Ladies and gentlemen, good day and welcome to the United Spirits Limited Q3 FY 2021 results conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Kripalu, Chief Executive Officer, and Mr. Pradeep Jain, Chief Financial Officer from United Spirits Limited. Thank you, and over to you. Thank you very much, and hello everyone, and a warm welcome to the FY 2021 Q3 results call. As we normally do, before we open up the lines for your questions, I wanted to share a perspective of the results that we announced last evening. Now, as we all know, India is experiencing a good sequential recovery, and it is reassuring to see progressive improvement in consumer spending, and particularly in premiumization. However, socializing, which is central to our category, remains somewhat subdued, with hardly any large events, which have been substituted in part by some smaller gatherings. Encouragingly, the quarter witnessed a fully operational off-trade channel and the phased reopening of the on-trade. The bars, the pubs, and the restaurants, where around 85% of them now are operational, albeit with low occupancy. Christmas and New Year celebrations were muted relative to what you normally see during that festive time in previous years. The resilience and buoyancy of home consumption, however, continues to be the positive of 2020. In the quarter, we have continued the rollout of our renovated bundles of No.1 whisky and Royal Challenge whisky, and I must say we are pleased with the response to both these bundles. Our teams continue to remain agile, working on multiple fronts to navigate the new normal. The Raising the Bar program has gained traction during the quarter as consumers started coming back slowly but steadily, encouraged by the safety protocols that have been created through this partnership. Operating cash flow remains strong, and our external debt stood below the INR 1,000 crore mark at the year-end or at the quarter-end, which you will understand, given the journey where we came from, is a huge, huge transformation as far as debt is concerned. And therefore, we are pleased that CRISIL has reaffirmed its AA+ Positive rating. Before I move on to the company's standalone performance, I also wanted to share that our IPL cricket franchise, RCB or Royal Challengers Bangalore, came fourth in the recently concluded league, and that, including the profits from that, reflects in the consolidated results of the quarter. Now, moving on to specific numbers for the standalone performance, as you know, our reported revenue declined 3.6%. Adjusting the effect of the route-to-market change in the state of Andhra Pradesh, our net sales were broadly flat, growing at 0.2%. The Prestige & Above segments declined 0.8%, driven by higher festive comparatives in the prior year. However, excluding Andhra Pradesh, P&A grew 4.5%. The Popular segment declined 6.7% in the third quarter. Increased consumer prices, particularly in some states which are important for our retained Popular business, were continued to be impacted because of this segment being particularly price-conscious. Management-led productivity interventions, coupled with benign commodities, led to a 24 basis points improvement in our gross margin to 44.6%, a reversal of the trend that we had seen in the previous many quarters, where you saw some level of challenge on gross margin. Our A&P reinvestment levels continued to be healthy, somewhere between 9% and 10%, and these helped to support the investment in the renovation of our two core brands. Reported EBITDA was sequentially higher and back to the mid-teens level at 15.4%, and PAT stood at INR 230 crore. We continued the journey of monetizing our non-core assets and reduction in debt levels as well as interest costs. As we look ahead, commodities remain broadly in check, at least for the next few months. However, the directional movement of the Ethanol Blending Programme could influence the prices in the coming quarter. So, net-net, in summary, I must say we are happy with where we are at the end of calendar 2020 versus whatever expectations we had a couple of quarters ago when the pandemic and the challenges of that pandemic were really looming large. In this quarter, we believe we have delivered quality performance with growth and Prestige & Above, and therefore continued premiumization, despite the reduced socializing that is happening, while improving margins backed by overall fiscal prudence, where we have brought down debt and also brought down debtors. As we stand here today, we now have a better understanding of this new environment and are hopefully progressing towards full normalcy. We look forward to the next few quarters with optimism. However, given the dynamic nature of this environment, we believe it is not prudent to provide any short-term guidance on numbers, and hence we have refrained from doing that. So, with that, I'm going to open it up for your questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead. Sir, thanks for the opportunity. I have two questions. First is on advertising. Recently, ASCI Advertising Standards Council of India, they have banned surrogate advertising for around 12 liquor companies. So, does this impact you directly? Second, how does this impact the sector in terms of the ad spend? Could it come down? But on the other hand, how do you drive demand in the discretionary category if you can't do too much of surrogate advertising? Thanks, Abneesh, for your question. So, there have been some challenges with ASCI notification, particularly in one or two states. Now, obviously, we are being cautious in trying to work through with ASCI what is appropriate and setting the right codes for the advertising. Okay? So, I don't believe that we are reaching a situation where there'll be a complete ban on our advertising. But what I do want to say is this: that even for us today, a lot of our ad spend is not above the line like it's classically true for FMCG companies. A lot of our so-called thematic ad spend is also in store and on-ground activation because we believe that our brands are also created in the bars, right, in the stores and through events. And that opportunity is not very often there in the FMCG sector. So, we have always treated that as a strategic brand building and equity building opportunity. Push comes to shove, if we have to tweak the ratio of that spend, we will do it. But I don't think, I think we need to be cautious as an industry. We should not overstep what are the right rules and regulations. And I think in this competitive spirit, people tend to go a little bit over and do more. As a company, we normally have exercised a lot of self-restraint because we are cognizant of this, and we believe we need to play a leadership role to make sure that freedom is not lost, the freedom that we enjoy. So, that's really my answer to your question. Sir, one follow-up on the advertisement. So, in an IPL quarter, I was surprised the ad spend was down 6%. What was the reason for that? Down in the sense that, you see, I think you have to look at what was the, I mean, we spent, I think, it was 9.4% A&P in the quarter. Okay? Now, it's a matter of judgment whether the previous year's base was higher or this year's spend is a little lower. I think the most important thing is that we spent quite aggressively through IPL. 9.4% spend, right, on our total business, right, is a significantly higher spend when you look at it as part of our P&A portfolio, right? And that reflects a very, very healthy spend in absolute. So, I think when we built our plan, we aimed to fully fund and fully support all the news that we had behind our brands, particularly the new news, right? And we have done that. Sir, my second and last question is on Uttar Pradesh. That's a key state. Now, a regulator has said that you need a license if liquor is beyond a certain limit. So, does this impact because this could be just for absolute top and very minuscule because of the quantum they have certified? But if that is the case, why is the regulator doing this kind of action? Because this, again, goes, brings the sector back one step forward, two steps backward in terms of more regulations, more issues. So, I have not sensed that this is going to impact the business in any material way. Right now, regulation does tend to sometimes be two steps forward, one step back. UP has taken, in fact, five steps forward in the last three, four years, by the way. So, it has been one of the most progressive states on regulation. And we are on the anvil of hopefully a big breakthrough coming in Delhi. And there's a public notice to that effect where Delhi is bringing down the legal drinking age. They are reducing the number of government stores and increasing the number of private stores, right, and simplifying the rates and the process for label registrations and so on. Now, if that happens, that's a big bonanza. So, this is part and parcel of this regulatory environment, Abneesh. Okay, sir. Thanks a lot, and all the best. Thanks. Thank you. Thank you. Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead. Yeah. Hi, Anand. My first question was on the fact that I have seen the third quarter, your net sales decline and even the P&A growth or flat trajectory looks similar to what you did in 2Q. So, I do take your point that the share of festivities is higher, but we've also seen a significant reopening of on-trade, though it's still way lower, but it's definitely better in 3Q than 2Q. So, is it slightly disappointing that your overall trajectory is almost similar between the two quarters, or is there something else in the 2Q numbers, maybe restocking or something like that, which kind of improved the numbers and there is actually a sequential improvement on the ground in terms of uptake that you would consider? So, first of all, the comparative for last year was it was one of the higher growth quarters, particularly for P&A. Okay? So, that's the fact that it's a somewhat higher comparative. The second is the fact that in this quarter, a significant part of our business is based on big weddings, big banquets, big celebrations, big parties, right? And that's in the base, right? So, what I would like to say is this: that I'm saying, given the context, right, and yes, on-trade is opening, but if you do go to the bars and restaurants, they're not packed the way they were because they have also had to enforce a lot of norms as far as social distancing, etc., etc., are concerned. Okay? So, if you look at all these things put together, I'm not disappointed, by the way, with where we've ended up. And what's happened, interestingly, is that Scotch has done well and lower Prestige has done well, right? So, I think there's some slipping of mid and upper Prestige to lower Prestige. But as far as consumers of Scotch are concerned, they're obviously more resilient, right? And we have seen the price-sensitive sectors of popular getting impacted, particularly in states like West Bengal, where there's been a significant increase in consumer price, all right? And that's affected our total numbers. So, I would say you read it in context, yeah? And even if you were to compare it with the previous quarter, I certainly don't think it's a step back in performance. At minimum, it's in line with what we did in the previous quarter. But the overall shape of our P&L, right, and the progress that we made on other aspects of our P&L, I think reflects the quarter-to-quarter recovery. Right. Thanks for that. And my second and last question, when this lockdown happened and this initial phase was there last six months, we saw spirits significantly outperforming beer as an industry, obviously a lot more in-home consumption. So, as the on-trade comes back, is it something that is possible? Are you seeing that there's a bit of a shift back in terms of the consumer choices here? And therefore, the recovery may not be that strong. And is that also making you slightly cautious in your commentary? Because your commentary does look a little cautious given that you're now kind of entering into a period where there's even more reopening likely to happen. No. So, listen, the natural thing is that there will be some people who will go back to beer, right? But all of them will go back. Some will stay with a higher share of spirit in their consumption basket. It's to be seen, right? And there have been one or two states where beer was tanking sharply. They've had some regulatory benefits, right? And that helped the beer sector recover in those specific states. So, I would say this: that you might not retain all the gains of the shift from beer to spirit. Normally, in life, you retain some part of it, right? What exactly that is, I don't know. Absolutely, I do not think socializing will happen in a congested way till I think people are comfortable about the vaccine and the fact that they don't have any risk. So, they will go very selectively to places that they go to. And we will see continued recovery slowly and steadily, but not a full recovery as far as socializing and bars and restaurants and big weddings and those things are concerned, all right? So, I'm just saying I feel very positive about the fact that one or two quarters ago, we were thinking about a doomsday scenario for our industry because socializing at the heart of whatever we do, right? I think we're a lot better than what that was. I think there will be steady progress in terms of recovery. Okay. Thanks, Anand. That's it from my side. All the best. Thank you. Thank you, Arnav. Thank you. Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Hi. Good afternoon, everyone. My first question is on your gross margin. On a sequential basis, your gross margins have seen an expansion of about 150 basis points, even adjusted for the inventory write-off in Q2. So, I just wanted to understand what is the reason behind this? Yeah. Do you take that question? Yeah, Arnav, I'll take that. Thanks. Yeah. So, sequential basis, I think there are a couple of reasons. The October, November, December quarter is also high on the premium end of the mix of the business. So, that is one reason why you see a sequential improvement. And the overall higher volume, right, which does provide a little bit of operating leverage in the quarter. And the last point being what Anand mentioned in his opening script, which is that commodities have continued to remain benign. So, that also provides a kicker. I think those are the three broad reasons that I can say that which are contributing. Has there been a sequential decline in the commodity prices? By and large, stable, I would say, right? There is no reduction. By and large, stable. Okay. And your first point on saying that October to December quarter has a higher component of premium, and that's the reason why gross margins are better. But I looked at your last four or five years. That has actually not played through. I mean, your Q3 gross margins are generally in line or sometimes even below Q2 gross margins. That is a historical trend. And on your second point on operating leverage, here, I'm looking at only the RMPM cost, only the COGS, and not any overheads which would get any operating leverage from higher margins. So, on the first point, there would be other drivers that change that overall from a mix perspective. The mix has always skewed favorably in the OND quarter versus the prior quarters, right? And your second point, yeah, I agree. I think that's a fair point you make. In the end, financials do not have an impact. Operating leverage should not have an impact, right? So, it's largely the mixed component that is driving the upside of the gross margin. Got you, sir. Secondly, just wanted to, now that it's been a few months, get some feedback from you on this government drive of allowing home delivery. At the time when this happened, we were all sort of quite positive in terms of this being a very sort of significant structural change, and now the distribution sort of bottlenecks will not matter as much. Although, of course, the delivery guys also have to source it from the retail point but they can obviously sort of travel two, three kilometers and get it versus a consumer doing that, so, I mean, now that it's been a few months and you've seen some data on the ground of how delivery is progressing via your trade partners and channel feedback, what is your sort of view now on this entire move? Do you see this still as a very material sort of development, or it's not been as great as it was earlier expected? So, I have no doubt in my mind that home delivery will be an advantage and will fuel category growth, right? If you go back to the evolution of e-commerce in India and home delivery in India or the Swiggy and the Zomato of the world, it took a long time for them to get to the point of inflection, right? And the market was seeded for many years. And people were still going to the Kirana [Balaji] shop or going to the restaurant to pick up whatever they wanted. And suddenly, something happens, and there's a tipping point, right? And things take off. So, I think you have to recognize that in any behavior change, there is a gestation period. Now, having said that, what's happening on home delivery in the alcohol sector? So, I would say it's a mixed bag, right? Some states are very, very modest, if at all, right? West Bengal continues to show traction. And what we are trying to do is, I tell you, as an industry, we need to make one state succeed and be material and have the data to then go and share with other states of what it can do to reducing congestion at stores, controlling who buys and the age of people who buy, yeah, building in convenience, right, for the shopper, and therefore, excise revenue enhancement. And therefore, we need to be able to demonstrate this. So, that's really what we're doing. So, while you are seeing some states announcing and then not showing much traction, I also do believe that I think it is exciting that it is, for instance, Maharashtra today, it is now legal. Earlier in Bombay, people delivered, but now it is legal to do it, right? I think that also reflects regulatory freedom in some ways. So, we have to believe that increasing accessibility is going to be a driver of category growth from 75,000-odd stores in the country where you can buy a drink or have a drink, right, versus INR 9 million for FMCG, right? You've got to believe that accessibility is a big barrier to growth, right? And you've got to stay committed and focused to go through this gestation period, right, and help it get to the tipping point. And I think that's what we are trying to do, right? So, we aren't giving up. Yes, there was an initial euphoria. And the euphoria was because in peacetime, this would never have happened, a regulatory unlock of this kind. So, the euphoria was because of the regulatory unlock. Now is the hard work and perspiration to make the model succeed and deliver, right? And that's what we're trying to do. Mr. Panthaki, do you have any more questions? Yeah, that's all from me, sir. Thank you. Thank you. The next question is from the line of Avi Mehta from Macquarie. Please go ahead. Hello. Yeah, Avi. Hi. Yeah. Hi, Anand. Thanks a lot for taking this question. Anand, I have two questions. One was essentially on the initial comments when you highlighted about the McDowell's No. 1 and the RC relaunch. Would you be able to give any sense on whether there's been a competitive response to it or how it has been in terms of market shares? Any detailed commentary on how it is trending across the markets would be useful. Yeah. So, I'll tell you. Sorry, you have a second question? You want to give that to me as well? Yeah. And the second question I wanted to understand was we do know about Delhi, but is there any other regulatory or pricing action that has happened during the quarter which you could kind of help us with? Yeah. So, on your second question, I mean, listen, the excise cycle is coming up now, right? There has been no other major one. The big change has happened in West Bengal, actually, where there's been significant retail taxation and pricing. The industry is under stress. Both P&A and Popular, right, is under stress. The overall industry actually has been negatively impacted and sharply negatively impacted. We are still talking to the excise commissioner and putting data together to make sure we can get that corrected. But I think that's the significant negative, if you like, that has happened in the last few months, right? Delhi is hopefully going to be a big positive because Delhi has been one of the most challenged states for companies like us to do business in, and it can turn around the fortunes of our business in Delhi, okay? Now, coming to the first point, I would say this: that number one is now largely national, okay? And RCE is there in about half the country. Now, number one is doing well consistently, and there were some places where we were not doing so well in the past, and those have bottomed out, and hopefully, we're on the way to recovery. But number one has actually had a discontinuous impact in many, many states in the country, right? The number one renovation. And if you do any store checks and so on, you will see what I'm talking about. The full impact in one of our biggest states, which is Maharashtra, is only going to be seen now because it's a state with a massive No. 1 volume base. And we've renovated just a few months ago and put it into the market. These things take a few months for it to respond. Obviously, the initial signs are all very, very positive. Number one is very strong. RCE, I would say, is doing well wherever the renovated mix has gone, okay? We have had challenges in some of the other states where the renovation has not yet gone in. Competitive response has been very aggressive, right? Both on pricing, right? There have been some pricing actions, right, which have happened earlier. On top of that, a lot of spend coming to fight against these two renovations that have gone in, and including some of the smaller local players who have done significant price corrections in states like West Bengal, right, which is also therefore impacting the full potential of these mixes. But net- net, I just want to say that as these roll out fully, I remain confident that both these are going to add to our overall competitive position. I'd like to believe that our overall competitive performance in the quarter has been decent, right? We don't have hard numbers, but has been decent. But time will tell. Okay. Perfect, Anand. Thanks a lot. Thank you. Thank you. The next question is from the line of Vishal Biraia from Aviva Insurance. Please go ahead. Hello. So. Hi. If you exclude AP, would we have lost market share still in the P&A segment across India for this quarter? No, I don't believe so. I don't believe so at all. That's why I just said in the previous response that I believe we've had a competitive performance. Yeah, I was saying if the lockdown has opened up and the markets have come back, I'd like to believe that we have performed competitively, yeah? I mean, time will tell when actual data comes out. But I'd like to believe that we have performed competitively. And I feel from the ground, actually gives me that sense, right, that in overall terms, we have performed competitively, right? Now, in AP, AP is a funny one because some people do business there, and some people don't do business there. And that could always steal a little bit away. But despite that, I think we performed competitively. Okay. And just one more on the BIO front. Does the sales momentum that we saw in the second quarter, does that continue in third quarter as well? Yes. BIO momentum has been strong. It continues to be strong. It was strong in the previous quarter as well in July, September. Continues to be strong in October, December. Part of it could be because of people are now getting more comfortable buying duty paid because they're not traveling overseas and buying duty-free, right? That could help. I also believe that people are, since they're consuming more at home, you can also afford to drink better because it's cheaper than drinking in a bar or a restaurant, right? And therefore, people might be upgrading the quality of what they're consuming. And when you invite people home, then you tend to serve better stuff. So, I think that's also helping. So, BIO is doing well. Johnnie Walker is doing very well as a brand. But the bottom part of BIO is actually doing remarkably well. Johnnie Walker Red Label, for instance, right? And that gives you a sense that there's a lot of upgrades happening. It's not only duty-free sales, but it's also upgrades from upper Prestige or BII Scotch going into the lower level of BIO. So, actually, that's been one of the highlights. It is doing really, really well and continues to do well. Fair enough. Thank you very much. Not at all. Thank you. Thank you. The next question is from the line of Aditya Soman from Goldman Sachs. Please go ahead. Hi. Good afternoon. Hi. One question from my end. I think with Scotch doing so well and upper Prestige as you indicated, is there a function of just duty-free substitution here? And what happens when some of this reverses? That's a million-dollar question, right? And how long will it take for people to travel as much as they were traveling earlier? And yeah, no, obviously, it will have some impact, right? If you are getting the substitution of people buying locally, then I think when they start traveling in, they will start buying stuff outside. However, I'd like to say this. You see, I can tell you, even for myself, by the way, right? I used to travel abroad quite frequently, and I used to buy whatever I wanted to buy from duty-free because there were enough trips to cover whatever my consumption was. Now, what's happened now, and it's happened to many other people like me, is you have now gotten into the habit of buying locally. Now when my travel starts again, I'll buy more of my regular BIO, like Johnnie Walker Black Label and so on here. I might, when I'm going on those rare trips abroad, I'll buy something that's more select, more premium, right? Because it's a rare opportunity going abroad, and there's more arbitrage, and the more premium scotches or malt or whatever, right? So I might still continue to fulfill my, a bulk of my basic needs from the local store. I think what's going to happen is it may not go back fully. First of all, it's going to take a long time for full commercial travel to come back to where it used to be. We've all seen what's happened to Boeing. It's going to take time for it to come back. I believe there will be some residual impact, and it could be a material residual impact that will stay with the business. No, I understand very clear. Just one follow-up there. I mean, is there any sense you get on how much that substitution effect has been given, I mean, from, say, sales of Johnnie Walker versus some of the other Scotch or locally bottled Scotch whisky? Yeah. It's very hard to estimate. So, like I said, there's an explosion, let's say, in Johnnie Walker Red Label, right? And you can explain part of it of substitution of duty-free sales, but not all of it, yeah? But it's very hard to do real math on this and give you a sharp view. Therefore, it's management judgment and that more than a number. But I think it is reasonably material. It has to be reasonably material in a segment like BIO. Understand very clear. Thanks, Anand. Thank you. Thank you. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead. Yeah. Hi, Anand. Two questions. Hi, Latika. Two questions from my side. The first is on the margin bit. I heard you talking about watching out for ENA on account of ethanol blending. Did you see any inflationary impact as you exited the quarter, which made you a little cautious to comment on this? And the second bit is on A&P spends. How should one think about it? Are we now more focused on driving top line, and does it mean that EBITDA margins should kind of be in this mid-teens range for some time? And the second question is, strategically, we have kind of struggled with more of mid and upper end of Prestige, but we have done very well on the Scotch side. Now, is it also a function of the fact that are your investments disproportionately more skewed towards these Scotch brands? And how does that influence the P&L margin for United Spirits? Because I think there will be a dynamic of royalty payout. So, if you could clarify on that? Thanks. Yeah, sure. So, first and foremost, there has been no hardening of ENA as we exited the quarter, the simple response to your question. For the moment, right, it's still benign. I think this is more you see, we have been caught by surprise sometimes about government announcement of a certain ethanol blending price. And then what happens is the price of ENA then kind of in sympathy goes and catches up with that ethanol blending price, okay? That's what ends up happening. So, I would say this is not meant to ring a cautious tune at all, right? But just a watchful tune to say that you could have funnies of this kind. But as of today, I wouldn't be overly concerned about the immediate future outlook, right, on ENA, certainly over the next few months. I mean, the movements will be nominal. As far as A&P is concerned, we absolutely want to invest in top line and invest to grow competitively, yeah? And now, typically, what happens is A&P spends tend to be the highest in this just concluded quarter, right, because of festive and everything else. And this was exacerbated to an extent because of IPL, right? And they're always a little lower as you start approaching the summer months. So, you will see sequential changes in A&P, but the annual number will be in line with strategy, or at least the rolling months will be in line with strategy, right? And as you can see, from 5% or something like that in Q1, we have successfully built it up, right? And I think we are encouraged by the fact that it's working. Now, as far as focus on strategy is concerned, yes, there is a limit on the margins that the USL books make, right, based on the trading agreement. Having said that, I want to say this. First of all, that it is not as if we are focusing less on mid-Prestige or upper Prestige. Our philosophy is to say that investment must follow opportunity and news, so we had news on Royal Challenge and McDowell's. So, we invested behind those. Money must follow news, right? The strategic priority includes mid-Prestige and upper Prestige, and mid-Prestige, in fact, is where Royal Challenge operates, okay, and you have to watch this space, so we are going to continue to invest there, so I think you should have no doubt in your mind that we are clearly upgrading from popular to lower Prestige to mid and upper. Once life becomes a bit more normal, that is how it will go. The crown on top is obviously Scotch, right? By definition, Scotch comes from Scotland. We can't make it here, right? That's where it is. I don't think you should have any doubts about the strategy and the focus, yeah? Yes. Vishal can give you more details, Latika, later on how the trading margin works versus the manufacturer's margin for Scotch whisky. That is particularly for BIO, yeah? We can have that conversation. Thanks, Anand. Yeah. And maybe, Anand, I'll just add on to that, right, which is the point that both of us made in the last quarter was that it does provide a huge repeat-per-case incrementality, right? 10% of $1,000 and 10% of $5,000. It provides a huge multiplier on the absolute margin that you make, even though percentage might remain the same. So, Latika, just need to bear that also in mind of what it does to our P&L. Thanks, Pradeep. Yeah. Thank you. The next question is from the line of Harit from Investec. Please go ahead. Harit, your line is in talk mode. Please go ahead with your question. Yeah. Hi, this is Harit from Investec. Just had one question. On the innovation and advertising pipeline, I just wanted to get your sense on, over the last one year, the focus has been, as you said, on the new, which is on McDowell's No. 1 and on Royal Challenge. If you could give some sense on whether the next three, four quarters or the next two to three quarters will also be centered around these as we keep kind of adding new markets to the launches or given that now everything is open and we can kind of come back to, say, more innovations or new product introductions. If you could just give a little bit of flavor on how things could move going forward. Sure. So, like I said, our investments follow news. So, for instance, within Scotch, our Hipster Pack continues to do remarkably well, right? And we've invested Hipster Pack digitally and in store, right? And then we've invested between number one and RC, like I said. Now, over the next few quarters, you have to really watch this space. But there will be activity that will touch other parts of our portfolio as well. And we will aim to resource those properly, right, when we do that. So, yes, absolutely. We are now not holding back on anything given the environment. As you said, I think the environment is open enough for it to receive innovation, renovation, new news, whatever. And that's how we are approaching it as well. Got it. Got it, Anand. Second question was on the competitive environment. So, obviously, in the initial phase of opening up, it seemed like we were in a much better position and probably even have continued to gain share or be competitive over the last few quarters. I just wanted to get your sense on the on-ground situation currently, not with the large organized companies, but with some of the more tactical regional guys. Are they back in terms of full throttle, etc.? So, everybody's back with full throttle, okay? I mean, it's a competitive environment, and everyone's back now. And I think everyone's worked through how to operate in this new world, okay? So, there is aggression from the smaller players and some of the larger Indian players as well, as you would expect. But I'm saying that's kind of, yeah, so it's back to normal. And any one-time advantages that we might have had are obviously not going to sustain, right? What will sustain is that our brands remain competitive, and the activities we run are competitive in the marketplace, right? And as of now, I'd like to believe that we continue to be competitive. Got it. That's it from me. Thanks. All the best. Thank you. Thank you. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Co. Please go ahead. Thanks, Anand sir, for the opportunity. Sir, firstly, what portion of our sales come from the job work partners? That means the bottling we are giving to other smaller players? You mean third-party bottling? Yes, third-party bottling, yes. I don't have an approximate number, but we've never shared that information, have we? I don't know. I don't think we've ever shared that information. But why is it an important question for you, if I may ask? Sir, I would like to, because other players who are giving themselves as a key supplier, we would like to evaluate what kind of market is being captured by them. And also, how are you encroaching the market share through this bottling? I mean, they are labeling your products. Their productions are being labeled under your products. So that was our understanding. Small players are setting up bottling for you. That was my question. Yeah. So, we have dedicated third parties. So, we have all kinds of dedicated third-party factories, okay? And increasingly, by the way, we are moving towards more and more dedicated third parties in terms of shifting our volume strategically and not having old legacy sites that are really costly to run, right? And believing that there is no competitive advantage in making it yourself, right? And you might as well move towards a lighter asset model over time by getting more and more third parties to make your product with all your quality standards and checks and balances in place. Absolutely. Absolutely. Absolutely. That's how we are moving. Yeah. Moving forward, so what is going to be that mix? Any trajectory you have set around that this will be the percentage today, x number, and we are targeting x plus something for, say, two to five years? Sir, I don't have a number for you. I'm sorry. We don't have a sharp and clear number, but you have seen that we are coming to a number of five. You are progressing towards that. Sorry. Okay. Sorry. Sorry. Please go ahead. Sorry, sir. You are progressing towards that direction, and that is a very cost-effective and asset-light model that you are pursuing. That is what your message is. Correct. That is the thinking. Sir, you have articulated this West Bengal issue time and again. Sir, what is structurally wrong with the West Bengal market, and what is your understanding, sir? What can happen going forward? No, West Bengal was otherwise a market doing very well, okay, but what's happened recently is that the excise changes, the new policies, have raised prices by almost 70% for rum, number one rum, which is the biggest seller there, as well as prestige whisky, right, so the price increases have been, well, if I can use the word, almost irrational, right, and consumers are not that inelastic, right. So people can't afford, and I'm sure many people who are consuming popular whisky or rum are buying country liquor again now because it has become prohibitively high. Now, we believe this cannot be a model to increase revenue for the state because the volumes will drop so sharply that actually revenue, in the first six months, it may be okay, but after that, you need volume growth to drive revenue growth, right, and this is not a sustainable model. Like I said earlier, we're watching this space, right? There has been a significant short-term impact on volumes of all the players, by the way, for the industry of spirits, right? At this time, what they've done is they've also lowered the price of beer because beer had tanked completely. Beer is showing recovery in West Bengal, and spirits is sharply down right now. Still, such time that we're able to work with the regulators to get this corrected. Right. Sir, and on the raw material front, you told that the ENA prices and all are benign, and even the ethanol pricing do affect the pricing for the shorter term. Sir, what has been? Sir, last year, I think so, ENA prices do shot up by 20%-25% from previous year level. So, are these ENA prices maintained at those levels, or what kind of availability is there? And even for the duty structure, sir, is it a viable option for imports, sir, going forward if there is a shortage of ENA? So, we've explained this already, actually, to say that it has been yes, there was a sharp increase in the previous year. It has been last few quarters have been relatively flattish. Combine that with our own management productivity initiatives, right? So, COGS has been a positive for us overall, right? And therefore, you can see the positive impact on gross margin. So, I mean, I really can't comment beyond that. Sir, quarter on quarter, last point. Quarter- on- quarter, can you give that graph trajectory whether ENA prices are flattish or downward? Last two quarters are flattish. I mean, you can reach out to Vishal if you like later or anything more. But we'll give you a sense of where the commodity is. I mean, it's a commodity market. So, we'll give you a sense. And then you have to add to that management productivity, which is what results in the overall COGS number then finally. Thank you, sir. Other raw material basket is more or less in similar trend? For now, it's okay. The only other big one is glass, and for now, it's okay, right? Correct. But on commodities, you never know. That's why a bit of caution. You never know on commodities. That's why. Yes. Okay? Yes, sir. Yes, sir. I will utilize it. This is the operator. Sorry to interrupt, Mr. Kapoor. May we request that you return to the question queue for follow-up questions as there are many participants waiting for their turn? Thank you. Thank you. Yeah. We'll move to the next question. The next question is from the line of Naman Satiya from Ambit Capital. Please go ahead. Hello? Mr. Satiya, your line is in talk mode. Please go ahead with your question. Hello? We can't hear. Naman Satiya, please unmute your line from your side. Your line is in talk mode. As there is no response from the current participant, we'll move to the next question. The next question is from the line of Samkit Shah, individual investor. Please go ahead. Mr. Shah, your line is in talk mode. Please go ahead with your question. Mr. Shah, please unmute your line from your side. As there is no response from the current participant, we'll move to the next question. The next question is from the line of Palak Shah from MLP. Please go ahead. Hi, sir. Thank you for taking my question. Just one very contradicting statement. While we're refraining from giving any guidance or any sort of prediction towards the Q4 numbers, but for the comments that you made that the market is open enough for all the renovation and innovation in the ensuing quarters. Just a point on this comment. Can you help me understand this differently? Sorry, you'll have to repeat. I just lost you completely in the middle. Okay. Can you hear me now? Hello? Sorry to interrupt you, Mr. Shah. Ladies and gentlemen, the line for Mr. Anand Kripalu has got disconnected. Please hold while we reconnect him. Thank you. Ladies and gentlemen, thank you for patiently waiting. The line for Mr. Anand Kripalu has got reconnected. Thank you. And over to you, sir. Yeah. Sorry about that. Sorry. Could you please repeat the question? Yes, sir. So my question was, while the initial opening comments and you personally mentioned not refraining from giving any guidance or indication towards the ensuing quarters, but one of the statements that you made during the call was that the market is open enough for all the innovation and renovation launches in the ensuing quarters. Just wanted to understand this disconnect. No, there's no disconnect. I'm saying one is we will continue to give inputs to the market as is appropriate, okay? But given that we aren't still sailing in calm waters, right? And for us, because socializing is so critical, right, unlike for other sectors, socializing, going out, weddings, banquet parties are so critical, I think it's difficult for us to forecast what the impact of that will be, right? And still, we are sailing in calm waters. I think we believe it would be unwise to give a guidance because you're just not sure. Got it. Got it. That's all. But we'll continue to do whatever input we need to provide to keep driving growth and driving the business. We're not holding back from that. Correct. Just one. This is the operator. Sorry to interrupt you, Mr. Shah. May we request that you return to the question queue for follow-up questions? Thank you. The next question is from the line of Chinmay Gandre from Bharti AXA Life Insurance. Please go ahead. Yeah, sir. Thank you for taking my question. Sir, how has your franchisee income moved on a YoY sequence? Because I believe that also had some impact on the gross margin in the previous Q1 and Q2. Yeah. Pradeep will help answer that. Could you, Pradeep? Yeah. Yeah. Chinmay, again, the situation remains exactly what we shared in the last quarter. Andhra business has impacted that leg of our that segment of our business. There is no material change from quarter two to quarter three. As we start lapping the Andhra changeover from the next quarter onward, numbers will start looking better. Yeah. So, just to clarify, is the impact will be completely out in Q4, right? To a large extent. Yeah. Okay. Thank you, sir. Thank you. The next question is from the line of Chirag Patel, individual investor. Please go ahead. Hello. Yeah. Sir, first of all, I appreciate your tenure at company. The initiatives you brought up is really we, as an investor, witnessing in terms of numbers. So, I have a question in relation to these initiatives which you've taken. Like post as you took over this management from old corporate, other than this cost restructuring, what other things you feel you should require to you if you have a time then you would like to do in that direction to improve further performance of our company? Like unnecessary non-core assets you hold and you try to improve the financial performance of company. But let's say if you get another term, then what other activities would you like to do? I think that's a very broad question. I think, honestly, we'll take this offline because that's a more strategic question about how to drive longer-term growth and what more we need to do beyond what we've done. So, if you don't mind, I'm going to request to reach out to Vishal, and we will share whatever we can share. But it's much more of a forward-looking question. Yeah, and therefore, there's only so much I can really share on that. Yeah. Okay. Thank you. Thank you. Thank you. Thank you. The next question is from the line of Susmit Patodia from Motilal Oswal AMC. Please go ahead. Hello. Yeah. Hi. I'm Shah. I'm wishing you a very happy New Year. Hi. You too. So. Thank you. My first question is, is this whole route-to-market changes journey complete with AP, or you think there could be more on the anvil? It's complete in the sense that our business is almost completely shut there, right? So, there's not much more. Not other states? I mean, are there any other states that you think? Oh, other states? Well, I mean, fingers crossed, no. And what I've seen in this industry is one door shuts and another door will open. And this door will again open later as well, as we've seen. As I've spoken earlier, Uttarakhand, same thing happened. Chhattisgarh, same thing happened. Now they're fully open, and we're doing good business over there. I believe Delhi could be a big unlock. We are on the anvil of Delhi opening up, right? And that could be a significant positive. And AP is shut for now, but it'll not be shut forever. And we're going to keep doing everything we can as a business and an industry of compliance players to try and fight back. But it is what it is, unfortunately. Okay. Got that. And secondly, this other industry body, CIABC, they put out very interesting news articles on how tax increase is leading to much lower consumption and hence excise collection. Is this work finding resonance with other states apart from Delhi? You see, it's like this that people see their revenues. The one target the excise commissioners have is their excise revenue. And the moment they increase taxes, they know that you have a short-term increase in tax revenues, and after that, it starts flattening. And the only way is getting healthy volume growth, which gives you year-on-year excise increases. But the reality is many of them have a two or a three-year view, which is the view of a tenure rather than a long-term view. And everyone's trying to maximize what they can in the short term. Now, we keep going back and talking to them. And as you've seen already, I mean, we had a reversal in Delhi. We had a reversal in Odisha, but we didn't have a reversal in West Bengal. In fact, West Bengal went up further, okay? Right? It just went up further. So, we'll have to just wait until we have enough data to go back because finally, we are on the same side that they also want excise revenue increase, right? Otherwise, they're not going to be able to fund everything else they need. Got it. Yeah. And lastly, on the RCB profitability that you had mentioned. So, if we see the difference is about 50 crore of profit, this would not be the optimal profitability of RCB, right? Because you didn't have ticket sales. And is that fair to assume that normally your profitability is much better? Yeah. That's fair to assume. I'm saying ballpark, you have to say that every season you'll make about INR 100 crore profit roughly, right? And it'll be more if you do well on the league table. It'll be more if you get ticket sales and stuff like that. Yeah. Got it. All right. Thank you, Mr. Anand. And best of luck for your future. Thank you. Thank you very much. Thank you very much. All right. I think that it's 1:00 PM now. So, operator, I'll just hand it back to you and just want to thank everyone for their time and engaging with us on this call. Thank you. Thank you all. Thank you. Ladies and gentlemen, on behalf of United Spirits Limited, that concludes this conference. Thank you for joining us, and you may now disconnect the line.