far as the other states are concerned, outside Delhi, are there any other states also which you are seeing or you're expecting to follow the Uttar Pradesh model? And any views on Bihar, any like change in policy or at least discussions that have started happening around that?

So see, Delhi is taken to following the Uttar Pradesh model in a restricted way, but they plan to emulate this policy. Similarly, Punjab and Haryana are states, which are also considering transferring their model to the UP model. Having said this, first of all, we would like to say that Radico as a company is widespread. You see every liquor company has one key state, so does Radico, Radico has UP. But the fact is that Radico's brand portfolio being at the premium end of the market, we are widespread. Across the country, our market shares are strong in most states like Karnataka, for example, in Maharashtra, in the Northeast, in Delhi. So we are basically well spread -- Uttarakhand. So we are well spread as a company. And when we say that in the relevant segment of Magic, we hold a 90% market share, and across all verticals, when we hold 60% market share, that is a clear indication of the fact that it has to come from various states that operate in the market of India. Similarly, if you look at brandy, India -- South India is a brandy market. There, we have a 60% plus market share. So this is basically stemming from the fact that wherever there is a market for a specific category, we are strong there, and that is why we are all spread out. So UP could be a strong factor. But we are growing from strength to strength in other states as well.

So within a state, percent increase, is it over next 2 years period or what is the period you're referring to? And secondly, what would be the market share of the second biggest player in UP?

We are very strong in Telangana. We are strong in Karnataka. We are strong in Andhra Pradesh. We are strong in Maharashtra. And we are strong in Uttarakhand.

Sir, actually, my question was what is the market share of the second biggest player in UP? I wasn't referring to where you're strong. I was asking you who is the #2 player in the UP and what is the market share?

Okay. So that's Pernod Ricard, which has a 25 -- 23% to 25% market share.

And sir, the vision statement of 50% increase in UP revenues is over what period?

Can you repeat it?

Sir, you had mentioned that in UP, the government plans to increase its revenues by 50% as per the vision statement and policy. So...

This is for the next 3 years, they plan to take the revenue from INR 32,000 crores to INR 50,000 crores.

The next question is from the line of Shashank from Tata AIA Life Insurance.

Sir, just a few questions from my side. So these other Indian single malts, Amrut and the Paul John, are they also listed in Defense currently?

Sorry, come again. Can you say that again, please?

Yes. So these other Indian single malts, Amrut and Paul John, are they also listed in Defense currently?

I believe Amrut is already listed over there, and I'm sure this is an opportunity for the Indian single malt category as a whole to make a contribution, part of the Atmanirbhar and Make in India. So we are very excited about opening up of this category for the Indian single malts.

Okay. And what would be the pricing of Rampur there in Defense?

See right now, the pricing has not been finalized. In fact, it is mere couple of days. So once we get the PRC done, we can inform you accordingly. But it will be highly priced.

Sure. And just to clarify, so this local bottling plants in international markets, would it be your own plants or through contract bottlers?

Well, it will all depend upon the market that we aim to enter in. So obviously, we will have local partners as well because in foreign land, it is equally important to have a strong local partner. And we will look at all the possibilities of whether having our own or in partnership or a JV with the local partners over there. So a lot of thought will have to go in and then we finalize the way forward.

The next question is from the line of Shantanu Mantri from Think Investments.

Sir, just wanted to know, after UP, like in UP, we have 30% market share, can you just let me know that -- which are the next 4 or 5 states, like you mentioned, Andhra, Telangana, Maharashtra, 4 after UP and what would be your market share in these 4, 5 states, which are big for us?

So as we said that we are very, very widely spread. UP, we have a [Technical Difficulty]. However, there are -- out of top 10 states, we are available everywhere. And in fact, our market share are quite good in Karnataka, Telangana, Maharashtra, Uttarakhand. The other states like Kerala also, we are, after the price increase, ramping up the market share. So I think we are widely spread. And as we mentioned earlier also that 37%, 38% of our saliency comes from North, 37% comes from South and then may extend West, and 11% from CSD. So it's -- company is very geographically very, very wide spread in this saliency.

Sir actually, where I was coming from is, say, this UP has the strong target of increasing revenues to INR 50,000 crores, and we have a 30% share. Definitely, it will be a good benefit for us. So what I was trying to map was that other than UP, are there some few states that you all have envisioned where similar gains, big gains could come?

Yes. So our next phase of growth will come from -- see, first of all, I would like to say that there are 5 states, which contribute to 65% of the industry. They are UP, Karnataka, Telangana, Andhra, Tamil Nadu. Leave aside Tamil Nadu because that's a restricted market. So we are looking actively at strengthening our market shares in the state of Karnataka, Telangana and Andhra. They will be our next phase of growth where we are already strong there currently.

Ladies and gentlemen, due to time constraint, that will be the last question for today. I will now hand the conference over to the management for closing comments.

Thank you, Ashit. Thanks, everybody, for joining on this call today. As you are aware that Radico has a robust brand portfolio, and we have continued to invest behind our brands. We are looking to expand our premium offering and further new brand launches in coming quarters. The company has a strong balance sheet and cash generation, which provides us ability to invest behind our strategic growth plan. Overall, we believe that there may be some short-term challenges in the industry due to the pandemic, which shall not last too long. As vaccination increase and things are starting to normalize and thus we will return to the growth path and we had seen -- as we have seen in Q4 of '21, and Radico will outperform the industry. We look forward to interact with you on next earnings call and further engagement. In the meantime, if you have any queries, do let us know and feel free to mail to us. 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.