United Breweries Limited (532478) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to United Breweries' Q4 FY '21 Earnings Conference Call, hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harit Kapoor from Investec Capital Services. Thank you, and over to you, sir.

Yes. Thanks, Aisha. On behalf of Investec India, we'd like to welcome all the participants on this call. We hope that you yourselves and your family are keeping safe in the second wave of the pandemic. We have with us from the management team at United Breweries, Mr. Berend Odink, CFO, who will take us through the initial remarks for the Q4 FY '21 results earnings call for United Breweries. Over to you, Berend, for opening remarks.

Thank you very much, Harit, and good afternoon, everybody, on the call. Thank you for joining. And let me echo the words of Harit. I hope everybody is safe and healthy in these unprecedented and difficult times for the country. Today, we'll discuss the Q4 and year-to-date results. I'll start as usual with some opening comments supported by some slides. And after that, we open the line for any questions that are there. So this time, before we move to the figures, I think it's appropriate to look back and acknowledge the resilience shown during the year. We are very proud of our employees that throughout the country have risen to the challenging occasion, whether it's keeping breweries running, supporting the trade or adapting to continuously changing circumstances. And of course, many has wished to work from home and again, back now during this second wave, unfortunately. Towards consumers, we have seen many thematic campaigns, reflecting the various phases of lockdown and subsequently also towards reviving demand. For our customers, various support programs were run, importantly, some 5,000 outlets received social distancing and hygiene kits to support resumption of business. And last but not least, community support was extended as part of our CSR program. And during COVID wave, we are also extending significant support for the communities of the breweries where we operate, recognizing that this is the need of the hour in what are very challenging times for the country. So in summary, it's been an exceptional year with lockdowns, prolonged on-trade closures and COVID-related duty increases. The company has focused its responses across a few dimensions: health and safety, including introducing social distance operations, keeping consumers engaged and reviving providing demand, while reducing cost and preserving cash. Coming to the next slide, looking at the key results highlights. Q4 saw continued recovery in demand with 9% growth on a reported basis. And during Q4, many states saw strong recovery, including Karnataka and Maharashtra. In the state of Telangana, demand remained subdued due to the COVID cess that negatively impacts consumer prices. With an agile approach on costs and investments, the full year EBITDA margin came in at 10% despite a 39% volume decline for the full year. Quarter 4 saw healthy underlying profitability with EBITDA margin at 17.7%. The full year free operating cash flow came in at INR 440 crores, which is INR 362 crores above prior year. So in a challenging year, we achieved net cash position for the first time with a year-end net cash balance of INR 155 crore. The proposed dividend for approval at the next AGM is INR 0.50 per share, and this is maintaining the historic dividend payout ratio, in this case, on 12%. The next 2 pages summarize the Q4 full year results in tabular format. Q4 saw net sales at plus 8%, an expansion of the gross margin to 52%. And as mentioned earlier, EBITDA margin at 18%. Also to point out that in Q4, an impairment charge has been taken of INR 66 crore, which was booked as an exceptional item, indeed the majority relates to our plant in Bihar, where based on recent elections, there has not been any change on the stance of prohibition. Slide 7 shows the volumes performance by region for Q4 and the year-to-date numbers. Many markets posted double-digit volume growth, lapping the prior year impact of COVID and lockdown that happened in the latter part of March. In North, there's a 13% volume growth in Q4 with strong growth in most of the states, except Delhi where uncertainty on the new policy led to lower demand. UP state was stable. And it's important to note that in both UP and Rajasthan, the new excise policy results in the reduction of beer consumer prices. In the West, there was a 22% volume growth in Q4, and we've seen growth in all markets, except Chhattisgarh. In the East, we reported 26% volume growth for Q4. Substantial growth in West Bengal on the back of the revised excise policy, which led to lower consumer prices for beer. All of our main markets in East posted growth except for Orissa. In South, the growth of 3% with Karnataka and Kerala posting double-digit growth. But as mentioned earlier, Telangana market continued to trade below prior years due to the COVID-related cess negatively impacting beer prices. Moving to the next slide, on the premium brand portfolio. We saw continued expansion of both Witbier and AMSTEL. Witbier launched in Maharashtra, Punjab and Chandigarh. And Amstel is rolled out to Telangana, Maharashtra and Haryana. Both markets on trade being open. We saw in Q4, the premium portfolio growing ahead of the total portfolio of the company. The Q4 net sales on Page 9 was really driven this quarter by volume. And as stated earlier, that's been across most of the markets, driven by the good demand recovery versus the prior year. Where, of course, March was impacted by the COVID lockdowns that started. On the next slide, we have the EBITDA breakdown, gross profit improvements, driven by price and benign input costs. The margin improvement in other expenses over prior year were due to cost measures, better volume leverage and prior year Q4 provisions for obsolete stocks at the time of INR 16 crores. The quarterly progression and recovery in top and bottom line is shown on Page 11. And after a challenging start of the year, the company posted sequential growth and improvement in results as shown in the graph. Turning to Slide 12 on the free operating cash flow results. We posted a strong free operating cash flow of INR 440 crores for the full year. The decline in operating cash flow was more than offset by improvements in working capital. the capital investments were down as well as income tax. And with that, the company continued to improve its leverage towards the net cash position, as already mentioned, of INR 155 crore at year-end despite a very challenging year due to COVID. Finally, turning to the slide on the outlook and the summary. Due to the second wave of COVID-19, the industry outlook is very volatile. The impact will depend, of course, on the magnitude and duration of lockdowns, including any partial of full trade restrictions, whereas you can imagine the situation is now changing daily. Challenges faced during the first wave, include the finite beer shelf life and the costs that we made for liquidation and expired products as well as operational challenges, like, for example, lower returns of used bottles. Health and safety of employees and stakeholders remains paramount, while operations are fully in compliance with the regulations as they are introduced from time to time. UBL has and will continue to manage all elements of costs and capital investments with agility in light of the uncertainty in demand given the situation of the second wave. Important to note that the company has observed recovery of underlying consumer demand post the first COVID-19 wave, and we continue to be optimistic about the long-term growth drivers of the industry. We are well positioned to navigate the current circumstances with a leading market position, a strong brand portfolio and a robust balance sheet. With that, I'd like to conclude my opening comments, and we can move to the Q&A section. Please go ahead.

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

My first question is on West Bengal. So if you could tell us why in Bengal, you managed to get the tax and the price reduction. And I think a few more states you got. So are you expecting more states to give you this benefit? And when you see very sharp growth in these markets where the cut happens. So is it that you are getting new customers or getting some market share shift within from -- in beer from other parts of the alcohol consumption? So -- and does it continue? So is it in the initial 1 or 2 quarters, there is a big growth and then it tapers down? From your past experiences, if you could share how the consumer behavior is.

Sure. So in West Bengal, we've seen, of course, a new policy introduced for October last year, which was favorable to the industry in terms of reduced pricing in the market. I think it's fair to say that West Bengal the policy side has been quite volatile if you look at a longer period. So there have been moments where the liquor part was more favorable. And now we see, of course, the beer industry, a little bit more favorable. So those dynamics been at play, and that's also at play at the current point in time. At the same time, I would say the growth that we have seen is not beyond, let's say, levels that we have seen in the past in terms of absolute size of the industry. I.e., I think it's more a mix between the various categories of alcohol than to say that there's huge absolute growth in that sector. But as you say, yes, we have other states like UP, like Rajasthan, where we now see some reduction in beer consumer prices, which is partially positive from a perspective that we look at recovery of markets and that affordability is helping, certainly that recovery.

And where do you get the growth from? Is it from other parts of liquor? And does it sustain normally after 1 or 2 quarters?

Yes. Of course, this is initial growth that will taper off after a couple of quarters. And what I said earlier, we may see also the growth coming out of the more liquor segments of the markets back to beer. So I don't think it's, again, beyond levels that we have seen in the past. So it's more trading in terms of industry size for beer with we've seen in the U.S. couple of years prior. So yes, that's a good recovery to earlier levels.

Sure. My second question is versus the previous lockdown, if you compare now in the more impacted states, for example, like Maharashtra, Karnataka, Delhi and UP, however a sales or the business different versus the initial part of lockdown in wave 1? And second, if you could also comment on your preparedness and learning from wave 1, which is helping you in wave 2, anything which is helping. If you could point out that?

Yes, of course. So the you mentioned a couple of specific states. So let me touch upon those. So in Maharashtra, I think the difference between last year, of course, on a national level, at that time, we had a full lockdown, including all liquor outlets, including any production in breweries. So this time around, the situation is quite different. It's more state by state, set of regulation, of course, in Maharashtra, Delhi, it's a full lockdown. But for example, in Maharashtra, there is home delivery allowed. There is takeaway from restaurants allowed. Of course, it's a small segment of the market. I would say it is the difference versus prior year. In Karnataka, we have seen a 2-week lockdown being announced. But here, the retail outlets seem to be open at least in the morning hours. So there's some sales probably possible in the next few weeks, which is, of course, different from the full lockdown that we saw 1 year prior. In terms of learnings, yes, the situation is different. The social distancing operations have been introduced in all the breweries meaning that I think from that perspective, we can operate much more safely in a much more continuous way. We also are actively looking at stock levels in the market in not only at brewery levels, but also in the trade. Of course, we have other contingency planning in place. We look at it with quite some agility, particularly the last few weeks, things have been changing almost daily. So yes, quite a number of learnings. And whatever we can do, we're actively on it. But of course, at the end of the day, once lockdown implemented and announced, of course, we respect that. And we also support, let's say, the health perspective from what the government is trying to balance. So yes. Of course, there, we support that as well.

Sure. Just one last follow-up on this. So if any of your breweries closed because the demand will be a bit weaker, so you would have inventory -- are any of your breweries closed currently or any plans for that in any of the more impacted markets?

Now, of course, when there's lockdown and when we were not defined on the essential industries, that means we cannot package at that point in time. But I would say it's not so much of a problem in the sense that if the whole market is more or less under lockdown, there's basically operations. But otherwise also would come to a very low level or even to a stand still. I think it's more once the trade opens, that we make sure also the operations in the breweries can resume. But what I said earlier, we've had our learnings to make sure how to preserve the beer, how to make sure stock levels are managed in the right balanced way. So as of now, there is no issue as to be seen, but things, of course, may change in the next 1 to 2 months, we have to see that.

The next question is from the line of Vishal Biraia from Aviva Life Insurance Company India limited.

A question on the -- I mean, due to the fresh lockdown that we've seen this time, is there a risk of write-off on inventory side that we saw in the first half year?

As of today, we don't -- we have not identified the risk in the Q4 results. We have not anything on write offs. But of course, it will all depend on the impact and duration of lockdowns. I mean at a certain stage, yes, if it takes a very long time and stock cannot move, whether it's the breweries or in the trade, then there is that risk. So that's a fact that we're looking at. We're managing that. But at the same time, we cannot rule it out. I think the only perspective, I think is, is that direction on the COVID and the impact. I think it's much more nuanced by the various states than maybe a year ago when it was the national scale lockdown. And particularly when the trade opened up, that was this state by state almost. So from that perspective, yes, I think the situation is different. But yes, I cannot rule it out today to say that there might not be any stock at certain stage at risk.

Okay. And one more question on the market share gains for full year, rather, so what would be the extent of market share gains that you would have got in more states? Were there any states where you would have lost market share?

Yes. So we have -- on the market share front, we have seen a good performance in a number of the states, even the important states like Karnataka Maharashtra, we have added share. Also in states like UP, Kerala, Tamil Nadu. So yes, . We've also seen some challenges in other states. So for example, in Delhi, we have lost a bit of share, which mainly has to do with the channel mix where channels that were impacted more, was where we were having a higher share. So that impacts the mix obviously. We have lost some share in Orissa, where sell offs were much more driven by expiry products of all the industry players. So once our products were sold out, some of the competition, but let's say, some priority over our stock because that was approaching expiry. In Telangana, we've seen a little bit of market share pressure, so quite some high discounting happening in the market. So in that sense, it's a mixed bag. But in the key important stages, we have expanded share. And in Q4, we were back at levels of some 52%, which we normally trade at in the quarter.

Okay. And just one last question. Do you very wish to manufacture Heineken as part of your breweries ? Or have you ramped that up? Or do you plan to ramp it up in the near term?

Yes. We have -- this year, added another brewery to the network that can produce Heineken. So we now have 3 breweries with the capability to produce Heineken. As of now, we don't have immediate plans. But of course, yes, as the business continues to grow, and we look at our footprint in terms of what economically makes sense in terms of securing supply, but also balancing cost of taxation and investments behind it.

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

So a couple of questions from me. So firstly, any update on how input costs appearing, in particular, barley is something that we're seeing inflation again after sort of fairly benign period last year. So would this be a factor going into the remainder of the year? And also your perspective on glass. And then the second question on sort of you've obviously seen an improvement in operating cash flow, a lot of that came through from working capital. So how sustainable do you think this sort of positive movement in operating cash flows?

Yes. Thank you, Aditya, for the question. So first, on the input cost, yes, as you rightly pointed out, barley is trending up a bit this time around. So we're now in the buying season, we see prices around 15%, so 1-5, up versus last year, crop prices. But again, it's . So we'll have to see what is -- what will be the full impact once we have done all the procurement. But definitely, the quality and the quantity is a bit down versus what we used to see in the prior few years. Having said that, at least for Q1, we are covered with last year crop. So those prices are really manifesting itself and would take a little bit of time before it moves through our profit and loss. On glass, the new glass prices for us are flattish or stable. I think the challenge here is more around recollections from the market where we saw in Q3 and Q4 a bit of an upward trend in terms of lower collections and therefore, higher new bottle injections to support the volume recovery. But purely in terms of prices of new glass, that's stable. On the working capital side, yes, the working capital block has come down quite a bit, and that's, of course, supportive. I think still, I would say that even by end of March, we are seeing quite some pickup in volume. So I would be expecting that we can carry that through quite a bit. At the same time, probably we will have to absorb some of that to move back in terms of capital locked in working capital in the sense that once the market is fully back at levels that we've seen pre-COVID, I think we end up probably a little bit below in terms of where we are today. But again, the good news is that in terms of receivables and outstandings, all of that is in a very healthy situation, given the challenges also the states have around budgets and deficits and what have you. So I think that's good to conclude.

Just one follow-up on the barley. Let's say if the barley prices stay elevated and it starts flowing in through your P&L. Is there anything you can do in terms of imports? Or is it just too early to discuss that?

I mean, yes, imports are an option, but I think generally, the import prices are a little bit above the domestic prices. Of course, depending on where prices move domestically, you'll find some kind of and can you get a switch to imports. So that's something, of course, we monitor. At the same time, from a local sourcing perspective and making sure that there's continued interest for farmers to grow barley we would have a preference to source domestically. But of course, yes, it also depends on relative prices, but normally, imports are a little bit above domestic volume price.

The next question is from the line of Pratik Rangnekar from Crédit Suisse.

My question is more on your -- the run rate that you're seeing currently. It is -- sir, you were having a fairly strong pickup in this quarter before the closures hit in March. So if you could maybe quantify on how much of volume sales were lost because of the March shutdowns in some of the cities? Also if you could comment on the trend in April? And maybe if you could throw some light on how -- what percentage of outlets are you currently seeing working or are they -- or is it majority closed?

Yes. I think in terms of March, the impact, I would say, was relatively low. Of course, the first number started to trend up. But in terms of trading impact and measures on that front, I think it was not that prevalent. I think those measures started more in Maharashtra first during the course of April. And then, of course, spread to more and more states. So where we stand today, I think the main impacts are, again, in Maharashtra, Delhi with full lockdowns, although Maharashtra they allow home delivery. Kerala seems to move now in full lockdown. Other states, I think the majority they have is at least kind of evening curfews and weakened lockdowns. Some states like Karnataka and at Rajasthan only sell liquor in the outlets in the morning hours. So I guess there are different models and different types of restrictions happening at the moment. But I cannot give you a number today as to how many outlets are open or not because this is already fluid picture where we stand today. I hope this gives you some context and shed some light as to what's happening in market.

Fair enough. Just one more question, maybe from a more strategic perspective. Are there any plans on adding more premium or maybe more different varied kind of brews, which are prevalent in your international markets and bringing those to India?

Yes, in general, we keep continuing expanding the premium side. Of course, AMSTEL and Witbier is what we've been working on the last financial year. But I would expect, as we've seen in the last 5 years, the number of products in the premium end increasing. I think the next 5 years that will even increase more and that will definitely include things around craft variety and then -- those emerging trends from consumers in India. So I think in general, that is absolutely on the cards. But of course, we'll have to look at exactly what is the right timing and the right proposition for the various markets.

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

Yes. Berend, we've seen an media interaction today morning, mentioned that there has been a regain of market share. Was there any loss in market share in the earlier part of the year? And if so, have you ended up the year with higher market share, equal market share or lower than we begin the year?

Yes. In Q1 and Q2, we've seen a lower market share. This is mainly on account of, I would say, specific factors due to lockdowns, on trade being closed, some state mix in there. So there we were trending lower Q1 and Q2. If we now look at Q3 and Q4, what I said earlier, we're back to kind of 52% levels. And I think those are the levels we've seen kind of on-balance for the last 2 to 3 years. So would it back that market share, and that is good to see with all the markets and all those various channels opening up fully even into Q4. So on a just kind of normal business scenario, I think that is a stable picture.

Okay. The other question is regarding glass bottles. While your point on a lower availability of [ market bottles ] last year and therefore, higher costs on the . Are you seeing inflation because of the higher crude and fuel costs?

No, the prices for glass, they are kind of overall similar as to the prior year. That's what we expect for the current year. So of course, things might change a little bit because normally, these contracts are indexed to underlying input cost, whether it's sometimes soda ash or energy, et cetera. But where we stand today, yes, it's flat.

Okay. Just one final question. Typically, the company procures barley for the whole year during the beginning of the year as this -- has this been delayed a little because of the lack of availability and quality of the barley?

Yes. We tend to buy, let's say, in March, April, May for the ensuing year. Last year, the crop was pretty good and some lower prices, we've decided to buy a bit more. So that will help us. Of course, this year when we also see the barley pricing trending up a bit, as discussed earlier. So from year-to-year, we make those calls as to what is the right strategy in terms of procurement. And that can mean that we buy, for example, 15 months, 18 months or limited to maybe 9 months, depending on the quality and quality that we see on the ground.

Next question is from the line of Alok from AMBIT Capital.

My first question is on the -- while you mentioned about the market share. My question is around what is it that we are doing for the overall market development. Any specific initiatives over the last 3, 4 years and next 2, 3 years going ahead? Do you plan to take to expand or recruit more consumers in the beer space? That is number one. And number two is, when you mentioned about improvement in the working capital. But when we see receivable and inventory days, it seems to be quite high as compared to the previous year. So can you elaborate on the reasoning for the same?

Yes, thank you for the question. So first, on the overall category penetration, which is how I take your question. So yes, this is definitely one of the key pillars in our strategy going forward that we want to increase and drive the penetration. We see a couple of components, for example, quite active in terms of promoting, drinking at home and introducing more and variety of occasions for beer consumption. We look, of course, also at the policy side, making sure affordability is improved, making sure distribution reach improves. For example, in the past, we spoke about the home delivery element, today and what we see in some states . So that could be a potential factor in the longer term. So all in this, we're very cognizant that in some of the states where we already have a good position, we see much more opportunity from driving the category penetration, than, let's say, only focusing on market share within that state. So I think your point is spot on that we all know that in India, the beer industry penetration is very low, per capita consumption is still very low. So to aim to move that up is one of the key pillars. On the working capital, question, I think you're right, if you say if you balance that to, for example, 12 months of sales, the numbers would be a bit higher. I was more coming from the perspective if I look at absolute amounts then we've seen quite a reduction in the capital tied up in working capital components. And I think if you just look at beer sales, of course, we had a very unusual year with Q1 and Q2 being quite lower level than almost. So if you tend to look at that data, for example, on a 6-month basis. I think it's telling already a different story. And of course, yes, that's more the mechanics of looking at 6 month trailing or 12-month trailing.

Okay. Got it. But as you mentioned before that there's not been a sufficient RM inventory. So I'm assuming the inventory which is there at the year-end would be more finished products. Is that understanding correct, then?

It could be there. We also have a little bit higher stock of barley than maybe years ago. So a couple of smaller components. But I think in general, the inventory is relatively lower component in working capital. I think it's mainly about the receivables is the main driver.

Okay. And in terms of receivables, while it is higher in terms of days, we don't see any risk, right?

No. I think referring to what I said earlier, with a very challenging conditions for a lot of the states. The payment behavior has actually been very healthy. So with that, yes, I think it's not a guarantee of how the behavior will be in the future, but I think it's at least good to conclude that last 12 months have been good on that front.

[Operator Instructions] The next question is from the line of Rahul Ranade from Goldman Sachs Asset Management.

Just 1 question. So just comparing our performance, say, 40% for the full year volume declines. If we were to kind of compare it with, say, volume growth that we saw for the full year in terms of the spirits industry. So I just wanted to get your perspective, like now with the benefit of hindsight, what do you think were the key drivers of the underperformance versus the spirit industry? Like one of the obvious factors that I could think of is that the pandemic or the lockdowns hit us when our season or the peak season, which is the first quarter, is in full swing, and that is 1 reason. But apart from that, any study or any market research you did to kind of understand the reason for the underperformance, apart from just the seasonality effect?

Yes. The seasonality is obviously one, which for us is exactly these couple of months, our Q1 and March to a certain extent. I think other elements that we see now is, of course, the need for beer to be chilled before you consume it. So if you think about consumption at home, for beer, you need some kind of cooling, some space, obviously, et cetera, which is much more complicated than if you would not need it. So I think that's 1 element playing into that. Then the -- with outlets being closed et cetera, of course, there were shifts in consumption. And then, of course, beer being a bit more bulky of a product if people have to choose maybe between, I don't know, transporting 1 or 2 bottles of liquor versus maybe 6 bottles of beer. Yes, if you make a trade-off perhaps more people have chosen for liquor at that point in time. So to me, these are all elements, I think, that were really much impacted due to trade closures, lockdowns, restrictions being there. And again, the Q3, Q4, I think we have seen that recovery coming back fully. So we don't see any structural change in consumer behavior or demand. But of course, during lockdowns and all kind of restrictions being there, some of this has come into the .

Sure. Sure. And is there any sense of evidence of, say, down-trading happening where the kind of job losses, et cetera, that we kind of hear, is there an economic impact or an economic angle to some kind of a downtrading people shifting from beer away to spirits something on those lines?

No. I mean, even within beer, we have, of course, also our economic products in the various states. So we've been looking at that in terms of -- do we see some shifts happening. But of course, also plus and minuses, but I have not seen any data that says there's been a structural shifts on down-trading or trading out of the category. And I think when we talked earlier this call about some of the demand in West Bengal or in UP. I think that also shows that, yes, that can also quickly pick up again. So to your question, I don't think there is a shift out of deal or down in the price lever towards more economic products.

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

Am I audible?

Yes, sir.

Yes, a couple of questions. One, if you could touch upon on the margins in Q4, we've seen a very sharp gain. And these are the highest margins we've seen in Q4. So what are the drivers for those and any one-offs that we should be aware of?

In the Q4, no, we have not, in this quarter, seen any one-offs in the EBITDA as reported. Of course, I think you have to reckon that this is an unusual year. So in the A&P spend, for example, we have been a notch slower than we would usually trend that. That also has to be seen in light of a lot of the closures that we have seen during the year, et cetera. So that could be around 1% of the top line versus normative levels. But for the other parts, I think it's about cost measures and of course, some more volume leverage due to the growth versus the prior year quarter.

So ad spend, you're saying as percentage of sales are lower by 1% versus last year, this is for Q4?

Yes, both Q4 and the full year. Yes.

Okay. Okay. So even if we exclude that, there's a very sharp jump. Would you say that these cost reductions are sustainable?

Yes. I mean, going forward it's -- the market situation on what we discussed early is very dynamic. Of course, we see a lot of opportunities on the premium side, which also continue to support with the right innovations and activations behind that. So I would imagine, if anything, that number on that side would go up. We spoke about barley trending up a bit in terms of prices versus prior year's. Glass bottles, again, some uncertainty due to the current lockdown and how much will come back. I think also to next year would occur in financial year that we started. I think on the pricing side, we see in some states strategy in terms of excise policies, some even reducing prices. So it's positive. So I think it's to me more about volume recovery post, hopefully , second wave and maybe less truly about pricing. So these are all elements, I think, impacting the margin at the end of the day. But as we've seen last year, the fluctuation, quite some volatility, not only on the demand, but particularly on the bottom line and the margins. But happy to conclude that this quarter, we ended up on the good profitability, but difficult to make outlooks for the next quarters.

Okay. Okay. And just 2 bookkeeping questions. If you can share the total provisions or write-offs done in FY '21. And also, if any, pricing actions taken or received across states in the current year or in the last 3 to 6 months.

Sure. So on provisions, we put on that last year, Q4, we taken around INR 16 crores. During the year, we have taken more, but I think there is a bit of an arbitrary element in terms of when you provide, but also of course, our liquidation schemes in the market that put some below-the-line expansions, you support the sell-off of stock that's closing to expiry. So it's difficult to pinpoint to one number, but definitely, it has impacted, as many elements has done the last financial year. The provisions have been an important into that as well. In terms of pricing, that's again, what I said earlier, probably more about volume recovery than the pricing approach. So in Karnataka, prices have been flattish. In Maharashtra, we've taken around INR 5 per bottle in terms of prices. Another couple of states, low prices in terms of, example rupee . So in general, maybe a tad below what we would do in prior years.

The next question is from the line of Manish Poddar from Nippon India AIF.

If you can help me with a couple of data points. First is, what would be the on-trade growth for Q4 and, let's say, full year? And the same number for off trade.

So for off trades, the -- I think the growth was closer to normal because that was unrestricted after lockdown to the largest extent. On trade, of course, we've seen a lot of restrictions going even up to October and in some states even longer. So I think the good part is that in Q4 when most of the markets would be comparable, I think, both off and on, we'll probably be close to pre-COVID levels. But if you would ask for the full year number, I have to get back to you, but definitely, the on-trade would, of course, would be much below normal given the prolonged lockdowns.

Okay. And just one more. On the inflation or the RM inflation front. So let's say, if you have to index the inflation for the commodity -- for your raw materials, how would that stack up versus, let's say, last year? So you said for barley, I think it's about 15% odd. But let's say, the composite index, if last year number was 100, where does this number stand now?

Probably if you would all put it in the mix, that would be a couple of percentage points up to mid-single digit. That will be my estimate. But of course, we are entering that season with open positions on, for example, some of the aluminum, some of the barley that is currently under procurement. So yes, we're still locking in some of the prices for the key contracts, but that's currently the estimate, yes.

The next question is from the line of Tejash Shah from Spark Capital.

So you spoke about market share again in towards the end of the year. But Carlsberg reported its number today and they called out teens volume growth in India. So just wanted to understand, is there any particular player who's losing more than historical market share? Or is it -- how in 4Q?

Yes. I can only comment on our own figures and how we arrive at them. So when we talk about market share gain, I think it's more as to be seen versus Q1 and Q2. What we explained earlier where due to kind of COVID measures, we dropped a couple of percentage points on national level and that we have been guiding that in Q3 and Q4, that has been recovered and we're back to normative levels. But I think it's probably better to ask the other market participants as to how they trade and where they got gains or losses, et cetera.

Fair enough. Second, if you can share some comments or insights on consumer trends and demand trends you would have witnessed in markets which have opened globally for you. And any structural shift in how consumers looks at or consumes this product?

Your question is on beer specific in India?

Beer specific, yes, beer specific. Wherever you opened globally also as a group, any consumer insights you can share that can be useful as a lead indicator of in India and coming period when we open up?

Okay. I get your question. Yes. No, I think, in general, of course, looking at the trend that once on-trade opens up, for example, we've seen a very good majority that are very keen to go back and then kind of resume the patterns as we've seen pre COVID. And I would say that's probably a picture we've seen in many other markets and in even international markets like China and et cetera, Vietnam, some of the trading has been higher than even prior year. So I think those are just anecdotes and a couple of examples. But overall, I would say we haven't seen structural shift for, say, okay, consumers approach the category in a different way or their pattern of going out is structurally different. And I think that's also what we've seen readily build up back to the recovery in Q3 and Q4, where a lot of the markets were pretty much trading on levels that we've seen pre COVID.

The next question is from the line of Sunita Sachdev from UBS Securities.

I have 2 questions. One is I really appreciate the kind of market color you've tried to give. But since we are obviously looking at the season time happening in April, May, June, the main season. And we really have no comparison with the base year last year. So from your perspective, where do you think the season will end up or what is the kind of planning that you may have for the season versus 2019, which is the last normalized year? Any kind of index, is it possible? Is it going to be 50%, 60%, 70%? That would be helpful.

Yes. I mean, in our own planning and then let's say, scenario work that we do, of course, look at 2 years back. I mean last year, Q1 is not that useful in terms of comparator or benchmark obviously. But honestly, the picture is changing so quickly every day that yes, we more look at the actions that we can take than trying to target absolute levels. But that could be on the cards by the end of Q1 because if one market goes into lockdown for 2 weeks or one market opens up earlier, those kind of, of course, very big swings. So we tend to focus more on what do we need to do to be ready, anticipate and react to things happening on the ground. The whole budgeting part is quite scenario based and agile, I would say.

Okay. And so there is no possibility of kind of looking at any kind of index on 2019 performance?

Yes. I mean, of course, we look at indices and potential outcomes. But yes, we've got all the uncertainty in the market and on the ground at the point in time. I don't want to put out figures that in a few days' time might be too high or too low, given all the things that are happening.

Completely appreciate. Second question that I have is, I think, as an earlier question also was on margins. You obviously done a very good job on cost rationalization and look forward to the balance sheet to get more details on that. And you've also achieved healthy cash flows. Any update on any large IT project or ESG project or any CapEx, et cetera, that you'd like to change, given that we are clearly obviously in the crux of our long-term performance, and you still managed a decent operating performance? So are we thinking -- are we thinking on large CapEx outlay for the next 2 years or so?

Yes, at least for the near future, I would say probably this financial year, we're looking closer at something like maybe INR 250 crore type of levels of CapEx. Again, we are still recovery what it we would like this year. So in terms of expansions, a year ago, we completed a number of expansions. So they give us now ample capacity for the near term. But of course, we always need to look at kind of 3, 4, 5-year horizon. So the fact, I think it will be good news, so I would come back a bit more capital investments because that would signal that we see that growth coming. But yes, given what's happening with COVID last year and this current second wave, yes, CapEx will not be really on the cards.

The next question is from the line of Prashant Kothari from Pictet.

The first question was on the premium end of the market. Can you share what is our market share there and how it has changed during the year?

Yes. We don't have that data for the last quarter on the premium side. But what we did see in our own data internally is that, yes, particularly in Q4, we've seen a good recovery of the premium segment with on trade being open, et cetera. So the growth in premium was double that of the total portfolio, which is something we've seen in earlier years on the normal market circumstances. So that is positive. And of course, we are actively -- innovations with expanding Witbier, expanding AMSTEL, et cetera. And yes, that's what we're focused on, and we will continue to pursue also that growth in the premium end of the market.

So in normal years, like FY '21, how much of the premium volumes would have been going through on trade [sellers]?

We would not have specific channel. I mean, obviously, on trade the premium end would be a little bit larger in terms of affordability and the type of location. So I think for on trade is specifically channel where some of the launches take place, some of the the recognition starts where some of the supported promotions take place. But as we sell into the market, it's difficult to separate it clearly what goes into on trade as such and what goes into the off trade on the national level.

Okay. Understand that. And then you mentioned there is some kind of pricing competition happening in Karnataka general kind of trade level competition. Can you just give some color there? And is it a temporary situation you think? Or is it something that could sustain for some more time?

Yes. One of my comments was on Telangana, where we've seen quite some competitive intensity on discounts and the like. So yes, I think that's reflective of the competitive market dynamics where these will be different state-by-state from time to time, across different market participants and brands. So that's -- yes, I would say, the healthy competition that is ongoing. But yes, in Telangana where we said the consumer prices have been quite high for quite a while now since the unlock last year in May. Also, trade margins have been reduced. So yes, it's a pretty competitive set of dynamics moment there.

Okay. And the last question on my side is on the tax rate, and I see it is much higher than the 35% tax rate. If you could explain why that is so? And are you going to sustain these higher levels?

Would you repeat the question? I didn't get that.

I'm just trying to understand the tax rate. It appears to be more than 30%. Why it is so high? And what should we expect for the future?

Yes. I think going forward, it's going to be more closer to the 25% as we've seen with, let's say, the nominal effective tax rate. In the year, of course, we have this impairment, which is not fully deductible, so hence, the effect of rate was a bit higher this year around.

We take the last question from Himanshu Shah from Dolat Capital.

I have a couple of questions

Sorry to interrupt. Himanshu, we were not able to hear you, your audio is breaking. The line got disconnected for Himanshu. I would now like to hand the conference over to Mr. Harit Kapoor for closing comments.

Yes. Thanks, Aisha. We'd like to thank all the participants who joined for all the United Breweries call. And would now hand over to Berend Odink for his closing comments. Over to you, Berend.

Thank you, Harit. Thank you, everybody, for your interest. And I hope everyone stays safe, stay healthy in these times, and look forward to connect on the next call or the next engagement that we have. Thank you very much.

Thank you. On behalf of Investec Capital Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.