United Breweries Limited (532478) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the United Breweries Limited Q3 FY '21 Earnings conference call hosted by Investec Capital Services. [Operator Instructions]. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Harit Kapoor from Investec Capital Services. Thank you, and over to you, sir.

Yes. Thank you, Janice, and good afternoon to everybody on the call. On behalf of Investec India, I would like to welcome you all to the third quarter financial results earnings call of United Breweries Limited. With us from the management, we have Mr. Berend Odink, CFO; and Mr. P. Poonacha from Finance and Investor Relations. I'll hand over the team now for opening remarks, post which, we'll open it for Q&A. So over to you, Berend.

Thank you, Harit. Good afternoon, everybody, on the call, and thank you for joining. Today, we'll discuss the Q3 and year-to-date results. And as usual, I'll start with a couple of opening comments supported by a few slides, and then we'll be very happy to take any questions that you may have. So I return to the key result highlights. Q3 saw continued recovery in demand on the back of trade restrictions gradually being lifted, with volumes down for the quarter, 15%. And as a reminder Q1 volumes were down 77%, while Q2 volumes were a minus 48%. The company posted strong underlying EBITDA margin improvement to 15.6%. This is excluding nonrecurring items versus a 15.4% margin in the prior year. This is driven by improvement in gross profit margin of 119 basis points and cost control. Q2 continued to be impacted by COVID restrictions. But in Q3, we saw further relaxations of trade restrictions, and hence, better recovery and good sequential volume growth. We had a robust free operating cash flow and active cash management, resulted in a net cash position of INR 97 crores for quarter end. And for the end of December, we've seen in various states, a number of trade restrictions being lifted that were previously still in place, and we would expect this to further support demand recovery. If we move to Slide 4, summarizes the Q3 results. Net sales was down 11%, and all cost elements were down, and the reported EBITDA is INR 178 crore. In the quarter, we booked an exceptional income of INR 55 crores related to sale of leasehold land, which was no longer a use for the company. On the next slide, we show the P&L results year-to-date, with both EBITDA and bottom line results now turning positive, including Q3. If you move to the volume performance on Slide 6, we show that per region for quarter 3 and year-to-date. If we start with North, volumes were down 21% in Q3, where we've seen a balanced recovery across most of the states. West posted minus 11% decline in volume with continued recovery in all markets with rest of Maharashtra ahead of the national average at flat volumes. In East, we reported a growth of 14% for the quarter. Here we witnessed substantial growth in West Bengal on the back of revised excise policy, leading to lower consumer prices, while all main markets in East posted growth, except for Orissa. It's good to note that Orissa opened the on-premise channel in January. In South, the volume was at minus 18%. State of Karnataka posted growth and Tamil Nadu volumes were flat. And here the attached bars in Tamil Nadu opened end of December. State of Telangana saw recovery below the average of the national. But again, here, permit rooms opened end of December. And finally, in Kerala, the volumes of the quarter were ahead of the national average, and here on-premise fully opened end of December. If we move to the net sales breakdown on Slide 7. We said it besides the negative Q3 volume impact, the company realized a positive price/mix impact with both positive state mix as well as price increases and a positive brand mix. In terms of EBITDA on the next slide, we show the note, the main impact being the negative volume, which was to a significant extent, offset by the higher gross margin and reduction in other expenses. EBITDA, excluding nonrecurring items, was INR 201 crores or a margin of 15.6%, up 16 basis points versus prior year. The Q3 nonrecurring items include provisions for potential expiry of stocks and doubtful debtors to the tune of INR 23 crore. And included that, the reported EBITDA is INR 178 crores. Turning to the slide on outlook and summary. The industry outlook continues to develop positively, yet remains volatile depending amongst others, the future trajectory of the pandemic. The company continues to actively review costs and focus on working capital management and optimize capital investments to further strengthen the operational performance. And as always, we see the UBL is well positioned to navigate the current circumstances with leading market position, a strong brand portfolio and a very healthy balance sheet. The company continues to be optimistic about the long-term growth drivers of the industry. With that, I would like to conclude the opening comments and I'll pause here and let's open it up for questions, please.

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

Good recovery. When I see the region-wise data, which you have given, I see that the 9-month dip for Eastern region is the maximum. But for Q3, the recovery for East is also the best. So apart from the Bengal cut in duty, which you have highlighted, is there an inventory deepening which has happened in Eastern region?

Yes, Orissa also had the entire business opening up in Q3, which is the reason why the East has done better.

And this Bengal data, are you sharing to other states in Bengal after the cut? Is the state government making much better tax revenues, if you add the volume impact and the cut in duty, so is this state government much better off versus earlier?

We have not made a calculation because we yet do not have industry because we have grown but we don't know exactly, we've not been tracking the industry fully. So we really can't comment on the exact numbers because, I mean, unless there's some declaration from the revenue department of West Bengal we really wouldn't want to comment on that.

But the cut is for all the players, right?

Yes, yes. But I mean, unless you have consolidated numbers, we really wouldn't want to comment on the revenues that the government has collected on this. Because there is a spirit angle also to it. So if you take revenues, revenues include both your spirits and beer.

Sir, my question was only on the beer, in your industry.

Yes. I think it's more a question of how the volumes will stabilize. I mean short term, we've seen, of course, a very high growth in the first 1, 2 months. But I think the question for the state will be, in the coming months, how will that pan out? I think the positive stance is that, yes, they look at moderation and affordability. And that together with the volume growth, the industry, most likely will yield longer-term higher excise revenues, that would be my expectation.

And sir, the last question on the Delhi proposed regulation change in terms of the registration and the brands, so do you see any benefit for you? In the spirits, we understand the larger players are happy about the proposed change, while the smaller players aren't. And for the UP market for the bigger purchases by customer, he needs to pay license fee, does that impact you also?

On Delhi, I think, in general, the proposals that we have seen are positive in the sense of supporting ease of doing business, looking at the minimum legal drinking age, looking at the number of dry days, also lesser restrictions and fees. So we'll have to see how that develops into formal policy, but I would say, indeed, as of now, that's positive.

UP will be effective April 1, and UP also seems positive.

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

My first question is on Andhra Pradesh. Any sense of any recovery there compared with where we were previous quarter? Or is it status quo? And the second question is on your new launches that you've launched over the last couple of years. I mean one would be the Witbier. Have you launched it in any further states? And what has been the initial response in the states in which you've launched it and same for nonalcoholic beer as well?

Thank you. So your first question on Andhra, I think in Q3, we have seen a reduction of price levels in the beer market. As of yet, it remained a negative on our figures for Q3. So hopefully, the market stabilizes, and we can see a bit of recovery going forward. But in totality for Q3, trading was very low. And as I said, on balance a negative for our figures. On the new launches, we indeed have further expanded the foot printed number of brands. Witbier has now also been launched in Delhi with good initial responses. And yes, we will continue in the months ahead to roll it out to additional states where we think the proposition in the wheat segment has a good opportunity. And in terms of the nonalcoholic portfolio, yes, we continue to see healthy growth despite the turbulence of the pandemic. So it's a small base. It's a small segment versus our total alcoholic beer business. But yes, we see steady progress. We see steady consumer traction developing. So we're happy with that progress.

Just following up there. I mean can you give us any sense of numbers on Witbier, nonalcoholic beer, or even Andhra Pradesh, honestly, because are we -- do you expect to be sort of flat year-on-year given that the impact started in 4Q last year? Or would you expect growth in 4Q?

On balance, I would expect growth in the full year.

Got it. And any sense on volumes on Witbier and nonalcoholic beer?

Nonalcoholic beers, we split out separately the revenue and the results. Witbier, I think you have to reckon that this is quite small in the grand scheme of things of our business. But for example, where we launched a couple of quarters ago in Karnataka and Goa based on our estimates, we have been leading the segment for the recent quarters. So that's encouraging. But yes, you have to take into context that the Witbier segment is a relatively small segment of the larger market.

The next question is from the line of [ Avinash Bala from Brookfield ].

I think my question pertains more generally to your portfolio of beers and especially the craft beer and Witbier segment. Well, you've said -- there are a couple of points that I have been reading. The first one is that in the U.S., the craft beer sales is around 15% of the overall sales of all beers. Again, the second point is, recently, AB InBev had a start-up with Indian Hotels to put up CapEx to open breweries, right? And third, I've seen that a lot of breweries, craft breweries are expanding to the retail, right? And we have just 1 product category. So is it fair on my -- is it a fair assessment on my part, if I have to say, so far as craft beer is concerned, the company is a little reactive as opposed to being more proactive?

Yes. I would look at it -- I would, I think, split the market a little bit 2 ways. One is where we talk really about entrees consumption, being it microbreweries or brewups, which is really local, fresh, experimenting with different flavors, on-site experience, if you will, non-packaged beer usually. The second element to crafts, I would categorize more as the bottled craft that is partly sold on-premise partly to the take-home channel. Here also, we see in India, a lot of products coming to the market, some stay longer than others, others develop better than other launches. So that is very much, I would say, under development. I think as we look at our company, we don't see ourselves that much in the kind of microbreweries. Of course, in general, it's very positive. I think that the perception of beer, the experience with it, the number of consumers and occasions, exposure rate continues to increase. So that's really promising. Not to say that we immediately should invest in everything that is happening in the market. But definitely, if you look at our portfolio, yes, we have launched Witbier, what I would imagine that over time, more and more propositions also would come into the market that reflect the developing consumer preferences also here in India.

Are we -- do we have any plans like to open up, like you said, some -- now that you said that you're not going to maybe think about opening up breweries to own the experience? Is it something the company is thinking about?

Of course, we always evaluate it. I don't see us in the short term, having increased plans to come to the market with that. I think it's more of an offering where there's a large share of food, wine, potentially kind of a real estate in urban areas. I think that's less of our core business today. But of course, there are different models and opportunities as to how to get into this segment, so that it's something we continue to evaluate it.

[Operator Instructions] The next question is from the line of Krishnan Sambamoorthy from Motilal Oswal.

My question is regarding on-trade, how much has been the revival on a Y-o-Y basis for the quarter? And possibly, if you can give it on December exit month -- exit as well, is it getting better and better? And if so, what's the extent of recovery?

Yes. Definitely, the on-trade has played an important role in the recovery and the sequential growth that we have seen. I think in general, but it is more anecdotal, we have seen quite some footballs. People are happy to be back, happy to socialize, be it, of course, within the restrictions that are applicable from state to state. I think as time progresses, people also feel more confident of visiting the on-trade. With our estimates, the number of outlets that is open, probably a few thousands might still be closed, but the far majority has opened by now. So it's in a not full swing back, I would say, as maybe 1 year ago, but definitely encouraging trends. And yes, that we see supporting our recovery.

But in the quarter the opening up of on-trade has been, especially in Telangana and Kerala has been towards the last part of December. So as such the quarter has not fully captured the opening up of on-trade. Tamil Nadu, Telangana and Kerala, opened up towards the later part of December.

Yes, but all 3 were opened in December. Any indications as to what was the extent of recovery compared to the same period last year, maybe December last year?

Yes. Poonacha mentioned these states, most of them were end of December opened up. So we'll have to see the recovery. But generally, what we see states opening up back in September, back in October, the on-trade, it has step-by-step supported recovery.

Okay. And has any of the states relaxed the 50% capacity restriction?

Sorry, I didn't get your question?

There is a capacity restriction, right, the number of seats that can be -- is half of what it was earlier, right, according to the government regulations in states. Has any of the states relaxed those?

No, no, we've not seen any new updates.

Okay. The other question is on -- that AB InBev reduced prices of Hoegaarden and Corona in December. Any impact that you have seen on the premium segment, superpremium segment as far as the roll back?

On the premium segment, I think that's partly coupled to the recovery that we discussed in on-trade. We see numbers coming back to -- in terms of share within our portfolio to last year Q3 levels, so that's positive. But as we said earlier, there's a very healthy, consistent trend of premium growing. So the number of products, I guess, in that segment, the pricing, how it's brought to the market, I think that will continue to evolve quickly in the years to come. And yes, this also has our full attention.

Anything to call out, a material gain or loss of market share in the segment?

No, nothing that stands out as far as I've seen the numbers.

[Operator Instructions] The next question is from the line of Ashit Desai from Emkay Global.

I have a question on UP tax reduction on beer. I mean this has been done after a long time. And I mean, given the context that IMFL volumes have doubled in the state, whereas beer volumes probably have not grown at a similar pace over the last many years. How do you see this tax reduction? And if you can comment on the extent of price reduction and how attractive it is for a consumer and for the beer industry growth going ahead?

Yes. Based on the policy, we have seen the potential price reduction could be around INR 20 per can, the main can. We'll have to see exactly how that pans out. I mean we're now doing the price application. So there's a little bit of unclarity on some of the COVID cess, how does it exactly spans into the calculation. But those technical points put aside, in general, we would expect a reduction in the market. So this is, of course, positive for the affordability, for the accessibility of the category. And yes, we would expect that to support further volume growth in UP.

And what is the share of volumes in UP now, and the industry?

You're talking about UB share?

Yes.

Market share of UBL in the beer industry of UP right?

No, no, industry volume share? Contribution volumes.

Salience of UP vis-a-vis the entire country.

Right.

It's about between 7%, 8%.

Okay. Okay. And secondly, is the procurement of glass bottles now normalized versus we had some issues in first half? Or can we see more improvement over there?

Yes. The procurement of glass, I would say, by and large, has normalized. I mean the huge capacity crunches of about 1 year, 1.5 years ago, have all stabilized themselves. I think 1 watch out we have on glass bottles is that recently, we've seen the share of new bottles slightly ticking up, saw a little bit higher than we normally trended. So this is something we carefully monitor. We would expect with further on-trade opening that to stabilize and be of a temporary nature. But in terms of the first part of your question, yes, the pricing as such and availability is normal.

So share of new bottles were still higher in Q3, which should come down in your view?

Yes. In Q3, we've seen it a bit higher, but it's a bit too early to say, will it remain at this level, are we stabilizing from here, or will it come down as the market continues to create less restrictions and better recollections of the bottles.

Got it. One last question, if I may. Could you share the December exit volume recovery?

In December, we were at minus 10%.

The next question is from the line of Alok Shah from AMBIT Capital.

My question was more on the pricing of the competition [Technical Difficulty]

Sorry to interrupt Mr. Shah, but there's a lot of disturbance from your audio, so we are unable to hear you well. Could you please use the handset mode while speaking?

Sure. Is it better?

Yes, you may go ahead, sir.

Okay. So we are picking up that there has been some price cuts by the competition. Do you see price reduction apart from the Hoegaarden brand and also within the Carlsberg portfolio? Or it's only the Hoegaarden that you see? And my second point is that are we in terms retaliation to that planning to take the price cut in the upcoming refillings that you do to the state?

Yes. We've seen a few brands, I think, related to the way they are produced, some go to market, change some of the pricing. But in general, I don't recognize a picture where prices have been trending down. Of course, on a local level, there could always be certain activations or promotions. But in general, I don't see that as a picture or a recent trend in the market as sort of how we will look at pricing going forward. Yes, that's too early to share at this point in time. But I think we'll kind of recognize that, yes, the profit pool and the excise duty -- sorry, the profit pool is low and the excess duty is relatively high across the whole industry. So I would imagine the room for price reduction is relatively limited.

[Operator Instructions] The next question is from the line of Harit Kapoor from Investec Capital.

So just 2 questions from my end. The first 1 was on the other expenses side. So over the last 2, 3 quarters, you have managed these expenses quite well, even in your presentation you've mentioned about relooking at costs. I just wanted to understand what proportion of the cost structure you feel in terms of the reduction could be permanent going into F '22 and F '23 when normalization resumes?

Yes. Within the other expenses, we have a variety of costs, if you will, some relatively variable distribution, promotions, and some rates and taxes. Other more fixed, be it insurance, audit fees, administrative overheads, et cetera. Our approach has been that we look at all line items. We're not coming out with guidance as to what is the absolute or percentage margin that we seek to take out. But it is an area we've been active on in the last 9 months, and we're still in the middle of, let's say, cost review and finding new opportunities, new -- greater ways to look at what is the right cost level and the right processes for the business, given, of course, also what has changed due to COVID and yes, some of the new realities for the companies operating in the industry. So yes, we have been happy with some of the reductions so far. Some of it will come back as volumes increases as we will continue to support the brand in a bigger way. At the same time, we'll look at other types of costs to hopefully offset that to a certain extent as well. So yes, we're actively looking at it.

So just a follow-up to that, is it suffice to say that there will be some element of overhead costs, which may not come back completely once normalization resumes. However, well that you can't quantify that but would it be correct to assume that?

Yes, we definitely look at, let's say, coming out of the pandemic period with a leaner cost base. But of course, we look also that, let's say, in the respect of what we spend on commercial power -- higher power, if you will, and then market share position of the brand, et cetera. So in that whole context, I think we have to look at what cuts retained in the bottom line margin. But in fact, your observation is correct that some of the costs, we don't expect to have back post the pandemic.

My second question was on the material cost side. You did speak about glass, but if you could give us a sense on the barley price environment, at least the market prices seem to have come off sharply. But for your consumption cost, what kind of dips have you've seen? And what is the outlook there in terms of your consumption?

Yes. So on the raw materials side, the main input cost for us is barley. There we have been buying roughly at around 10% lower prices than the prior harvest. So this is what's finding our way now in our product prices. And yes, we'll have to see come another quarter what the outlook will be for the harvest and the pricing. So that's a bit too early at this point in time to comment on.

The next question is from the line of Krishnan Sambamoorthy from Motilal Oswal.

My question is regarding the month of December. Does the Christmas, New Year consumption largely tend to be on-trade, and therefore, maybe 10% recover -- 10% decline may have been much lower, if not further?

No. Actually, I mean, what you're saying is right, but there is enough sufficient pipeline stock for the spike consumption since most of the on-trade outlets opened up in the end of December. So as such, when we report revenues, it's on our primary dispatches. So I mean that has not given us a real boost considering that there is sufficient pipeline stock in December this year.

Understood. The next question is a bookkeeping one, what will be the likely CapEx for FY '21. Any plans for the next year?

Yes. So this year, we continue our earlier guidance that we approach, I'd say, just shy of INR 200 crores capital investments. There you would have to net off the exceptional gain that we booked this quarter meaning we'll get closer to kind of INR 150 crores number for the current running year. For next year, I would think we have most likely a similar guidance of below INR 200 crores given that we still continue to come out of the pandemic situation. But we'll come back to that in the next earnings call.

The next question is from the line of Ashit Desai from Emkay Global.

Yes. Just 2 follow-ups from me. One was, I missed the AP impact part, if you can highlight what has been the impact over there? And is there any change in terms of the volumes over there? Or we continue to stay away from the market still?

So in AP, the -- what I said earlier, the government has changed the excise rates back in the start of Q3. So that led to some stabilization. For us, the number of orders has been very low during the quarter. So net-net, the last Q3 was still a negative impact from Andhra on our figures. And yes, we'll have to see coming quarter if that stabilizes and then hopefully maybe picks up. But that's what it's at the moment.

And how much was the negative impact?

Well, as you recall, we came one -- October prior year, it's 1 of the policy changes were implemented. So that has led to the quite a reduction in orders and demand. So we did see some orders back in the -- in October, November from that year. So net-net, we were still below that this quarter. So as of yet, yes, the comparables out of the base figures, if you will. So let's see what happens following that.

Okay. And why is our depreciation costs lower versus last year and even sequentially? Is there a change in that?

We are depreciating based on the shifts that the various units are operating on, with the companies act prescribes that if you're operating 3 shifts, then it is full depreciation, sorry it's double the depreciation. If you are operating single shift, it is a single depreciation. So thereby, considering that most of our units were not operating to full capacity there have been depreciated unit-wise based on capacity utilization.

Okay. Okay. This wasn't a policy which was followed earlier, right? Because I'm sure in lean season, we were never operating 3 shifts across capacities.

Yes. But as a whole year, if we did -- we did operate above 6% to 7%, which means to say what, as a whole year, if you take an average, we did above what we would term as 3 shift depreciation. So as such, to have equilibrium, we operated depreciation in the manner that it was 3 shifts across all 4 quarters. Considering that this year is an unusual year, and we have the pandemic around and the -- some states recovered faster than the others. We have depreciated based on capacity utilization in each state and each unit.

Okay. And what would be your capacity utilization now? And till what level you'll -- what will be the level where you'll reach a 3 shift kind of a utilization?

We should end the year by 3 shift utilization. So in the coming year, you will see us depreciating the way we did previously.

The next question is from the line of Avi Mehta from Macquarie.

I just wanted to understand what the earlier participants had indicated about there not being any substantial pickup? If you could just explain in the channel, I would have expected a big recovery [Technical Difficulty] would have also gone up. So why would -- why has that not happened, sir?

Sorry, just repeat your question.

Sir, with the recovery playing out in December, logically, the channel inventory also would have started to pick up stocks. Is that a fair -- has that played out? Or is that a fair expectation that should play out going forward?

Yes. I mean it's a fair expectation, it's a fair expectation. But if you see we -- if you compare our business in 2020 vis-à-vis 2019 December, the overall stock has been 9%, 10% lower. The large states like Tamil Nadu, Telangana and Kerala put together, these 3 states will be about 20%, 25% of the salience. In these states, the consumption in on-trade opened up only towards the latter part or to the last week of December. So as such, yes, there was a good impact on consumption due to the Christmas, New Year season. But however, considering that this December was far subdued compared to previous December, thereby there was sufficient channel stock to ensure this consumption could be met. And as such, we didn't have a real positive impact on our dispatches.

Okay. So the 7% decline that we saw in December is more symptomatic of the underlying demand trend rather than a channel filling. That's the way I should look at this, right?

Yes.

Okay, sir. Okay. And sir, second bit is essentially on the glass, new bottle versus old bottle usage. What exactly do you think how -- I mean not time lines, but what would be the steps in your view for the old bottle share to kind of start inching upwards? Is it still a supply chain issue? What exactly -- I mean, how should I look at that, if you could kind of give your thoughts on how that share should kind of rise as we go forward?

Sure. So we have seen in other states and that we expect the trend to be in the states where further on-trade has opened up. That a number of the operators in collecting the bottles increases so that restores back to, let's say, pre-COVID levels. And they visit the usual sites where collections take place. So there's a bigger network, there's a bigger pool of bottles being collected for more centralized points, if you will, i.e., on-trade and bigger centers of consumption, which is a different dynamic. If you can imagine that the full on-trade would have been closed, then kind of gathering those bottles, incentives for collectors to operate in certain areas is most likely less. So those are a couple of factors that we expect to play into this to stabilize the bottle returns.

Okay. And sir, lastly, there is a shift as we are witnessing people celebrating with smaller bottles. Is that a trend that you think you can sustain? And if yes, are you kind of -- how are you looking to address that? Or how would that impact?

Yes. There's some super premium brands, which are packaged in different sizes for this kind of consumption pattern. But whether this consumption pattern would continue going forward when on-trade resumes and when footfalls go to the levels prior to pandemic, we need to wait and see.

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

Yes. Sir, 1 question on advertising. So 1 is competitive intensity in terms of advertising, how is it versus pre-COVID, you and the other 2 main players? And second, because of surrogate advertising stricture by ASCI, is there any risk of your propensity to drive discretionary consumption?

Now we have seen a lot of the advertising move more online and digital, as one can imagine. I think our share of voice has been good, if not higher than usual. In terms of the legislation, yes, always, let's say, back and forth. And clarifications to be had there. But we don't see any negative impact or potential issues where we would not be able to market the brand. So we work close with the agencies, with the regulators and yes, are confident that the plans that we have, we can execute them in the future.

And ad intensity is back to pre-COVID?

I would think, in general, that's a bit related to the market recovery. So that would still be a notch below what we might have seen a similar time of year 1 year ago. But definitely, it's again with the recovery picking up, and this would be my expectation that, that continues towards, let's say, normalcy as well.

And sir, last question, before the COVID, generally most quarters, beer was growing faster than spirit as an industry. When do you see that coming back?

If you look at the forecast. I think it's good to see that in the last quarter, the kind of gap that we saw earlier much wider between beer and spirits seems to be narrowing down quite quickly. We always said, structurally, we don't see due to the pandemic any reasons why once things stabilize, consumption or behavior of consumers would be in any way meaningful way different. I think the trend so far confirm, I think, that hypothesis. When it will kind of pause and then beer picks up further beyond, I feel that will remain difficult to put any expectation or time line on. But yes, we are focused, of course, very much on the beer category. And yes, happy with the sequential growth that we have seen in the consumers coming back.

The next question is from the line of Pritesh Chheda from Lucky Investments.

One question. FY '19 was one of the best years for us in terms of gross margins and EBITDA margin and thereafter we saw inflation in barley prices and thereafter the new bottle related cost increases and the lower volume of usage, which happened in FY '21. So is it fair to assume that FY '22 as we get into the next year, the cost structure or the dynamics are more similar to FY '19 in terms of the gross margin considering that the barley prices have come off and there's no inflation in the glass bottles?

I think that's a bit too early. I mean we have to see the new barley harvest that will be coming to market in April, so what pricing will come out of that. Potentially glass bottles, et cetera, we'll see different dynamics in the -- at that point in time. We'll have to see what happens to excise policies, impacts on consumer prices. There will be a couple of state elections. So I guess there are quite a couple of unknowns that -- yes, we -- as we move closer to the start of the New Year, hopefully, we get a better sense of the range of outcomes, what that margin could be.

So slightly differently, based on what statistics that we have on hand today, which is the pricing index that you would have taken and the corresponding raw material index as on date, is it -- if you just consider those few elements, is it then a fair guess to assume that the gross margin are back to what they were 2 years back?

I think the gross margin is, one, of course, is the input cost. The other one is very much a function of state mix and the prices obtained in the various states. Of course, we have seen in Q3 a very good improvement. I think bottom line EBITDA margin is also coming back to good levels, coupled with the cost programs that we are running right now, I think that gives good confidence. But as I said, I mean, we're also having a couple of more external factors like commodity prices, excise policies et cetera. So can move things to the positive and the negative as well.

[Operator Instructions] Ladies and gentlemen that was the last question for today. I would now like to hand the conference back to Mr. Harit Kapoor for his closing comments. Over to you, sir.

Yes. Thanks, Janice. On behalf of Investec, I would like to thank the management of United Breweries as well as other participants on the call for giving time for this session. Now I hand over to United Breweries management for closing comments.

Thank you, Harit. Thank you, everybody, for your interest in the company today, for your questions. Any questions unanswered, please let us know after this call, and we're happy to follow up. For now, I wish you all a good day, and look forward to speak next time. Thank you.

Thank you. On behalf of Investec Capital Services, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.