United Spirits Limited (UNITDSPR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the United Spirits Limited Third Quarter FY 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations, United Spirits Limited. Thank you, and over to you, ma'am.

Good afternoon, everyone. And welcome to United Spirits Third Quarter and 9 months ended FY '23 earnings call. Today on the call, we have with us our Managing Director and CEO; Ms. Hina Nagarajan; and our CFO, Mr. Pradeep Jain. Hina will provide you an update on business performance, while Pradeep will run you through the financial performance during the period, post which we will open the floor for questions. With this, I hand over the call to Hina for her opening remarks. Over to you, Hina.

Thanks, Shweta, and good afternoon, ladies and gentlemen. Thank you for joining us on the Q3 FY '23 earnings call of United Spirits Limited. It's always a delight to interact with all of you, and I wish you and your loved ones a very happy and healthy new year. I will first give a brief update on macro and industry and will then discuss progress on our portfolio reshape strategy followed by some business context of the results that we have announced yesterday evening. The consumption and the growth story of India continued in the October to December 2022 period with India safely being one of the bright spots, I would say, in an otherwise gloomy global economy. This was the first full festive season post-COVID where people celebrated both inside their homes and out of their homes with great fervor. I mean we saw that Dussehra Pujo, Diwali, even Halloween, Christmas and New Year. Premiumization and aspiration-driven choices continued to be the key drivers of demand with greater growth coming from the middle and upper income segments in India. The lower income segments did feel a crunch in their wallets as inflation continues to be high and that reflects in the lower end of our portfolio. Having said that, we would like to say hopeful of inflation coming down and a boost in income owing to strong winter harvest. I mean speaking of [indiscernible] in particular, we continue to witness good growth post-COVID, particularly at the mid upper segments of the P&A portfolio, and that is reflective of the consumption revival in the broader economic context with the festive season adding further momentum I've mentioned earlier. Our premium Indian whiskys and scotches continue to drive category expansion on the back of sustained trend of premiumization, inflation and the larger global macroeconomic headwinds may act as a bit of a drag, but we believe that consumer demand will continue to be robust. Global data also suggests that the Indian consumer continues to be amongst the most resilient and optimistic in the world. Net-net, I would say a larger growth story pegged on premiumization continues for our industry. In this context, we have delivered a good performance in the quarter despite headwinds from routes to market change and partial recovery of Diageo into -- this was also the first pristine quarter post the slump sale and franchising of the strategically reviewed popular portfolio. Pradeep will reemphasize a couple of points that we have consistently communicated with regards to the divesture and the franchising in his section of opening comments. During the quarter, we have also completed the merger of Pioneer Distilleries Limited and signed definitive agreements to divest the nonoperated Sovereign Distilleries Limited that progresses us towards a simplified legal entity footprint. I'm also very happy to inform that the Board of Directors have approved a multiyear supply chain agility program, which aims to strengthen our end-to-end supply chain, making it future ready by improving its resilience and agility, driving efficiencies, delivering additional productivity savings and making our supply chains and operations more sustainable. This is in addition to our focus on everyday efficiency savings. Just to take you through a bit more on the rationale and economics of the program with more detail. As we have clearly articulated on several occasions that being a combination of acquisitions and mergers over a period of time, USL still has a fair amount of legacy costs stuck in the P&L. And we want to accelerate towards our near-end stage manufacturing footprint. This is exactly what we're trying to achieve through the multiyear supply agility program. The total program cost will hover around INR 500 crores consisting of both cash and noncash components in roughly a 60-40 ratio. Once completed, the program will generate INR 130 crores to INR 150 crores of annualized productivity benefits. Overall, the discounted payback would be about 4, 4.5 years. There are also appropriate disclosures to this effect in our financials. Back to the impact of route to market and policy change, that is clearly visible during the quarter, and there is unarguably a setback for companies like us with this change. We are doubling up our efforts to make up for this lost growth opportunity by sharpening portfolio execution, particularly on various segments and brands like Black & White, Black Dog, Royal Challenge. We are harnessing the strong momentum of these offerings and also accelerating the reach of our innovations such as Royal Challenge American Pride and the renovation of Royal Challenge Whisky and Signature across other states in the country. Overall, we remain very pleased with the response received on our renovated innovative offerings and new launches over the last few quarters and continued the sequential momentum of growth of the same in the October-December quarter. We also launched Johnnie Walker Blonde, the smooth bright and light-scotch variance from the house of Johnnie Walker, Blonde is priced position between Red and Black and will play the strategic role of recruiting the next-gen non-scotch consumer. We have also launched a renovated new Royal Challenge in many other markets. The renovation launch was done with Choose Bold video from Viral Kohli, which reached about 12 million-plus accounts. Complementing the same, we have created the Naya Sher anthem, which was created in collaboration with Divine and Jonita Gandhi featuring Viral Kohli. The renovated Royal Challenge has been rolled out in Assam, Rajasthan, U.P., Haryana, Maharashtra, Goa, Daman and Diu, Chandigarh, and we are targeting a full national rollout completed by June 2023. On McDowell's Number One, we continued focused investments, pan-India launch of the new Yaari song in December, which basically was attributed to KK who was the original singer of that song, and this is one of our strongest sort of brand assets, I would say. And that new song garnered 26 million-plus views. The song aims to build salience for the brand across the country and drive brand love amongst the youth with celebrity handle, digital as well as new age platform promotions. On the digital side, we are continuing acceleration on consumer engagement, content and community building through our platform, in.thebar.com. And we are also driving precision marketing for effectiveness and efficiency of our marketing spend. We create this virtuous cycle, therefore, of energy efficiency, smart investment, leading to top line growth. I am pleased to share that our consumer activations have been significantly recognized by the industry for their innovative approaches and best in class [indiscernible] to quote a few the drone activation around Johnnie Walker, which we did [indiscernible] won a gold, both at the mobile marketing awards, Maddies, in the media innovation category and at the ET Brand Equity Brand Strategy Award for tech-enabled media plan category. Godawan, artisanal single malt whisky won its first international taste award for both its expression at the International Taste Institute Awards Brussels. And our renovated Black Dog packaging has won WorldStar Award, which is awarded by the World Packaging Organization as the highest award in the field of World Packaging. All this is a reflection of the work of our extremely talented team underpinned by deep consumer insight and above everything else, our ability to adapt to the ever-changing marketing landscape. We will continue to invest in our brands by driving focused interventions. And over the coming months, we'll further build up [indiscernible] availability for our P&A portfolio and equity of our Diageo brand. To sum up, we remain optimistic about the prospects of our business and confident in the resilience of our well-established processes and overall in our ability to navigate headwinds. In the last few years, our teams have demonstrated their ability to overcome several significant challenges with renewed portfolio and razor-sharp focus on driving commercial excellence in store and on-premise, revenue growth management and everyday efficiency. We are confident in our ability to deliver sustainable long-term growth and stakeholder value. With this, I hand over the call to Pradeep to take you a bit deeper into the financial update. Pradeep, over to you.

Thank you, Hina, and a very warm welcome to all of you. I would like you to refer to the results press release posted on our website last evening. At the onset I would want to make 2 terminologies clear that have been used throughout the document. One is reinstated wherein all numbers are adjusted for the Pioneer Distilleries merger as it is effective April 2021. Four, for the previous periods, these numbers are reinstated while current period reported numbers are already inclusive of PDL. That makes it comparable. The second term that we are using is rebased. This is eliminating the impact of the strategically reviewed popular portfolio from the base year to make comparisons meaningful and absolutely like-to-like. Hope this will provide all of you a better understanding of the performance and the numbers. Now before I come to the retained portfolio, core operating performance, let me cover the impact of the slump sale and the franchising of the strategically reviewed popular portfolio. Since we have announced the deal in May 2022, we have consistently communicated that you will see 2 impacts of the transaction on a go-forward financials. A, divested perimeter will not provide any material pickup in margins as it is more or less -- as it more or less makes portfolio margins. And B, on fixed overheads, will lead to an operating deleverage for 12 to 18 months, and we will have to recoup the same through a combination of growth [indiscernible] leverage over the next 4 to 6 quarters. If you look at the numbers released for the quarter, these were exactly the 2 things that are playing out. And we have consciously called out the impact transparently exactly in the manner in which we have been conveying it to all of you over the last 3 quarters ever since we announced the deal. Now let's come to the core operating performance of the retained business. Like-for-like, we have delivered a portfolio NSP growth of 9.7% during the quarter. Underlying growth stands at 11.5% after adjusting for the one-off bulk scotch sale in the prior year same quarter. Prestige and above growth stands at 11.7%, with double-digit growth in our scotch portfolio. The price mix during the quarter was 6.5%, reflecting the higher growth in more premium segments, as we move up to consumer price ladder. The continued brunt of inflation, which remained at double digits, approximately 11% for the quarter and partial Diageo normalization adversely impacted gross margins. Our marketing reinvestment rate during the quarter was 10% of net sales. As mentioned by Hina, we continue to drive customer-centric activation, strengthen our brand equity and premiumize the portfolio. EBITDA was INR 368 crores and EBITDA margin was 13.2%. Exceptional charge of INR 151 crores is on account of the supply agility program approved by the Board. Reported PAT for the quarter is at INR 111 crores, impacted by the supply agility onetime restructuring charge. As we look ahead, input commodity inflation is expected to remain high. Having said this, our sustained efforts on pricing and productivity are also yielding results and will reflect higher run rates in the subsequent quarters. On A&P, we have done targeted calibrations earlier in the April to September period with full normalization of Diageo supplies expected in Jan and March, we will invest in the brands to ramp up equity and redeem the lost ground. As always, our focus is on the circle of control rather than the circle of concern, and we continue to work towards expanding the pipeline of value chain productivity and revenue growth management initiatives, right? So I would like to hand over back to Hina for a very, very special update, which is hot off the press, and then we can open up for Q&A.

Yes. So hi, everyone. I just wanted to share -- this is right off the press as we speak. Very pleased to announce that our 100% subsidiary, Royal Challengers Bangalore, has acquired women's IPL team for Bangalore, just now. As the BCCI bid process closed over the last 2 hours. We are very delighted with this because, I mean, this is really taking forward the narrative of inclusion and diversity that we have led, particularly for our industry and in a broader context in India and globally. And it gives us -- it fits perfectly with our purpose of celebration. Cricket is big in this country for having this additional platform of women's IPL, fits hand in gloves our purpose and value. So delighted with that. With this, Pradeep and I would be happy to answer all your questions.

[Operator Instructions] The first question is from the line of Jaykumar Doshi from Kotak.

A couple of bookkeeping questions. The first one, when I look at the bridge between INR 470 crores of reported -- INR 490 crores reported EBITDA last year and INR 420 crores rebased EBITDA, the impact is INR 70 crores. So our understanding at that point of time was that the EBITDA impact or EBITDA of the divested portfolio as slump sale as well as franchising portfolio of INR 195 crores ballpark in FY '22. And post this transaction, you were expecting certain royalty income for net impact of the business that was sold or franchise would have been somewhere in the range of INR 160 crores, INR 170 crores. And over and above that, what I understand is the operating leverage impact that you're calling out is another INR 100 crores. Is it right to understand that if I look at your FY '22 EBITDA, the impact of the portfolio that has now been divested, I mean your EBITDA is going to be a fuller level somewhere in the range of INR 250 crores to INR 270 crores? Or if you can tell me what the rebased number for FY '20 full year was stand-alone, the equivalent of INR 240 crores at a full year level?

Okay, Jay. So let me take this. That's why I did kind of want to cover this in my opening comments as well, right? We've always consistently said that there are going to be 2 comments. There are going to be 2 impacts, 2 impacts, right? One is the EBITDA of the divested business that it makes after loading of overheads, right? I mean it's a very, very convenient living room view, right, that the marginal contribution can be taken as the EBITDA of the business. That's not right, right? I mean to run a sustained portfolio and a business even of INR 1,500 crores, you require corporate functions, right? So therefore, those corporate functions on a fully loaded basis is the INR 42 crores that you are seeing, right? And then the second thing we've always said is that those central corporate functions obviously don't go with it, right? And very loosely, I have to take the joke of my own salary. My own salary doesn't come down, right? Once I divest the portfolio, right? So there is a deleverage on account of that, which we have consistently maintained. We will take about short anything from 4 to 6 quarters through a combination of growth and obviously our continued discipline on discretionary overhead. I think we've established a fairly good track record over the last 4 to 5 years of maintaining a fairly disciplined organization on discretionary overhead, right? So that's the way one will really have to look at it, right? Yes. So I don't know whether that answers or not, right? So basically, what I'm saying is what you see the INR 42 crores in the quarter, that's the core fully loaded basis, EBITDA that is losing. Rest is timing, we will recoup it over the next 4 to 5 quarters as we grow the business back to the origin. Does that answer, Jay?

Understood. Got it. And it sounds we didn't anticipate or at least I didn't anticipate that I didn't anticipate INR 110 crores, INR 112 crores kind of annual de-operating leverage impact. So my understanding of the underlying EBITDA was higher than what the reported numbers are.

No, absolutely, right? And since you raised this, I would want to clarify that we have been very, very clear in articulating that there will not be any mathematical pickup of the margin, right? But if you look at the numbers, there is a mathematical pickup, purely due to the dilutive part of the portfolio going away, right? So if you combine the 2 impacts, the net impact on the EBITDA margin is roughly about 40 to 60 basis points, which is playing out whether you look at the quarter numbers or whether you look at the 9 months number, right? So I just wanted to kind of balance that picture also.

Understood. Second question is can you explain a little bit more about this program, supply chain asset program that you've initiated? And what will that look on INR 500 crores, 60% cash impact, it's like INR 300 crores of cash costs. So what is the nature of this cost? Is it entirely going to be severance? Is it going to be INR 300 crores of severance that you will have to pay in the next maybe 3 to 5 years?

Yes. So Jay, again, by and large, we have a very, very detailed descriptor in our financials that will give you a good sense, but we just wanted to share the highlights, right? And again, we are being consistent with what we have communicated to you, right, over the last 3, 4 quarters that this is something that we are working on. And we will want to accelerate now, right, towards our end-state manufacturing footprint and it is becoming extremely difficult to kind of do them on a piece-by-piece basis, right? So therefore, we did want to announced this multiyear program. And yes, I mean, you can make reasonable guesses on where the costs would be, right? The costs are largely on account of severances and on account of the write-down of the asset value of the asset set that we'll probably close towards our progress to the end state footprint.

Understood. Lastly, could you comment on the inflationary trends in case of ENA and glass bottle? And what is your outlook on the gross margin front? Where does it go from the current levels over the next 1 or 2 quarters?

Yes. So Jay, look, I mean, I think Hina has also covered it in the press release itself. The RMPM still continue to remain inflationary, though just to balance what I would want to say certain smaller mix elements have started coming down also, right? Paper has started coming down. PET has started coming down. But these were not the big drivers of our COGS portfolio, right? ENA is kind of flattish, I would say, right? But glass continues to be inflationary, largely driven by the natural gas inflation, et cetera, et cetera, right? And the capacity is completely kind of choked, right? I mean there is -- it's pretty much a [indiscernible] market right now, right? So that -- but having said that, as we have mentioned, all the work that we have done in ramping up our productivity run rate and all the efforts -- and all the efforts of the last 2, 3 quarters, et cetera, the higher pricing run rates and the higher productivity run rate will also start reflecting in the quarter. So therefore, net-net, to sum it up, we believe, even if you look at the gross margins of the rebased portfolio that you have mentioned we are pretty similar to the last quarter, right, on a sequential basis, right? So we would right now want to believe that it seems to be bottoming out, right? And as our pricing and productivity kind of run rates ramp up, right, hopefully we can reverse the trend from next quarter onwards.

[Operator Instructions] The next question is from the line of Abneesh Roy from Nuvama Institutional Equities.

And congrats on winning the women's IPL team for Bangalore. That was my first question. So what could be the medium long-term impact of this on your brands and revenue? It's a very interesting development. But the fact is that the rights have come obviously quite expensive. And I see that BCCI has received more money than what they received for the men's team in the first year. So obviously, a lot of time has gone, but RCD staying around INR 900 crores for this. So what would be the revenue and the brand impact long term? And if near term, how do you see in terms of the impact on profitability because this is something which is currently going to be in the nascent stage?

Yes. So Abneesh, thanks for this. So look, on profitability, right, I mean, is a bit of a portfolio game. Yes, this is a long-term bet, right? I mean if I go back to the men's IPL also since we have that history, and we have seen it organically play out over the last 15 to 17 years now. It did not make money for the first 10 years, right? But the good thing about this investment is and all of you are aware, it kind of timed perfectly with the new cycle of the men's IPL and the new media auction cycles of the men's IPL, right? So we are fairly buoyant, right, that is going to provide a kicker into the men's IPL profitability. And a part of that will be consumed by the women. But longer term, genuinely, right, from where the women's IPL cricket penetration, viewership penetration stands today, it can only grow by leaps and bounds, right? And therefore, it's a long-term jewel that we are picking up in our portfolio. And obviously, the 3 or 4 reasons that Hina mentioned at the outset, right, that kind of provides a kicker to our core alcohol businesses. Hina, do you want to add anything?

Yes, I would just add that actually, we have taken a very conservative view over the next few years of what women's IPL could do. And even there, the business case made absolute sense. So we have gone through a proper due diligence process with the Board duly, and we believe the business case is very robust for it. And like I said, Abneesh, I think the impact -- I mean this is right up where Diageo focus on value stands, right? So I think our focus on inclusion and diversity, we have stood gender, cricket in the past, and this is taking that narrative forward. So I would say it's a very strong affirmation of what our business stands for. And we believe that this will only strengthen our overall equity as our business being a strong revenue case over the next few years.

My second and last question is on the premiumization and the packaging. So in premiumization, we have delivered a good, consistent growth over the past few quarters. Could you be a bit worried because of the start-up job losses, IT net addition has been at a multi-month low? Would you be worried on that in terms of the outlook, not from a Q3 or Q4 and being more on the FY '24? And on the packaging bit, in terms of the innovation and cost savings which you are driving, next few years, could you talk about that, what exactly you'll be doing? And how much could the potential savings there?

So Abneesh, to answer your question first, I mean, we have seen this in India and globally actually. The premiumization story has remained quite strong. If you look at mid- to upper segments, as I said in my opening script. Thus basically, we don't see a slowdown there, right? We are seeing robust growth, and we expect that premiumization trends to continue. I mean in a sense, because we are not a daily frequency purchase items, right? And people only purchase a bottle every month or 2 or 3 months, right? We are not really comparable with the grocery items and the regular consumer FMCG. So our story doesn't get as impacted by inflation as the daily consumables do, right? So we are not seeing a slowdown. Actually, the only little bit of slowdown that we see is towards the lower end of Prestige. And it is difficult to say conclusively whether that is there to last. I think there is some -- there might be some slowdown on upgrades from country liquor to popular business, which is the key source of growth for that segment. But difficult to say, so we will continue to watch that segment over the next few quarters. But beyond that, I think we see the premiumization story and the growth quite robust. And we see that in global trends as well. Even pessimistic markets like the U.K. which is currently the more specialistic market on consumer sentiment, we are not experiencing a slowdown in alcohol sales and the premiumization. So I think we are quite confident that the fundamental growth trend will continue.

Right. And on the packaging bit -- packaging cost to that?

I mean, on packaging, look, I mean you are probably referring to the removal of IPCs , which we have started doing, right? So that was definitely both a sustainability and cost saving initiatives, of course, I mean report savings with it. So we have started that. I mean I will talk about our innovation as we go along. I can't really talk about it in advance. But there's a number of innovations that we are looking at, which are both to keep our growth momentum in Prestige and above. And also accelerate our sustainability journey because that's also a very critical pillar of our strategy. And whether it's alternate format or whether it is more innovative packaging, we are working on that. The technical team is working on that, and we will be announcing these at the appropriate time.

[Operator Instructions] The next question is from the line of Manoj Menon from ICICI Securities.

Just allow me one to follow up on the question on the profitability of the divested portfolio because that is one of the questions to many investors have been asking us since yesterday. If I look at the 9 months profit, right? So it's 110 plus 80. Am I supposed to add these to 190 divided by 983, which gives me a mathematical outcome of 19.2% EBITDA margin. Because cost is cost, right, whether it is corporate costs or the other variable costs, et cetera. To begin with, is that the right way to look at it that the [indiscernible] portfolio actually had a 19% EBITDA margin, cash, noncash profitability included.

So Manoj, that's not the right way to look at it, right? And that's why we have consciously kind of split the numbers, right? And we have tied in with the consistent narrative that we have shared over the last 7, 8 months ever since we have announced the deal, right? So the 110 is with the corporate overheads that portfolio was absorbing, right? And even after we have kind of sold that portfolio to Inbrew, et cetera, they have also had to set up the corporate organization, right? So that's the broad point that I made, right? And to run our INR 1,500 crore business, right, anyone will need a reasonable size corporate organization. Now we can dispute, we can debate whether it should be INR 28 crore per quarter organization or it should be INR 20 crore or it should be INR 35 crores, right? But the fact is that you need central support corporate organization functions to run that machinery, right? So that's the rebate. But the second thing is we've always said that, look, when this happens, there will be an operating deleverage, which we will recoup. As our experience in other parts of the globe, when we have divested the tail end of our portfolio, et cetera, where we do not have a longer-term right to succeed, we believe that we will be -- we will be able to accelerate on our P&A growth, et cetera, to be able to recoup this over the 4 to 6 quarter, right? So Manoj, that's pretty much the story. Consistent with what we have said from me onwards. Now that the first quarter has come in, I am equally transparently sharing the number this year.

Understood. The only follow-up, which comes here and I'll take it offline is that this INR 80 crore calculation for 9 months, is it volume indexed or volume linked. I mean that probably that's the reason it's a higher number than what many of us thought?

No, it's -- okay. I mean the way we allocate corporate overhead is great percentage, right? All the direct overheads, et cetera, has anyway gone with right? So the people who are dedicatedly working for their portfolio, the plant, for example, did one own manufacturing facility, all those have gone with the deals, right? So these are the big allocation percentage basis, right? So if our full corporate organization has fixed overheads of, let's say, 7% to 8% of NSV, we just load the 7% to 8% of NSV on all segments of the portfolio.

Very clear. So just quickly, the second question on -- one on the actual pricing, which you would have got, let's say, in 9 months this fiscal with geography, some granularity if you can? And one theoretical question I had is on, let's say, initiatives like mono carton removal, which I presume is an industry-wide practice, at least definitely in the top companies for sure. Can it redefine the industry profit pool higher? Or because you will do it on a like-for-like basis, it is likely to get expensed away?

So maybe I'll take the first question, right? Yes. So on the pricing, Manoj, I mean here are the broad headlines, right? So if you talk of the quarter, right, we've got good pricing, price increases from -- I mean, I mean, you just call out 4 states definitely, right? West Bengal, Delhi, Odisha, Karnataka, right? Those are the 4 states. And obviously, our long-pending application with CSG, we've also managed to get some price increases and in CMD, which is very, very difficult to get, but we have managed that also, right? And a couple of other small states, right? I know that Daman and Diu we got some pricing, et cetera, right? But overall, at a slightly elevated level, I do want to say that you look at the July, June performance year of Diageo, right? I mean that's the way I mean we -- Hina and I do have a schizophrenic life, right; April, March and July, June. But if you look at July, June, right, we are trending towards probably one of our best year on pricing, right? And broadly, we right now have a line of sight to about 2% of our NSV, and 2% pricing we've never got in the last 5 to 7 years, right? I would probably face the highest since the acquisition. Now having said that, it is still only a fraction of our inflation. Always focus on mix and product , right? So I hope that answers the pricing question. Now your second question, maybe I'll request Hina to build after what I have shared, which is, will it redefine the profit pools. The entire mono carton removal and packaging. See, Manoj, the conditions in which it is happening, right? Like I said, it was a sustainable initiative. In the current inflationary conditions where your costs are inflating by 11% and you are getting probably pricing in terms of percentage terms only at 20%, even at 2%, right, it's only about 20% of , et cetera. I think it's just kind of helping counter inflation to my mind, right? But once the inflation kind of normalizes a little bit and we see some panic coming back, et cetera, yes, absolutely, that kind of comes into the profit pool. And then it's up to each individual player to make the choices that they want to do with that profit. So I don't know whether Hina, you want to add something?

So I don't think there's anything to add. Absolutely in this current environment, I think it is just going towards offsetting the cost and of course, it is helping on sustainability. At the moment, sustainability is the bigger driver, right? So I think it's a wait and watch area. Very difficult to tell you whether this will change anything because the environment still looks quite tough.

Does that answer your question, Manoj?

Absolutely, loud and clear.

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

Just a small clarification on this EBITDA margin bit. Now the way I just wanted to clear -- the way you are -- we would be right in kind of looking at this, the 15% 9-month number, which I think from a full year basis should be probably a similar percentage on a full year basis, that is the level which you would look to reach back in the next 4 to 6 quarters on the back of scale benefits? That's the way it would be apt to look at, right?

Absolutely.

Absolutely, Avi. That's the right way because that is the middle block of the bridge is our retained portfolio, right? And that's what we need to focus on. That's what you guys need to look at. That's what we are maniacally focused on. And you're right, and yes, so...

Yes, Absolutely, that's right.

You've got it absolutely right.

That number, what would be on a full year because you don't have that benefit. That's what I would -- it's just to get us clear on what is the target that you internally are looking at, we are also aligned on that. Could you give us a sense of what that target is for FY '22, which went by when you do this adjustment?

No, FY '22 or FY '23. So Avi ...

So I mean, what the actual was. 16 is the 9-month number, is it the same for FY '22? And hence -- because the quarterly things remain volatile?

We haven't done that, Avi, right, because there was so much of work this time. We haven't yet done that, right? But when we come to you and maybe we will anyway we will have that number, right? So I mean the way I'm seeing it, they'll till we start lapping the add for the divestiture of the popular portfolio in September 30th, we will -- yes, we will pretty much continue with these bridges, right? So you'll get a sense, it will not dramatically differ, I would say.

Okay. Okay. And just clarifying on that, the inflation aspect that you are witnessing is just something that will probably be impacting the time it takes to achieve it, which might be -- this is why the 4- to 5-month range that you are rates that you're looking at, is that the right metric that you are also kind of believing it, right?

That's right. That's right. Absolutely, right.

Okay. Perfect. Just 2 clarifications, bookkeeping, if I may. But one is this women's IPL, congratulations on that, any sense on the likely near-term impact that I should build in? Would it be more like INR 900 divide by 10 plus some numbers, so we should be around INR 60 crores or so? Or any sense of that number or what your math is, a? And b, is there to be one-off or in the subsidiaries this time because of which the sales when I just controlled minus stand-alone, the sales comes out to be negative, those are the 2 clarifications.

Okay. So on the first one, right, I mean, obviously, the INR 900 crores will be amortized over a period of 10 years, right? Now we don't know how the rest of the IPL math will work, right? I mean we've done some modeling based on our learnings of having handled -- seeing the men's IPL progression. So we have to wait right, for -- I mean the good thing is the tournament will happen in March, right? So whatever local sponsorships, this and that et cetera, we will want to wait for 1 cycle to complete before we can provide, right? But as I mentioned at the outset to Abneesh's question, the good thing is that this bump of investment is happening in the year in which the men's IPL media auction cycle is changing, right? It's going. So therefore, that should provide a profitability kicker, right, which will, hopefully, and the impact of this, let's say, the INR 90 crore amortization of the INR 900 crores should be consumed by that sticker on the men's IPL profitability. So that's a very, very broad model in our mind right now. But obviously, we need to wait for things to emerge over the next 3 to 4 months.

Perfect. And the subsidiary bit, is there any one-off over there?

Subsidiary bit, I'm just kind of quickly jogging. No, there's nothing on the subsidiary base, right? I mean since there have a lot of action in this quarter, I'm assuming that you have read about our signing the definitive agreements on the sovereign distillery, right? That was a 12-year idle nonoperative assets that we finally managed to dispose, right? So we are happy with that, that will lighten the balance sheet. We haven't taken any charges on account of that, that was fully provided for over the last 7, 8 years, right? That's one. And the second thing is you would have seen our announcement on the follow-on funding of [indiscernible] beverages, right? So apart from that, nothing around the subsidiaries.

Okay. I wasn't able to understand why the subsidiary consolidated sales were lower than the standalone sales, that's what I was asking, but that's okay I can take it offline.

Maybe, Shweta will probably get back to you, right? I will also understand the query a little more.

[Operator Instructions] The next question is from the line of Percy Panthaki from IIFL.

So my question is on the P&A sales. So last quarter, we had done a 22%, 23% P&A sales, the 3-year CAGR since Y-o-Y growth can be disrupted by COVID, we are looking at 3-year figure. So that was around 14%. And in the con call last time around, you had mentioned there are pluses and minuses affecting this number. But overall, they cancel out each other, and there is no one-off at an overall level in this 22%, 23% kind of top line growth. Now this quarter, we have fallen to a 13 -- sorry, 12% kind of top line growth on P&A and the 3-year CAGR has decelerated from 14% to a 10% kind of a level. So just wanted to understand what really has changed for the demand outlook to suddenly change so materially in 1 quarter and if 10% is a 3-year CAGR now. And now this quarter has been absolutely normal in terms of sort of demand, is this an indicator of what the P&A portfolio can grow at in future?

Okay. Super, Percy, great question, and we were mentally prepared for this. So I'd just say that I don't think we ever said that the pluses and the minuses are canceling each other, right? I thought what we said was that this 23% is clearly not sustainable, right? So I tell you what is happening on a sequential basis, if you look at it, Delhi is the big joker in the pack, right? I mean for the last 4 quarters, up till July, September quarter from October, December of last year, Delhi was adding about 4 to 5 points of growth, right, to our national portfolio, right? And with any kind of reversing completely, that positive kicker has become a negative kicker, right? So Delhi was adding, I would say probably 3 to 4 points of growth, right? And it will still stabilize -- it will still stabilize further in terms of the negative direction over the next 2 quarters, right? So essentially, the swing is Delhi. Delhi, the plus 3%, 4% has become a negative 1%, 2% from October, December onwards right? So that's broadly the 5 to 6 points of pulling, right? That's one. Second thing is around the same time when the Delhi bump up was coming, West Bengal had also favorably changed after the industry has kind of continued 1 year advocacy with them, right? If you remember, post-COVID, they have taken some 45%, 50% consumer price increases, et cetera, et cetera, right? So that benefit now we have started lapping, right? It had opened sometime in October '21. So huge growth for 4 quarters, right? And therefore, now we have started lapping. So that's adds 2 to 3 percentage points, right? So that broadly explains the 23 coming down to the 12 , 13, right? I mean that's broadly the math, right? Now third thing, I mean, it's just that last year, right, with Delhi, Diageo being so salient there, et cetera, we had an absolute cracker of a quarter last year on Diageo sales. And this time, Diageo, as we have said, Hina mentioned in our opening comments, it's not fully normalized, right? So hopefully, it will fully normalize in January.

But a large part of has now come in towards the end.