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

Ladies and gentlemen, good day, and welcome to Som Distilleries and Breweries Limited Q4 and 12 Months FY 2024 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. Before we begin, I would like to remind all participants that some of the statements or comments made on today's call may be forward-looking in nature. These may include, but are not necessarily limited to financial projections or other statements of the company's plans, objectives, expectations or intentions. The company disclaims any obligation to update these forward-looking statements to reflect future events or developments. Kindly refer to Slide #2 of the earnings presentation for a detailed disclaimer. I now hand the conference over to Mr. Nakul Sethi, Director, Finance and Strategy of Som Distilleries and Breweries Limited. Thank you, and over to you, sir.

Thank you so much, ma'am. Good day, everyone, and welcome to our company's quarter 4 FY '24 Earnings Call. This past year has been a remarkable journey for us, punctuated by numerous milestones. In terms of volume, beer sales for quarter 4 FY '24 was 63 lakh cases, up 34% over the same period last year. The mainline brands such as Hunter and Power Cool registered volume growth of 12% and 27%, respectively, as compared to quarter 4 FY '23. For the full year FY '24, our annual beer volume surged by an impressive 43%, totaling 214 lakh cases compared to 149.6 lakh cases in FY '23. Beer realization for the full year FY '24 was INR 552 per case compared to INR 488 in FY '23, mainly influenced by the mix of SKUs and price increase. Notably, our flagship brand, Hunter, recorded a 19% year-on-year increase. Black Fort grew by 50% and Power Cool saw a 42% volume increase. Total IMFL volume for the financial year '23/'24 was 10 lakh cases as compared to 8.9 lakh cases in financial year '22/'23. The overall IMFL portfolio grew by 14%. These remarkable strides were propelled by robust demand for our products and our commitment to delivering top-notch offerings tailored to our consumers' preferences. Turning to the financial performance for quarter 4 FY '24, we reported a substantial increase in our total income reaching INR 3,852 million, showcasing a remarkable year-on-year growth of 52%. Our EBITDA for the quarter amounted to INR 455 million, exhibiting a robust year-on-year growth of 59% with a margin of close to 12%. Furthermore, our net profit for the quarter stood at INR 188 million, reflecting a commendable year-on-year growth of 19%. For the entirety of FY '24, our total income surged to INR 12,864 million from INR 8,080 million, indicating a notable year-on-year growth of 59%. Similarly, our EBITDA for the financial year reached INR 1,552 million, reflecting a significant growth of 50% on a year-on-year basis with a steady margin of exceeding 12%. The PBT for the financial year '23/'24 was at INR 1,219 million as against INR 704 million for the financial year '22/'23, showing a growth of 73%. The net profit reported for financial year '23/'24 stood at INR 853 million as against INR 604 million reported in FY '22/'23, showing a growth of 41%. These impressive financial achievements for quarter 4 and the full year FY '24 underscore the success of a growth-oriented strategy and the profound impact on our profitability. Furthermore, after the CapEx completion at Hassan, our overall beer capacity has increased from 30.2 million cases to 35.2 million cases as of April 2024. Looking ahead to an upcoming peak season, we anticipate heightened capacity utilization, which will undoubtedly translate into improved sales and profitability in the forthcoming quarters. Before we proceed to the Q&A session, I would like to express my sincere gratitude to all the stakeholders for their support and confidence in our endeavors. Thank you.

[Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama.

My first question is on the raw materials side. If you could tell us on your key raw materials like glass and barley, et cetera, how do you see in the coming quarters in FY '25 on the trend?

Sir, the prices of barley have stabilized. The glass bottles prices also have stabilized, but the benefit has not been passed on to the end consumers or end users like us. But the point to note is that our dependence on new glass bottles continues to be high, because we are in a growth phase which is higher than what the industry is going. But we expect that we should be able to maintain our margins in the range of 12% to 13% for this current year also.

Okay. Second is in Karnataka, last few quarters you have done quite well. I understand the national market leader is also now coming up with price points which are quite aggressive. So if you could tell us at the lower price points of the market leader, which I hear is even below INR 500, and then they have one more at around INR 117, INR 120. That kind of pricing, is it impacting your own plan from a 1 or 2 years' perspective? Because these are initial times, you may have also done well. But overall, because market leader is also now aggressive on pricing, how do you see Karnataka market share from 2, 3 years perspective?

We had entered Karnataka close to about 4 years back, and we had taken the market leader and other dominant players head on. And at all price points, the market leader as well as the other competitors also operate. So we are pretty sure that we are able to maintain our market share. And in fact, we are looking at increasing our market share in the next 2 to 3 years.

Two quick follow-up. Now that you have done well in terms of the entry strategy in Karnataka, would you look at premiumization there also? And second, in other markets, would you look at replication of this strategy? And any states you have finalized further on this?

Sir, each state has got a different strategy. We cannot just cut, copy and paste for the different states. And we are also working on some premiumization strategy. We'll keep you informed about that, sir.

[Operator Instructions] The next question is from the line of Shanmugam K., an individual investor.

So this is regarding taxation. Firstly, congratulations on a good set of numbers. As you said in interviews, you got it more than 50% of growth, both the EBITDA as well as revenue. But if you look at profit after tax, I see somewhere abnormal in terms of taxation, sir. The overall for the year, if you look at, is coming at INR 6 crores of taxations coming from 30% of your profit before tax. And if you look at cash flow, the cash flow statement is showing INR 16 crores or INR 18 crores paid. And last year, there is no taxes as well in the cash flow segment. Can you give me some translation on the taxes, sir? What do you see?

This is a provision which has been created, which was required to be created under the regulations. So this amount actually will differ from the actual outgoing tax everywhere. And as for the last year, there were accumulated losses in some subsidiaries. So we got the benefit of that.

Sir, do you mean it's deferred tax included in that?

Yes, sir. Yes, sir.

Then how much deferred tax included? Generally, in the financial segment, there will be split between current tax and deferred tax, sir. Sorry, if I'm missing it, can you please give me the deferred tax portion of this total INR 36 crores for the year?

It would be about INR 14 crores, INR 15 crores.

INR 14 crores, INR 15 crores is deferred tax.

Yes, yes.

Okay. So the balance, actual INR 12 crores to INR 13 crores would be federal tax and remaining current tax paid. Yes, so that's what it is being shown in the cash flow statement around INR 15 crores to INR 17 crores, I believe. Okay.

Yes, sir.

So that would be deferred tax. And I see in the balance sheet, I think I'm right, there is a tax recovery incremental number. If you look at year-on-year, it is coming around INR 6 crores to INR 7 crores, sir. Am I right? So may I know about that, what is the tax recoveries?

Tax recoveries?

Yes, in other asset side, there is a tax recoveries. I see some incremental number about by INR 6 crores to INR 7 crores on the balance sheet.

I'll have to check on that, sir.

Okay. So that recovery, is it going to be -- is it direct taxation or...

I think it's going to be some VAT, which is payable. That's on an ongoing basis.

VAT. Okay. Yes, so there is another part. So how is the deferred tax when you say, sorry to ask again, there's INR 15 crores in deferred tax. Any source can you mention, sir? I know the deferred taxes, I know why deferred tax would arise, because of temporary differences between your tax books and your company books. But this amount seems to be abnormal. May I know which source side, because of differential in depreciation or differential in many brochures that you made. Specifically, can you mention some source on which that you had to take this deferred tax?

I'll answer this, sir, on a one-to-one basis.

Okay, okay. That's one thing. And secondly, sir...

I'm sorry to interrupt, sir. I would request you kindly rejoin the queue for followup questions please.

Can I ask you one last question? Sorry, two questions. One question, taxation. The second is going to be on cost savings. Can I?

Yes, sir. Yes, sir, please go ahead.

I'll move on to my second question. My second question is, this is referring to your notification that efficiency improvement, sir. Efficiency improvement, you said that on packaging cost, that there will be some productivity about 25% going forward that commences from April onwards. So when you say it's a 25% productivity, I believe it's regarding the packaging cost. So what would be your packaging cost for the year, sir, in FY '24, if you look at? And what is the percentage on sales as of now, as of March?

We cannot disclose that figure, sir.

It's a cost element, sir. I just...

No, no, we cannot discuss the cost element, sir.

Okay. May I know the percentage of sales, sir, or package cost on sales?

Cannot, sir.

Okay. If you say the 25% of packaging cost is going to be -- we'll have some cost savings, am I right? That's what the notification when it says it's 25%. Am I right?

Sir, I would request you to join the queue. It's taking too long.

[Operator Instructions] The next question is from the line of Darshika Khemka from AV Fincorp.

Congratulations on normal set of numbers. I had a question that the last time around, you had given a guidance of around INR 2,000 crores of revenue for the next 2 years. Does that guidance stay intact? Or would you want to revise your guidance upward given the kind of performance that we have had during the year?

Ma'am, I think it would be more prudent that we look at how the quarter 1 pans out for this current year, and then maybe can have a talk on the guidance.

[Operator Instructions] The next question is from the line of Alisha Mahawla from Envision Capital.

Sir, we, in the last financial year FY '24, got approval to supply to few new states. Have we started catering to any of those? Which of those will be a priority in FY '25? And is there any potential market share that we're targeting with. the same strategy around the new states specifically at entries, if you could just talk about it?

Yes, ma'am. So we have started dispatches to newer states like Rajasthan, Jharkhand, and also to Uttar Pradesh. So all these 3 states are priority states for us in the coming quarters.

And the increased capacity from Hassan should be able to cater to this demand?

So see, the plant at Hassan for the full year, the capacity utilization has been in the range of 93%, 94%. So there was no headway for supplying to the other states like Kerala or Puducherry from there. So the increased capacity of close to about 50 lakh per annum would give us the much desired capacity to supply to these states.

And Rajasthan, Jharkhand and U.P. would be catered from the Bhopal plant, sir?

Yes, yes. Yes, ma'am.

And are we also talking of a capacity expansion at Bhopal?

Not right now, ma'am. We ended the year with about close to about 70% capacity utilization at Bhopal. So we still have scope for at least this year.

Okay. So what is the kind of CapEx that we're targeting for FY '25?

We are working for the exact number, because we are keen to expand our capacity in Odisha. And we are working on the exact numbers. Maybe in the next 2, 3 months, we'll have a concrete idea about the money we'll spend.

And any plan on acquiring any capacity in any of the newer states that we're looking at entry?

That process is ongoing. We are always looking at some opportunities where we get some value bias.

And just one last question that I would like -- you were mentioning earlier that at these states, the strategy that we will have to work out will be different. And also because we'll be catering to it either from Bhopal or Hassan, directionally where do you think that the state mix and the product mix on consumer basis -- in terms of margins, what could be a sustainable number?

In terms of margins?

Yes.

So like I mentioned to the previous caller, we are looking at between 12% to 13% EBITDA margin. That's our target for the short to medium term.

The next question is from the line of Hiten Boricha from Sequent Investments.

My first question is on the utilization level. You mentioned Karnataka. Sir, plant is running at 90% and Bhopal is running at 70%. Can you also give the same for Odisha plant?

Sir, Odisha is slightly lower at about 50%.

50%. And if you can answer like Odisha plant is catering to which market, sir?

Right now, it is to Odisha and some of it is going to Jharkhand.

Okay. Odisha and Jharkhand. Okay. Okay. Sir, my next question is on, I believe we have hired Mr. Anand Agarwal as the Chief Marketing Officer from April. So if you can throw some light on the strategy. What are the strategies we are looking for marketing, as I believe we don't follow any surrogate advertiser, et cetera. If you can throw some light on that.

He is industry veteran and he's got lots of experience working with alcobev company, and we look forward to his guidance and the way forward in growing our brands.

Understood, understood. Sir, one last question on the volume and the prices. So if you can give any number or guidance time, what kind of growth we are looking this year in FY '25 as our Odisha plant is running at low utilization? So if you can do some number on that?

So, I think, like I mentioned to the previous caller also that let the numbers come in for quarter 1. And then maybe we can give you a clear amount of idea about the growth we are anticipating for the rest of the financial year and maybe for the next year also.

Any update on prices, sir? Are we looking for price hike after the...

We are evaluating. Found out a little later.

[Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital.

Sir, just the thing that I wanted to understand, do we have any kind of data which kind of explains or give an understanding that how much percentage of our revenue would be from premium mix or something on those lines? Do we have any kind of data? And how do we plan to scale this percentage over the next 2, 3 years?

What do you exactly mean by premium mix?

Premium mix in terms of your, I mean, higher ASP SKUs, right? The mix of those, yes.

Let me give you an industry perspective in the beer, especially beer, about 85% to 86% is the strong beer segment. And you only have about 14%, 15% is the premium and lager and the craft beers. So I mean, all the industry is concentrated in the 85%, 86%. So from that's where the volumes come in. So similarly for us, we are maybe getting about 95% to 96% of our sales from this big chunk.

But it's a strong beer, right?

Yes, yes.

Okay, okay. Understood, understood. And do we have any kind of outlook on the debt side? I think currently, we are at about INR 177 crores of debt, as of FY '24. So how do we see that in the next 1 to 2 years?

I mean, obviously, we'll require some debt for our working capital, but I do not anticipate that there will be much change in the term debt profile in the short to medium term.

Okay, okay. And in terms of your total debt, including the working capital, it might have some increase, right, because of your working capital requirement?

Yes, because, obviously, we will need working capital if we want to grow. And most of the states, as you probably know are duty-paid states. So obviously, I mean, there will be a need for working capital as we grow.

Correct. Correct. But in the past, did we have any plan, I mean, to go debt-free or something of those sorts? Did we add any plan of that sort?

So we have a plan that we have to keep our debt-equity ratio intact. And if you could see, in the last 8 quarters, we have tried to reduce our debt. So I mean, we want to have a judicious mix of our internal approvals and equities plus debt as we grow.

[Operator Instructions] The next question is from the line of Shubham Jain from NV Alpha Fund.

Yes. I just had one question, a follow-up on the previous question that was there on the working capital. So if you look at our current liabilities, it's gone up from INR 70-odd crores to about INR 120 crores and change the case of financial liabilities. So what exactly are these liabilities? Because in the last year, there was about INR 60 crores of statutory liability.

So I think you...

Just want to understand what is the nature of these liabilities.

You're saying in the current liabilities?

Correct. So you have about INR 118 crores of current liabilities and INR 120 crores of financial liabilities.

So this is some supplier financing, which we had taken during this quarter.

Okay. And bulk of the increase is because of supplier financing?

Yes. And there is some increase in the VAT payable also.

Okay. In the VAT payable. And the supplier financing comes at what rate for us?

It comes at about close to 9.5% to 10%.

Okay. So this is essentially debt, which is getting classified in other category?

Yes, because we tend to pay it maybe in the space of about close to less than a month or 45 days.

The next question is from the line of Yash Dalvi from Systematix.

Congratulations on the great set of results. So you said that you want to expand the capacity of Odisha plant, which is currently at 50% utilization. But you are not really keen on Bhopal plant, which is operating at a much higher capacity. So what would be the reason for that? Is the demand from Odisha and Jharkhand that strong?

Yes, yes. We are anticipating that the demand from Odisha, Jharkhand and the Northeast will increase in the next 6 months or 9 months. So that's why we want to increase our footprint in the Odisha capacity as of now.

In Northeast, which states would be directing there?

So there is less than 1. There is the other states like Sikkim and all.

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

Congratulations for a good set of numbers. So what happened to the QIP process plan before?

So as of now, there is no QIP being thought of, because the intention of the QIP was to take care of the CapEx and the other working capital needs of the company in last September. So it's been now 6 months plus. And as of now, we don't anticipate any need for peak fund at this point of time.

Okay. Then the taxation at Q4 [indiscernible] more taxes for the Q1 financial '25. Can you mention the percentage?

Sorry?

I'm sorry to interrupt, Mr. Abhinav, your voice is muffled, sir. May we request you to use your handset.

Am I audible now?

Yes.

So for the Q4, you have higher taxes. And it's because of different taxes, which are there. For Q1 '25, can you please mention the tax rate like in terms of percentage approximately?

No, I can't give idea, because that will depend upon how we grow and what will be the PBT at that point of time.

[Operator Instructions] The next question is from the line of Avinash from Quality Investment.

So I just have a very broad question. From like a 3-year or 5-year perspective, can you just give us on how are you planning to expand the business? So by that, what I mean is, is there going to be some sales, additional channels that you're going to use for distribution? And generally, to push sales, is it all point of sale initiatives that will give us this result? Just want to understand how we are planning to take market share.

Yes, I think we have been showing consistent growth for the last 8 quarters, and we have executed our plans very well in terms of growing market share, in terms of our sales volumes. And we expect that we shall do the same things, which we have done in the past in the future also.

Okay. Got it. And again, just curious because in the IPL season, we see some of the competitor brands doing some pseudo-marketing and stuff like that. Is that a line that we will pursue anytime soon? Or do you feel it's not very effective?

I think we are happy the way, which we are doing business right now. I cannot comment on my competitors.

Got it. And again, just to summarize, would that be like it's a distribution-led business primarily and that is expected to create brand? Is that like the hypothesis that we are working with?

Sir, this is similar to a FMCG business. And of course, the distributors and the retailers play a very important role in getting your products across to the consumers. But the prime thing is that the quality and the acceptance of the consumer should be there. Because distribution to a point can get product to the consumer, but it is a consumer who has to ask for the product next time around. That's the key.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Nakul Sethi for closing comments. Over to you, sir.

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

Thank you, members of the management. Ladies and gentlemen, on behalf of Som Distilleries and Breweries Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.