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

Our next question comes from the line of Manan Shah from Moneybee Investment Advisor.

Congratulations for good set of numbers. My first question is this CapEx of INR 35 crores in the Odisha plant, how do we plan to fund it?

So we have already taken a term loan of about close to about INR 25 crores from DNB. And we have taken about I think about close to about INR 16 crores, INR 17 crores of disbursement also.

Okay. And this expansion is largely towards the brewing or bottling, if you can just mention there is about that.

So we are increasing the bottling capacity from 42 lakh cases to about 60 lakh cases. And certain balancing equipment also is in set up.

Understood. And post this CapEx and including the working capital debt that we would take, what sort of peak debt are we anticipating this year?

I don't think that considering that whatever the debt is currently, we don't expect any further increase in the debt for the current financial year.

Okay. Understood. My next question was a bookkeeping question. In the balance sheet for the current year, we have seen a significant increase in current tax assets -- sorry, in other current assets from INR 55 crore to INR 96 crore. So if you can just highlight what led to this sort of increase.

Let me get back to you on that separately.

Okay. And just wanted -- my last question was regarding have the plant stabilized? I mean, that expansion that we did at Bhopal, as well as Hassan, have these plants stabilized and at what utilization would they be operating?

Yes, obviously the plants have stabilized and we are operating at maybe close to about 85% to 90% capacity currently.

Our next question comes from the line of Deepak Poddar from Sapphire Capital.

Sir, just first of all I wanted to understand with this doubling our capacity in Karnataka, what's our total capacity as of now?

It's about 90 lakh cases in Karnataka.

19 lakh cases. And ideally we did around 15 lakh cases -- 19 lakh cases overall, right?

9-0, 90 lakhs.

90 lakh, 9 million, right?

Yes.

Okay. And our volume in FY '23 in beer was about 15 million?

Yes.

Okay. And this capacity that you said 90 lakh, so I was just trying to understand overall, as a company level, what is our capacity as of now?

Currently we are at about [indiscernible] when we complete the Orissa expansion to be about 3 crore cases.

3 crores. And Orissa would be how much separately?

60 lakhs.

6 million. So around -- if we exclude that, around 24 million would be our current capacity, right, 24 million cases?

No, no. So, Orissa currently is at 42 lakh cases.

Okay. So incremental is 18 lakhs?

Yes.

Okay. Understood. So basically, I think, FY '23 our volume was close to about 15 million, right. So there is a big scope for growth in terms of utilization level that we can improve, right, going forward?

Yes. So we have added capacity in March to April, so we have added 45 lakh cases in Karnataka, which was earlier 45 lakh cases only. And another 18 lakh cases we are adding in Orissa.

Fair enough. And what sort of volume we might be looking at in beers in FY '24?

We are looking at about 20% to 25% growth in our sales, which should I guess to reach about INR 1,000 crores.

INR 1,000 crores, you're saying from beer or overall -- beer revenue or overall?

Yes, sir.

So I was just asking this INR 1,000 crores is revenue you're talking at the company level or at the beer level?

At the company level.

At the -- and what sort of margin trajectory we are looking at? I mean, earlier we had said in the past that maybe 13%, 14% is our aspirational margins, right? I mean, but we...

Yes, that's our aspirational margin, but we are in a -- we actually -- [ we're hesitant ] in terms of cost pressures are there. So, let's see how quarter 1 performs, then we'll have a better idea about how the year will end at.

Fair. But do you see all the cost pressures have already been factored or there are any more pressure that we expect to come in first quarter?

No, I said that now, for example, I've seen that [ soda ash ] prices have also decreased for April. So we are hopeful that the glass bottle prices also have now picked up as for our expectation is. Let's see.

Our next question comes from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited.

Most of the questions have been answered. Just one point, considering the seasonality, what could be the peak utilization any plant can do?

See, we have operated plants considering the peak utilization also at about 85%, 90% in the past. And for that matter, the capacity of the Woodpecker plant was at 45 lakh cases. We have seen it operate at about 100% also. So, we can easily achieve, I think, about 85%, 90%.

[Operator Instructions] Our next question comes from the line of Kuber Chauhan from Anand Rathi.

Congratulations on good set of numbers. Most of the questions have been answered. And I would like to know what could be the ad spends towards to improve our brand visibility? And secondly, what would be the first year utilization for the Odisha plant after the expansion?

I missed your first question.

2 questions were there. Are you planning for any spends on brand visibility, and just to enhance our brand and just to do more kind of a marketing? And secondly was on the utilization for the Odisha plant after the commencement in the June.

First, on the marketing spend, we -- I only assume -- previous calls also I mentioned that we love to work with the trade channels. So our marketing spends or our spends towards promoting our brands would be at the point-of-sales and the distribution channels. So we are happy with that strategy, because that has given us good returns in terms of volumes as well as sales. Coming to your question on Odisha capacity utilization, let's see, I mean, we obviously we'll want more utilization having spent INR 35 odd crores. So, let's see, I mean, how things work out for the remaining part of the year.

Okay. And also are we planning to tap any other states, new states which are into your focus.

So we are looking at increasing our sales in Delhi, UP in the current financial year.

Delhi and UP. Okay. And any sort of price hike if you can -- if you are planning for this year, in FY '24?

Sorry?

Any kind of a price hike, which you are wishing to take in FY '24?

No. On the price hikes, I have already mentioned in the call that we have taken price hike in 4 states.

Okay. And any further price hikes?

No, no. I mean, these are the key states where we want to operate. And I mean, there's no use of taking a price hike in a state where you don't have volume. So, I mean, these 4 states are the states where we want to sell more.

[Operator Instructions] Our next question comes from the line of Pawan from Compound 26 Capital.

Couple of questions. So most of our revenue growth was driven by Karnataka this year, right? Could you talk a little bit about what drove this kind of rampant growth just in terms of the market?

Sorry, sir, can you please repeat your question again?

Sure. So, most of our -- I'm assuming most of our growth was driven by the Karnataka market. So, could you talk about what happened within the market and how did we -- because I'm assuming that the market is pretty saturated. So how did we get this kind of a growth rate in this market?

So our growth has not only come from the Karnataka market, but yes, Karnataka has also contributed its fair bit. And the growth -- the Karnataka market itself has grown, but we have grown more as compared to the industry players. And we had grown in '19, '20 also, but due to COVID coming in and 2 years where vodka was especially in the peak season. But our brands have been very well accepted in the state and especially the state has also supported us. So we have seen phenomenal growth of our 2 key brands, Black Fort and Power Cool in Karnataka.

Understood. And in terms of your sales strategy, sir, could you talk a little about what is it that you kind of did different in terms of sales strategy versus competitors? How many sales force -- sales people did you recruit onboard to kind of get these kind of growth numbers?

So our sales strategy is simple as others. I mean, I don't think that we are differing in any way. But I think, the first starting point for any brand to be successful in the market is that it should offer good value-for-money, good taste, good packaging to the customers. So that we have trials at first, then you have customers coming in and asking for your product. And of course, your product has to be available at all the points of distribution, distribution has to be there. So it has to cover all the point-of-sales in the state. And your brand is available to all the consumers. So that's basically has been the way we had been able to taking more market share in new states where we entered.

Okay. Got it. And did we make any kind of large recruitments within our sales force through this year?

So, I mean, see, you have a strategy of you cannot have a sales force, which is large initially. So obviously we will keep on adding more people as you grow. So obviously, we have added more people as we grow and as we want to grow. So that's how we have been doing this.

Our next question comes from the line of Nishant Sharma from Nuvama Wealth Research.

Congratulations for good set of numbers. So my first question is related to the new areas where we are planning to enter like Delhi and UP, what will be your strategy to expand our footprint in these 2 states and at a Pan-India level, what is the POS for us?

So, there are certain questions which I obviously do not answer like POS across India. Either we can discuss strategy of how we sell more in Delhi or how we want to grow. But to give you something from POS in hindsight, yes, I mean, about 10% of our sales was coming from Delhi in '19-'20, it's unfortunately because of COVID reduced and there was a change in the excise policy of Delhi, which has a very material impact on the way business was being done in Delhi. And last year there was so much of demand from our existing state, where it does not make much sense to sell in Delhi, but we have got a good presence in Delhi. We are establishing our presence in UP and with our numbers going forward we'll justify our growth plans in these 2 states.

And sir, in terms of debt level, how are we seeing our debt levels going forward?

Our debt levels would be at similar level and actually we would want them to reduce going forward.

Okay. And you are pretty confident in achieving this, if I'm not wrong, you have guided for about 20 to 25 kind of percent a topline growth.

Yes.

And if I talk about on the margin side, you mentioned that gross margins were under pressure due to certain raw material -- escalation in raw material prices and also we are focusing on the glass bottle [ we are marketing ]. So, can we see some improvement going forward or these are likely to remain at those levels?

No, it's our endeavor that our gross margins would improve, that's why we have set up our canning facility in MP and we are trying to sell more of cans as compared to glass bottles, so that our gross margin improve. Because cans give you -- one, there is -- the cost escalation in cans has been limited to about 15% to 20% as compared to 40% in glass bottle, plus cans also give you the advantage of a higher realization from the glass bottles. So we are trying to improve our sales mix from glass -- pure glass bottle to cans in the coming short to medium term.

Sir, what would be contribution currently?

Cans would be, for example, in Karnataka, is about 10%. So we are improving it there also. In Bhopal also about 10% with cans. So we are trying to improve that also going forward.

Okay. So this 12%, 13% kind of a EBITDA margin, which we were able to clock for last 3 quarters, will it be sustainable levels or it is likely to be around 11%, which we achieved in the current quarter?

See, I mean, as the strategies, which I mentioned to you, we are working on them. Let's see how quarter 1 comes out. And then, I think, it would be better if we can talk about the margins then.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I now hand the conference over to Mr. Nakul Sethi for closing remarks.

Thank you all for joining the call. I trust that all your queries have been adequately addressed. Should you require any further information, please reach out to our Investor Relations advisors or me. We will revert with all the necessary details at the earliest. Thank you so much.

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