Som Distilleries & Breweries Limited (SDBL.BO) Earnings Call Transcript & Summary

So like we said -- answered the earlier question, the IMFL is just about 11% of our revenue today, right? And it is concentrated in a few states, right? In that state, wherever we have introduced Mahavat, which is a premium whiskey, we have just seeded the brand. It's just about 4 to 5 months old in Madhya Pradesh. And Delhi, we just rolled out. So premiumization is a long-term game, right? So we have started that. And hopefully, the mix of Mahavat and once we launch the single malt whiskey, all these things will contribute to better revenue. And as far as comparison to previous quarter is concerned, it's the combination of which brand was in demand in those markets, like in Madhya Pradesh, where particular SKU is selling at a lower realization. If that demand has gone up and the other demand is slightly lower, the mix has changed a little bit. But it is not a thing which is a permanent thing and this can be corrected.

Okay, sir. And sir, our capacity utilization is going down, but our gross margin is going up. So when we recover volume, will our gross profit increase even further?

It is a question of how we ramp up our sales. So I mean -- so if we run in a very normative 5%, 10%, then we can expect our gross margin to improve. But if we are looking at growth as what we are, then the gross margin would definitely be a little lower than what we are currently at.

But sir, if the utilization improves, then our fixed cost is not improving. So our margin should improve, right?

No, no, no. It's not a question of fixed cost. It's a question of how many glass bottles -- new glass bottles are you as a total percentage of the bottle...

Okay, sir. And sir, regarding Karnataka, we lost market share when the excise duty was high. Sir, how much of the market share have we been able to regain again?

So we have roughly lost about 5%, 5.5% in half 1 of this year vis-a-vis half 1 of last year. And -- but October, we have kind of gained back about 0.5%, right? In November, it looks like we are going to gain back over 1% vis-a-vis the previous quarter. So it is improving. The launch of Sunny Beaches beer, which is one of those mild beers has received good response from the market. Like I said in the beginning of my presentation, we have already reached about 5,000 outlets in terms of availability and almost 4,000 outlets -- 4,500 outlets have repeated the brand. So we're expecting this to create a huge scale in terms of volume for us. And therefore, our revenue and market share in the state of Karnataka will start picking up from Q3 and Q4. We will see bigger results in Q4 because the season will pick up.

And sir, regarding entry into Andhra, are we doing something about it?

Andhra, we have participated in the tender. And I think end of September, beginning of October, they have sent a notification saying that the government has approved it, but we have officially still not heard from them. So we are waiting for that, and our people are following up on the matter.

The next question is from the line of Manoj Kumar, an individual investor.

My question is that -- regarding the raw material price stability and the packaging material were stable in this quarter. In spite of this that IMFL realization was low compared to the last Y-on-Y basis. So any specific reason that why that IMFL realization was less? This is my first question.

This question about IMFL realization being low was answered in the previous investor's question.

No. But sir, what was the reason that realization was less? Because as per your...

The mix of -- because the available brands that we have, not the premium one. The premium one is very small. It's very early for us to discuss about premium brands, although it is very promising for the future, right? But in the available brand mix and the price mix that we have, the lower price mix were in higher demand during the quarter 2. And therefore, the realization is slightly lower. But all said and done, it's a question of demand and supply. And it's also a question of what exactly is getting demanded by the consumers, and that is what we are getting to. We are not pushing unnecessarily brands that are not acceptable to the consumer.

Okay. Okay, sir. And my second question is what was the revenue contribution from the Mahavat side in this quarter? Because in this quarter, the Mahavat was fully available in Delhi and MP. So if you share that one, what was the contribution in the total revenue -- or the million cases, means number of cases sold of Mahavat.

See, it's very, very small. I mean it's a -- beer and IMFL business, as you all know, it's extremely competitive business, right? We are first focusing on making it available, making it aware to the consumers that is available, and we do a lot of trial programs in the channels that are relevant and then build the brand slowly. So it is a very insignificant part of our total volume as of now. Like we said, once we focus into many states, including Madhya Pradesh, Delhi, UP, Rajasthan, et cetera, this brand will look at -- will start contributing 2% to 3% in the next 1, 2 years, maybe 3% to 4% or 5% in the next 2, 3 years to our overall mix of volume.

Okay, sir. I have one more question. Am I allowed to because I've already completed two?

Carry on. It's okay.

Okay. And sir, my next question is, does the company have any strategy for the brand outreach in the general public means like advertisement or sponsoring some events like that. Do we have any strategy like that in coming days?

This question was answered in the previous quarter as well. Our strategy is completely dependent on what we do in the channel. That is where the consumers go and buy their brands, take it home and drink or take it elsewhere and drink or sit in -- on-premise or a bar and drink. That is where our brands are going to interact with the consumers. So that -- and second place where we interact with the consumers is on the large consumption occasions like an event happening where we co-sponsor our brands and make our brands available to the consumers, whether it is beer, whether it is [indiscernible] we make it available to the consumers. These are 2 big things. Of course, we are also active in relevant social media channels with our relevant brands, and it's a seasonal thing, and we keep doing that.

The next question is from the line of Ashish, an individual investor.

So it was quite similar. I'm basically from Mumbai. And having gone through your presentation and your product profile, now there are several retail products in the IMFL and all. So the big question is, firstly, is Maharashtra even the vision of the brand company, number one, because I personally feel Maharashtra is a huge consuming state. But second question is, again, very similar to there are no form of endorsements for these brands because none of these brands come as a recall value, at least as far as the Mumbai, Maharashtra region is concerned. So how is that perception going to break into the minds of people? What is the thought of the company on that?

Yes. So a part of your -- the answer -- probable answer for your question was given in the previous question asked by the other investor. But however, I will repeat for more clarity. You see, Maharashtra for us is a state because -- it's a big state. And we are doing only very, very little in that state, basically because of the very, very tough route to market and very, very, very tough channel behavior, right? We are very slow. We are very clear that we do not want to invest our investors' money in markets where we find a huge risk, right? So we are very selective about where we operate. And therefore, you will not see us very much visible in the state of Maharashtra or Mumbai for the least. Having said that, we are trying to create a route to market for ourselves with the launch of single malt and also launch of Woodpecker in Mumbai very soon, maybe in the next 2 to 3 months. So we are in discussion with various partners there who are willing to support us. And we will be visible in that market -- available and visible in that market as far as Woodpecker and single malt is concerned, point number one. Point number two is that our brands are traditionally being a channel -- dependent on the channel behavior. Consumers go there, right? And we don't need to be highly visible like a Kingfisher Strong or I mean Kingfisher or Budweiser in order to gain market share. One of the very big examples that we have for that is how we created the brand Power Cool in the state of Karnataka, wherein within a matter of 1.5 years or 2 years, we've made that brand into a 5 million cases brand, right? There was no huge inputs, whether digitally or electronically or in the press.

Which brand?

Sorry?

Which brand is this?

From '21 -- 2021 to 2024, right? We created 5 million brand. I mean, how was it created? Basically offering consumers what they wanted in the channel at the right price with the right quality and packaging, right? So we get created. Like I was explaining about Sunny Beaches is kind of repeating the story done by Power Cool a few years back. The Sunny Beaches is repeating today the same story. We are getting the same kind of volume throughput with Sunny. We are not going bang-bang into putting huge money into advertising and things like that. We are doing very sincere efforts in the channel without wasting our -- because these are all very -- you know how the costs are. I mean, if you're going to go and invest in advertising, it's going to cost a huge amount of money. But at the same time, relevant brands like Woodpecker, for example, or a Bhimbetka, we will not hesitate to invest, right? The margins are better.

Okay. And are you also targeting the airport channels like the duty free and all that because...

Yes, yes, yes. That was a question asked in the previous quarter, and I promised at that time that you will hear some good news about it. And we worked on both pro markets.

Because you are the biggest perception.

Absolutely. Absolutely. We are very much -- that's -- like you asked a very relevant question about how are you creating awareness for our brand and the airport is a big channel for that, right? So last time, we had promised that we will make some progress when we hear in this quarter. I'm very happy to tell you that we have already placed a brand in T1 and T3 in Delhi in one of the outlets there, which is called Tonino, it is available. Woodpecker is available there. And we are in close pursuit with Bangalore Airport, both T1 and T2 to make sure our brands should be available by end of December at least.

The next question is from the line of Sidhant from Alpha Capital.

So what will be the capacity for the UP plant, which is coming up?

It is about close to about 10 million cases per annum.

Okay. Okay. And what are the utilizations currently for the existing plants right now?

For half year -- for Bhopal, we are at about 80%, about 40% each for Woodpecker -- the Hassan and the Odisha plant.

Okay. And sir, next question, as a percentage, what is the advertisement spend which we do? And are we going to increase it in the near future for Woodpecker and Mahavat brands?

As Diwa mentioned that all our promotion and advertisements are mainly done at the point of sales. So that's where the main expenditure is done. So Diwa, can you answer it?

Yes, yes, of course, I'll do. So -- the question about how much -- what is the percentage of revenue, is that the question?

Yes, yes. And are we planning to increase it in the near future?

Sorry?

What is the [indiscernible] And are we planning to increase it in the near future?

See, brands like Woodpecker and Mahavat and -- as and when we are going to put in single malt, we'll require a lot more investment, right, which we are prepared to invest, right? So therefore, it will increase the percentage of our marketing spend on the overall revenue, right? If you ask me what is the percentage today, it will be roughly in the range of about 2% to 3%.

The next question is from the line of [ Geetansh ] Gupta from TKD Investments.

Sir, just one question regarding the other cost. So this quarter, it was around INR 58 crores versus last quarter, it was INR 70 crores. So sir, why there is a drop in the other cost? And what will be the other cost in H2?

Sorry, come again, please?

Sir, this quarter, the other cost is around INR 58 crores versus last quarter, it was INR 70 crores. So just wanted to understand why there is a drop in the other cost?

See, other cost is a huge component. It could include the transportation charges, rebates, commissions, promotional expenses. So it can vary from quarter-to-quarter. So normally, I think this quarter, it was 21% of our sales, while the last quarter last year, it was about 24%. So I think it's fair to assume that they will be in the region of, I think, about 21% to 23%. That's how it varies.

The next question is from the line of Shivam Singh, an individual investor.

Sir, what is the quantum of related party transactions that we are doing? Because like Woodpecker, there are other private limited companies of the promoter in the same industry, right?

So there is only one company that's Som Distilleries Private Limited from which we buy ENA, which we use for the blending of IMFL. So I think that is about maybe close to about INR 20 crores, INR 21 crores in a year.

Okay, sir. And one more thing I wanted to ask. Sir, regarding the working capital days and regarding the trade payables and trade receivables. Sir, there is a lot of difference in this quarter. What is the reason for that? Like trade payables have reduced a lot, but trade receivables have increased.

So I'll have to look at the trade payables, trade receivables you said have increased.

Sir, trade receivables for this quarter was INR 3 crores or INR 4 crores. Sir, it was INR 4 crores. While in the same year previous, it was INR 12.35 crores negative. And trade payable this year is INR 52.65 crores negative. Last year, it was INR 10.45 crores negative. So there's at least INR 70 crores of difference in trade payables and receivables from the last year.

No, no, no. I think it's better that we convert it into days. Maybe connect with me directly after this call then we'll breakup.

The next question is from the line of Nagraj, an individual investor.

Am I audible?

Yes, sir. Yes, sir.

I just want to know what is the efforts the company is making to attract PMS, HNIs, ultra HNIs and institutional investors to buy more of our company's stake so that retail investors be benefited in the long term.

I think our focus now is that we want to consolidate our position in the beer industry. And I think the thing which we want to focus on more is to have better corporate governance and compliance because we believe that as we grow bigger, I think the investor confidence will come from these kind of things which we ought to do.

Sir, what I feel as an individual investor is, this is a different work in the company compared to running the business. Can we hire some consultants who can promote our company's performance and vision in the next coming few years to HNIs, PMS, institutional investors and ultra HNIs so that they will start buying our company share, that's what -- that's was my question. We can take some consultancy help so that we can understand better what the company is doing now to improve and what we intend to do in future.

Okay. We take your feedback into account, sir.

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

So it's been a tough quarter, but we are very, very hopeful of Q3 and Q4 combined and overall closing the year like Nakul had said, with around INR 1,600 crores, it looks like. The UP plant also is giving us a lot of hope, and that will be a big news, big performance in F '27. And we will continue to focus our efforts in terms of driving profitable sales. And driving growth in markets where we have not been doing well in the last 2 quarters, that is Karnataka and Odisha. I think there will be much more focus there, and we are beginning to see results coming in October, and we'll see better results coming there. So we are committed to delivering consistent value to our stakeholders in the overall sense. And we thank you, investors as well as analysts from the market to have spent their valuable time and to hear us out. And I think we are a company which is focused and hands-on with what's happening in the market, and we'll continue to deliver better results and better value for the money that we are investing in our company. Thank you very much.

Thank you.

On behalf of Som Distilleries & Breweries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.