United Breweries Limited (532478) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the United Breweries Limited Q2 FY '22 Earnings Conference Call, hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded. I'd 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. On behalf of Investec Capital Services, I would like to welcome everybody on to this call. This is the Q4 -- the Q2 earnings call for United Breweries. We'd like to welcome the management team from United Breweries onto this call. We have with us the senior management represented by Mr. Berend Odink, CFO; and Mr. P. A. Poonacha from Finance and Investor Relations. I'll hand over the call to Berend for opening remarks, post which we'll open the call for Q&A. So over to you, Berend.

Thank you, Harit, and good morning, everybody, on today's call. Thank you very much for joining. Today, we'll discuss the quarter 2 results of UBL. After the usual opening comments, Poonacha and I will be happy to take any questions. So let me first start with the results highlights of the second quarter. We posted a volume growth of 49% versus prior year, driven by a strong recovery of demand prevalent across nearly all the markets. Volumes were up 23% versus the first quarter. If you compare it to pre-COVID period of 2019, the quarter volumes were up -- were at 78%, with continued month-on-month recovery during the quarter. The September volumes were at 88% versus 2019 September. We posted strong EBITDA result at INR 170 crores contributed by volume growth and a lower impact of COVID in the current year versus last year and further cost efficiencies. The EBITDA margin increased to 11.9%, up from 8.1% last year. We posted free operating cash flows of INR 227 crores year-to-date, up from INR 95 crores prior year. The company has a strong liquidity position with circa INR 600 crore bank balances. The company received a CCI order with the imposition of INR 752 crore as penalty. The company is in the process of preparing the grounds of appeal and the appeal will be filed within the time frame of 2 months from the date of the order. And basis legal advice, the company believes that it has a strong case on merits for successful appeal on this matter. Accordingly, no provision is considered necessary. If we move to the next few slides, depicts the Q2 and the year-to-date results, with Q2 net sales growth of 58% and strong EBITDA growth at 133%. The year-to-date EBITDA is INR 272 crore compared to last year a negative INR 21 crores. If we move to Slide 5, it shows the volume performance for the key regions. Like last year, in the last quarter growth differs by region, by states due to different impacts and timing of the second COVID-19 wave and differences in markets opening up, both this year and prior year. The North posted good growth, particularly in UP and Rajasthan. Delhi is undergoing a policy change and as such going through revision at the moment, low stocks in the market. West saw broad recovery in all markets. East posted highest growth also due to lower base. South showed again broad recovery but Telangana recovery is impacted by still higher taxation levels versus pre-COVID. On the net sales, it was up to INR 1,426 crore, driven by 49% volume and 9% favorable price/mix. On Page 8, it shows EBITDA breakdown. Gross profit improvement driven by better volume performance. The GP margin down 52 basis points versus last year, up 341 basis points versus Q1. With continued focus on costs management and the leverage effect of revenue growth coming through, both employee expenses and other expenses enabled margin expansion of respectively 280 basis points and 154 basis points. The resulting EBITDA margin for the quarter was 11.9%, up from 8.1% last year and broadly equal to the pre-COVID Q2 quarter of 2019 of 12.3%, this despite the lower volumes compared to the quarter. Free operating cash flow were robust at INR 227 crore, up INR 133 crore versus last year. Working capital changes were INR 104 crore positive, and investments and interest cash out were both below prior year. Finally, turning to the slide on outlook and summary. India observed progressive recovery of underlying consumer demand, both first and second COVID-19 wave. Although the trajectory and future impact of the pandemic remains uncertain, the company has adapted its operations accordingly and will continue to manage the business with agility. The company is optimistic about the long-term growth drivers of the industry on the basis of GDP growth, urbanization and evolving consumer trends. We're well positioned to leverage and drive these opportunities with leading market position, portfolio brands and healthy balance sheet. With that, I'd like to conclude the opening comments, and let us move to the Q&A.

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

Congrats for very good recovery. So you have given the Y-o-Y growth in different states. So that will look really good because of the base. My question is on a 2-year basis, which states you're the most happy and which are the laggard states. And if you could share some outlook? I do understand Bengal and Rajasthan, the beer taxes were cut, it was made a bit more easier. So if you could comment on the outlook also?

Thank you for the question. Indeed, we see differences state by state. I think where we see full recovery or even higher volumes versus pre-COVID levels are a number of important states like, as you mentioned, UP, Rajasthan, West Bengal, Karnataka, Tamil Nadu, Goa. Where we saw still some recovery to be done is in Delhi due to, for example, the new policy that is introduced; in Telangana, as excise levels are higher; and also, for example, Maharashtra. And if we compare the numbers of recovery, so this 88%, we also compare to September 2019, where we have to recall that the state of Andhra had, at that point in time, a different policy, which was much more favorable to the beer industry. But from a bigger picture perspective, yes, we see good month-on-month recovery. Also very important, the role of the on-trade, where during the quarter, we've seen progressive opening up. For example, in Kerala, the on-trade opened only in September. It was also a couple of states where limited opening outs were in place, for example, up to 10:00 p.m. in the evening. So all this will, over time, I think, support further recoveries beyond pre-COVID levels. As usual, we don't really give outlooks or guidance on that. But I think the trend hopefully indicates the direction the volumes are progressing.

Sure. One follow-up. So on the Delhi new policy, do you see Q3, any big impact negative? And medium, long term, would you say because of this policy, Delhi will be one of your highest growth states in a 2, 3-year view?

I think we have to see exactly how the policy will pan out. I think there's still quite a bit of kind of uncertainty on how it will be implemented. But for many of the elements, it's a positive. It's much more about consumer choice. It's about removing some of the restrictions, about enabling longer opening hours, moving retail into private hands. So I think there are many positives. But too early to say whether this will be a large volume shift, let's say, in that market just now.

Sir, and last question on gross margins. You have kept it quite stable, which is a good achievement. Now glass prices in the last 1 or 2 quarters have gone up. So if you could tell us how you have been impacted on that? And in terms of outlook, both on glass and the liquid, how do you see next 1 year?

Yes. I think overall, the commodity markets in many areas, whether you talk about oil, energy or other input costs like some of the glass input materials or things like cartons, aluminum, we see very high spot markets at the moment, which is, I think, a challenge for many companies. With the current contracting position, for example, for next quarter, we do expect kind of lower level of utilizations as we have been guided previous quarter. But definitely compared to swap rates that will over time as contracts expire or as price adjustment formulas kick in, that will be really a watchout area. On barley, we are having the current stocks from last year crop still in hand. So that's all done in terms of procurement, but we have to move to next season. And of course, yes, it's agricultural crop. So it's very difficult to forecast what the pricing, the quality, the quantity will be. I think so far, kind of the rain and the acreages are looking okay. But in terms of pricing, we have to wait a bit until we have further clarity there.

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

Just a couple of questions. Firstly, what would you say would be a normalized EBITDA margin for you? I mean, just assuming revenues are normal, as things stand today. And secondly, in terms of the wheat beer launch, has it been launched in any more states? And any numbers you can share in terms of volumes or just in terms of response?

Thank you, Aditya, for the question. So first, on the EBITDA margin, we've always said, first, we need the volume to fully recover to enable the, I think, potential, let's say, of the P&L. We don't give guidance on that. But if you look at the past years, I think an important milestone is, again, get that volume back. Secondly, I think in this quarter, despite the lower volumes, we posted underlying EBITDA margins equal to 2 years ago. So I think that shows to some of the cost measures that we have taken. And once we get better volumes flowing through, I think that should enable the margin expansion. On the wheat beer, we are having activities and market presence in some 8, 9 states. There, we continue to build the segment. We have very competitive shares in that segment in some of the states, leading shares. So we're happy with that consumer traction. But of course, I think it's just one signal and one proposition of a lot of developments, particularly in the premium area with new flavors, with new segments emerging so that I think there will be much more activity and developments in years to come.

Understand. Just a follow-up on that EBITDA margin. Obviously, compared with 2 years ago, the margins now seem to be sort of back where they were on lower volumes. But if I compare with, say, FY '19 or even FY '18, I think the volumes are still somewhat weaker if you compare with 2Q FY '18 or '19. So I mean I'm just trying to understand if once volumes go back to a normalized level, would a 15% be a satisfactory margin for you, would a 13% be a satisfactory margin or would it be 20%? I'm just trying to understand from sort of where you would think of the margin as being optimal.

Yes. I think a couple of things that are very important for the margins. First, we continue with cost efficiencies. So we always said that it's not done. We have taken a lot of measures during COVID. We are actually continuing to look at further efficiencies as we move on. And particularly, if we look at the commodity market at the moment, I think it only shows that, yes, you will need to take further steps. What I said earlier, the volume coming through first, and hopefully, we have now a period of less interruption in front of us is very important. But I don't think we can say that at certain margin level, we're kind of satisfied that's what it is. It'll always be a dynamic of competitive position, market shares and presence in key states, the commodity cycle as to where's that at the current point -- at a certain point in time. And finally, the investment behind brands, existing but also innovations in terms of mid- to long-term competitive market position. So we cannot look at isolation and target one single number as an EBITDA margin. I think we have to see it as a component of competitive market share and some of the other cost items I mentioned, and then that will be an outcome.

Okay. Understand. I mean just one last follow-up on this. I mean in terms of that margin then coming down from, say 21% in fiscal '19 -- 2Q fiscal '19 or 17% in 2Q FY '18, would it -- would that be a function of just -- I mean, obviously, one is your input cost structure and secondly, the volumes. But would you also say that competitive intensity compared with them is -- compared with that time is significantly higher? Or that's not that big of a part -- that is not that big a driver of margin at this point?

I think competitive intensity always is quite high. It will move over segment. It will move over states. So I think that is not structurally very different. I think what is, of course, for the industry is that there's a lot of drive on the per capita consumption and driving the category penetration. And within that, a lot of effort on the premium side where you will see a lot of new brand launches and a lot of new segments coming up. And I think that will only increase for the years to come. And that will come with its investments, which in the short term will impact maybe margins. But overall, I think from the mid- to long term is very positive because it attracts new consumers for the category, drives a lot of value generation as well. So I think it's a very important phase for, let's say, the beer industry in India in terms of development.

The next question is from the line of Arnab Mitra from Credit Suisse.

My first question was on this 9% realization growth year-on-year. So if you could just help us understand how much of this is actual pricing? How much of this is mix? And do you expect realization growth to continue at this level? Or there was some exceptionally big changes in the mix on a Y-o-Y basis, given how disrupted the base was which is why it is 9% and it may not continue at this level as you go ahead for the next 2 quarters?

Yes, primarily driven by some of the pricing we have taken. That is not only for this current quarter, but also prior quarters where it will just continue the roll on effect. So in terms of what is the outlook on that, of course, some of the pricing will then be baked into the base figures. And we'll have to look next quarters at new pricing where the possibilities are, et cetera, where once, as we all know, normally, this is more a period of kind of March, April, May, where most of the price revisions are done. But yes, good to conclude that so far, I think that pricing has been relatively robust.

And any sense of how much of this 9% is actual pricing versus being mix? I mean, if you could give a ballpark split of this 9%?

Yes, we don't really want to break that out, but I would say the majority has been on pricing.

Got it. Got it. And the second question then was that your volumes are back to 88% of pre-COVID in the September month. What we have seen in even premium spirits is that volumes are much higher than pre-COVID. So going ahead, as -- would you say that the reopening now in terms of on-premise is kind of completely open. And therefore, the gap should really converge now given that there is no further restrictions in any states? Or do you think there are still some restrictions which effect beer a little bit more than the broader alcobev industry?

No, I think in, for example, September, we saw the last couple of restrictions being lifted. I think normally, it's -- you expect a bit of time for consumers to kind of stabilize and go back to their behaviors with the new opening hours, restrictions being lifted. So I hope that -- I think that looks all very positive. So we're optimistic about continued recovery from that perspective.

Sure. And one last question on barley. You mentioned that, I mean, now going ahead, it will depend on how the next crop is. So in terms of barley, is the domestic production the main driver of the price of barley? Or is there a lot of interaction with the international barley prices in terms of how your own barley procurement price plays out?

I would say it's relatively domestic. Of course, there is some linkages and there is some opportunity, for example, to import. However, from a longer-term perspective, we also want to give very strong signal to barley growers that, yes, this is a strategic crop. We would require to be continuously invested in. So we have an active program with contract farming with support on trainings and seeds and varieties, et cetera. So we continue to pursue that. And yes, unless there are real structural price differences or other considerations, our preference would be to buy domestically.

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

Yes. What proportion of your volumes is coming from cans rather than bottles? And any issue there because of lack of availability of aluminum or higher prices?

No, the cans are specific to a certain number of markets for historical reasons. For example, mainly in the north, the preference of consumers is more towards cans, maybe bottles. The share of cans is around 15% in our portfolio, but there are no shortages of aluminum or any of the materials. I would say it's more the pricing, of course, where, yes, some of those commodity investors trade quite high at the moment. But then it's a combination of positions that we've hedged in the past and open positions that we will need to hedge going forward. But there's no shortage, let's say, of cans itself.

Okay. Just to clarify, you said 15% is the can proportion.

Yes.

Does that answer your question?

Yes.

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

My first question is on the ad spend. So would it be possible to give a ballpark as to expense versus the 2Q FY '20 back to what percentage now?

Could you repeat the question? The line was not very clear.

Sure. My question is the ad spend in the current quarter versus 2Q FY '20, would be back at what percentage?

Yes. So we, of course -- yes, we have tailored the ad expense to the activity that we think is appropriate for the openness of the market. So it would not be at the level of 2 years ago. But as a percentage of the top line, I think you would say, broadly equal. I think the mix of ad spend also has changed much more to digital, for example, also much more consumer facing, et cetera. So there has been some shifts in, of course, what is possible and how we best activate the brands and reach the consumers. For example, 2 years ago, we'd probably have a bit more on sponsorships in any event. Now that is obviously not possible in today's environment. So that mix has changed, but broadly as a percent of the top line that would be similar.

Got it. Got it. And my second question is in terms of your premium portfolio. So firstly, can you give us a ballpark number as to what would be your share of premium portfolio volume to the overall volume? And secondly, in terms of manufacturing capacity, what would that percentage be? That's it from my side.

Yes, the share of premium stands around the high mid-single digits in the portfolio. We've seen consistently quarter-over-quarter that continues to grow, of course, also in line with the overall market trends. And we continue to invest in the capabilities in the various breweries to produce more and more premium on the various breweries. So as such, there's not a shortage or any, let's say, consideration, I would say, on the production side that we continue to invest and enable the supply to the market for more and more breweries over time as that program continues.

The next question is from the line of Vishal Punmiya from Nirmal Bang.

So I have 2 questions. Firstly, in terms of getting a clarity on the realization comment that you mentioned for the earlier question. So when I see it from -- when I compare the volumes with beer revenues, so there is a negative realization for the quarter compared to the positive that the earlier comment was made on. So what is that led by? And secondly, in terms of the demand environment, during the quarter, obviously, on-trade basically improved on a sequential basis. Was there any benefit in terms of inventory stocking by trade, if you can give us some sense on that front?

Yes. Thank you. Let me start with your second question. On the inventory impact, I would say it's relatively small. I think the duration of the lockdown, of course, was this time around luckily a bit shorter. So a lot of the inventory actually got sold out. So I don't think there is a great shift in stock decline or buildup. I recall that, for example, Delhi, where the market is going through a policy change. Hence, those kind of events, I think, make a bigger impact than on-trade itself in various states that have closed and subsequently opened up. On your first question, I did not fully understand it in the sense that, which figure have you been looking at when you say there is a negative realization?

Yes. So basically, I was hinting at beer sales growth versus beer volume growth of 49%, so 47% versus 49% volume growth. But at the top line level, I do understand that because of lower excise duty on a Y-o-Y basis, the realization might look slightly higher. But when I just see from a beer sales versus beer volumes, then the realizations would be a negative 1.3%. So I just wanted to get a sense on that front? Or am I looking it in a wrong way?

Yes. What we have highlighted is more on a net basis. So the growth revenues deducting the excise and then I think that is for us the most meaningful figure in the sense of how much do we realize after the duties and excise payments. And so we compare that to prior year quarter 2. On a per case basis, that's up 9%.

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

Yes, a couple of questions. So firstly, on staff cost, is this the normalized run rate that we will see? Or are there some one-offs over here?

No, there are no one-offs in staff cost.

Okay. And secondly, could you share what is the ratio of returnable bottles versus new bottles this quarter? And has this come back to a normalized level? Because when we look at your realization improvement of 9% and 51%, 52% kind of a gross margin, it seems that the cost of materials per case is more or less still similar to Q1. So there is a high single-digit kind of inflation that we get on a Y-o-Y basis.

Yes. The dynamics here are that, on the one hand, I think the collections are becoming much better. On the other hand, as the volume picks up, we also need to invest to enable that volume growth. So with that, the injection or the use of new bottles is relatively above the traditional base of around 1/3. So that is, with the market recovery, et cetera, of course, an investment we think we should fully do. So that will take a bit of time to, let's say, normalize. But I think in itself, the collections and the returns are also progressing well.

Can you share what is the current ratio?

I would only say it's a little bit higher than normal. But again, this is more a temporary effect after the low volumes that we achieved in the last period of the 2 COVID waves. And again, that normally would stabilize again back when we hit that full recovery of market, which, of course, is now, yes, close to on the way with what we discussed earlier before.

Okay. And so the rise in cost of materials that we are seeing is largely on account of this factor?

Yes. It's partly this kind of support for volume growth. We're also seeing some pressure in other, for example, packaging materials like cartons, is up quite a bit. So yes, from category to category, you'll see the different dynamics. But I think overall, net-net, yes, we've realized a good improvement in gross margin versus prior quarter 1.

Okay. And lastly, if you can share what has been the growth in premium volumes versus the overall 49% volume growth?

The growth in premium has almost been double versus the overall portfolio. So that's, of course, on the back of the on-trade opening up and a lot of normalization coming back. So again, quite a consistent trend on premium from what we've seen in the prior quarters and even the last few years.

You said growth has been doubled, which is like 100% versus last year, which I'm assuming is a very low base.

Yes, we had a very low base last year, of course, because the opening up last year was much more staggered, much more delayed state by state. And this year around, after the second wave, although we have some examples of states where on-trade was opened later due to specific circumstances, for example, in Kerala, but the far majority of states opened up soon.

I think it can't be 100% because the growth percent is both mainstream and [ sourcing in ]. So it is much lesser than that. So it's an average, right? So you can't just say 49%...

Right. Right. So if you can share what was the share pre-COVID? And have we reached those levels? Or it is, we surpassed those levels now?

No, with the ongoing recovery, we have not yet reached that full recovery as you'd have also seen with the overall sales volumes.

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

Just had 2 questions. Firstly, given the fact that you've seen a strong recovery on the premium side as well, just wanted to know whether you would look to, say, now front-end some of your innovation agenda in the premium space? You also discussed about there is going to be a lot of excitement there. So I just wanted to get a sense from you. Last 18 months have been challenging in terms of lack of new launches, et cetera. So just wanted to understand from your end, do you see a pipeline emerging from UBL's end in terms of new product launches, et cetera? And when if ballpark can we see some of this in the market?

Yes, I think you're right in the sense that there's a lot of development still to come on the premium end. I think that's the good news of the trajectory of the beer market in India that consumers are really moving up in terms of the products they prefer, the development of the various categories and a lot of things happening on the premium end. So yes, within UBL, we're, of course, actively looking to drive that and further develop the premium market also with our own products, whether existing and also, as you indicate, future innovations. But let me come back on that as -- when we launch that and what type of brands and formats at the right moment.

Yes. Just a follow up to that. Because if -- is there a -- is the time kind of as right as it ever was because some of the craft beer players also, having had challenging times over the last 18 months, given their smaller size and scale and the larger dependence on on-trade. So is the opportunity for a large incumbent like you maybe even better in the current context?

Yes, I think there are always opportunities. But for example, if you look at our own portfolio, even the last few weeks, we were still stabilizing some of the draft going into the market where that was quite disruptive. There were some policy challenges in a number of the states. So those are also a few of the things that, yes, we need to make sure that normalcy because we have a very strong leading share in the draft category. So those are a couple of the things that we, of course, first want to get right. But definitely, yes, the opportunity on premium and what we discussed earlier on the consumer preferences is there, and we'll definitely continue to look at that opportunity and continue to activate that.

Understood. Second question was on the cost side. So over the last 18 months, you have taken several cost rationalization measures to protect the P&L where the revenue wasn't so robust. Just wanted to get a sense from you on the overhead cost side. Now that revenues start to recover to more or less normal levels going forward, what is the kind of cost-saving proportion, maybe as a percentage of sales, maybe 100, 150, 200 bps on the overhead side that we could expect given what you've done over the last, say, 12 to 18 months. While it was -- it might not have been -- it would only be fully visible once your revenues come back to normal level. So any way if you could kind of quantify it or just discuss how much of that could we see going forward in terms of the actual savings reflecting on the margins?

Yes. I think I would just say that you see our numbers, we publish them every quarter, we also highlight any bigger one-offs that might be in there to give you the full visibility. But we are a bit careful to put really numbers on them on what is savings because we have a very active project team on the savings, with a pipeline with realizations that we continue to do that. I think that's important. At the same time, we also choose to reinvest the -- behind the brands or behind commercial spend or bring part of that to the bottom line or some of it will be required just to offset inflation that is there from time to time. So that's how we look at our cost program. But in the end of the day, it should reflect in the numbers that we published.

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

Now that we are aware of the fallout of the price issue that we had, and we are going to be obviously submitting a proposal to the courts, my question is more around how does this really affect your capacity expansion plans into the next couple of years? I'm assuming that once we get back to normal volumes in the next couple of quarters, we will be needing to start thinking of growth? And where are we, I guess, on capacity utilization? And how do we think of the new breweries and capacity expansions on the back of this fine?

Thank you, Sunita, for the question. So yes, for now, we have ample capacity because we invested before the peak season when the pandemic impact got known. So we first want to, of course, make sure we have a peak period where we fully utilize that or to a large extent. But it will be very positive if we, again, look at expansions because then that means, of course, we see the future growth close to realization. So I think we -- for now, we guided that, yes, on CapEx, we are on the trend line like INR 200 crores. Maybe after the next peak season, we will dial that up when we see that growth coming through. But as of yet, I think it's a bit too early.

Could you share any capacity utilization numbers?

I mean that will really depend on our peak season in kind of the quarter 1. So for the next quarter, if it's kind of a normal unimpacted season, yes, hopefully, we're back to usual high rates of 80%, 90%. And from there, we will continue to look at where -- in which states or in which sourcing area do we see the highest growth and the need to augment capacity in existing breweries and that will be, I think, the first step of expense.

So I guess, I take away a view that in the next 2 to 3 years, we are not looking at a large greenfield expansion?

Yes. I think the only thing you have to bear in mind, it we'll take anywhere between probably 18 months to 2 years or something to really implement a sizable expansion. So of course, we need to invest ahead of the curve, invest ahead of the growth, sort of could happen after next peak season. Again, it will depend a little bit where will the growth happen? Is it really an unimpacted season? But yes, net-net, I would say it's positive if we talk about CapEx for expansion because that's, of course, the growth we like to pursue.

Sure. And if I may, any commentary that you can give around possible outcomes of the regulation change that we are going to see in West Bengal or Delhi? I mean Delhi, I know you mentioned a couple of things. West Bengal, does it affect us any differently?

Yes. Delhi, I think, yes, what I said earlier, it's early days how it will actually be implemented and done. I think the model looks a little bit like maybe Haryana to a certain extent. I think the positive, again, is very much that at the end of the day, it's consumer choice, and it's about, yes, I guess, more freedom and more ease of doing business in the state. So with that, I think it's a progressive policy. But I guess a lot of the devil is in the detail as to how it will be implemented and how the trade will look at it. So hopefully, on the next call, we can maybe draw some early conclusions as to how is that going. But overall, yes, on paper, I think it's a progressive policy. So let's see how that will be implemented and how it will be structured in the market.

Sure. And even the West Bengal policy will be equally progressive, from your understanding?

On the West Bengal, you...

I didn't get the question, Sunita.

No, I was -- basically Berend gave us a lot of insight on the changes in regulation in Delhi and how it could make a difference to consumer choice and availability. My question was around West Bengal. What are the potential changes in the policy expected and whether it would potentially affect us, how would it potentially affect us?

West Bengal, the policy is -- I mean already the duty is down, and we are seeing very good growth in West Bengal. And now they are looking at making spirits less expensive. But however, considering that we are reasonably priced vis-a-vis what it was in the past, our expectation is we will continue to grow the way we are growing now till such time we come to the pre -- what do you call, I mean, pre-duty levels where the increase was such that the duty fits the MRP and the volume drop.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to Mr. Harit Kapoor for closing comments.

Yes. Thank you, Janice. On behalf of Investec Capital Services, I would like to thank the management of United Breweries for taking out time and giving us the opportunity to host this call. We'd also like to thank all the participants on the call for taking out time and attending this one. I would now like to hand over to Berend for closing comments. Over to you, Berend.

Yes. Thank you, Harit. Thank you, Investec for hosting us, and thank you for all the participants for your interest and questions. We look forward to connect next time. And in the meantime, if there are any other queries, we, of course, can be contacted and we look forward to engage. Thank you very much.

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