Ladies and gentlemen, good day, and welcome to the Q3 FY 2022 earnings conference call of United Spirits Limited. 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 telephone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Hina Nagarajan, Managing Director and Chief Executive Officer, and Mr. Pradeep Jain, Chief Financial Officer from United Spirits Limited. Thank you, and over to you. Thank you, Jacob. Hi, good afternoon, everyone, and thank you for joining us on the Q3 call today. Hope all of you are safe and wishing you and your loved ones a healthy and happy 2022. I'm joined by Richa Periwal, our Head of Investor Relations, and Pradeep Jain, our CFO. As is customary, let me share some headlines on our overall business context and performance in the quarter just gone by before opening it up to Q&A. Business operations remained normal through a large part of the quarter. Our country's vaccination program has picked up pace. Infection rates were largely under control. Consumer confidence was inching up, and the economy was on a brief sense of normalcy during the quarter, also evidenced by the increasing footfalls in public places. Improved mobility combined with festive holiday season further led to demand buoyancy. Supply side remained resilient even though input costs continued to exert pressure. Global supply chains remained disrupted with shortage of containers, highest shipping rates ever witnessed and port congestion. Heavy restrictions were, however, back towards the last week of December as the COVID case count in the country mounted, driven by the latest variant. In this context, we delivered a robust performance in the quarter. The quarter witnessed the ramp-up of the innovation renovation interventions made earlier in the year. The second limited edition pack of Epitome Reserve, a new peated Indian single malt, which is only 3,600 bottles, was also launched in Goa. Black Dog Whisky in its new avatar is now available in 90% offline salience markets. Our innovation of Royal Challenge American Pride was launched in Goa. With this, it has now been launched in three states following Assam and Madhya Pradesh. Renovated consumer bundle on Signature Whisky has now reached more than 70% of the national market. The use of recycled glass and paper cartons for the packaging has landed very well with consumers and drives differentiation. Our pocket scotch format innovation Mixr was extended to J&B Whisky in July and Smirnoff Vodka in September 2021. The same is currently ramping up on distribution as per plan. As we communicated earlier, both Signature and Royal Challenge American Pride interventions are in pursuit of strengthening our presence in the upper prestige segment and premiumizing the portfolio. Couple of other callouts for the quarter. We launched our digital platform, in.thebar.com. This is a place where our consumers can engage with our beautiful brand home, explore the latest lifestyle trends, find out food pairings with our liquids, the best gifting possibilities, and even make their own cocktails based on the occasion they are looking to celebrate. Johnnie Walker Revive the Night campaign reached 100 million plus consumers with Revive the Night messaging where the focus is to re-energize socializing at our favorite food and beverage outlets. On the policy front, both Delhi and West Bengal operationalized their new policies during the quarter. Additionally, we also saw the positive trend of state tax rationalization on the DIO segment continue during the quarter. Both Maharashtra and West Bengal made changes on this front. We've made progress in helping create a more sustainable world under Society 2030 Spirit of Progress strategy. We continue to reduce our greenhouse gas emissions from our own operations and enhance our water use efficiency. Our plastic waste collection drive and water replenishment initiatives are making good progress. We continue to run the Anti Drink Drive program and impart training to curb underage drinking. Let me now call out the highlights of the financial results announced on 25th evening. Our reported revenue increased 15.9% with underlying growth at 14.3%. The P&A segment grew 20% while there was a marginal 1.7% decline in Popular. I'm very happy to share that this is our highest ever NSV performance in a quarter. Off-trade continued its resilient performance. Continued recovery in on-premise footfalls, caveating here that the third wave now and the positivity rates going up still in many states will impact this in the current quarter. Healthy price mix continues to be a tailwind driven by the top end of the P&A segment growing high double digits. Inflation has been on an increasing trend during the quarter. Continued management focus on favorable product mix and a culture of everyday efficiency partially offset the commodity inflation. Underlying growth margin was 44.3%, down 31 basis points versus prior year same quarter. Our reported marketing investment was 10.3%, up 125 basis points. We stepped up investment to strengthen brand equity, premiumize our portfolio, and expand our digital capabilities. Underlying EBITDA margin stands at 17% for the quarter, up 159 basis points, primarily driven by operating leverage. With the full impact of the accelerated debt retirement since April 2020 and the lower interest rates, the underlying interest cost in the quarter is 56.8% lower than prior year. USL legal entity reached a debt-free status on December 31 2021. Fitch still upgraded its rating on USL's long-term bank facility to AAA/stable, while reaffirming its A1+ rating on the short-term bank facility. Profit after tax was at INR 291 crore in the quarter, a 26.7% increase versus prior year. In conclusion, I would like to reemphasize the following. We are happy with the current momentum on the demand front and are focusing on sustaining the same. As I mentioned also in my press release, external operating environment will continue to remain challenging in the near term. We are conscious of the rising inflation headwinds and are therefore working continuously to expand the pipeline of value chain productivity and revenue management initiatives. Our portfolio with the focus on innovation and renovation is well-positioned to capitalize on the rapidly growing premiumization in the category, and we remain committed to sustainable, profitable growth and long-term value to all our stakeholders. Last but not the least, we are currently in the final phase of the strategic review of our popular brands that was announced in the January-March 2021 quarter. As you would have seen, we have extended it by a quarter to land a meaningful outcome. With that, we can now open the line for question -and -answer. 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 your touchtone 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'll wait for a moment while the question queue assembles. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants, please limit your questions to two per participant. The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead. Yeah, thanks for the opportunity. My first question is, one of your key competitors, Pernod, is launching branded retail outlets. So if you could tell us, is there a good potential on this and what would be your thought process? In the markets where you have handed leadership earlier in Africa or say in any other market, does it make a lot of sense to have your own branded retail outlets? Hi, Abneesh, how are you? Thanks for your question. I mean, yes, we've, you know, read that Pernod is looking at launching these branded outlets. I mean, I think the situation differs from market to market. There were some countries in Africa where it made sense to do that, both for reach and, visibility reasons. You know, in some markets, it just does not make any commercial sense. This is an area which we will review and wait and watch. For the moment we are, you know, focused on the strategy that I've outlined a few, months ago. You know, focusing on premiumization, our, you know, products, broad-based, participation in the prestige segment and really accelerating our luxury and premium portfolio. Sure. One follow-up on this. inthebar.com, could there be a home delivery opportunity longer term because you exited HipBar and you are currently focusing more on customer engagement and the branding aspect. Longer term, could this also be a home delivery platform on your own? Absolutely, Abneesh. I mean, we are very excited about the opportunity of home delivery, which has unlocked during COVID. Eventually, yes. I mean, you know, depending on the regulatory environment, how the model grows, there could definitely be an integration in this for home delivery. Sure. Last question. Ad spends as a percentage of sales in the earlier quarters was more like 6%-9%, and you did say the reason behind 10.3%. Is this a one-off? Because now the cost inflation is a key concern for every consumer company. Would you like to make it lower in the near term because of the cost inflation? I mean, Abneesh, we have, you know, increased our A&P spends in the quarter gone by to support the renovations and innovations that I've talked about, and also because on-trade was opening up and, you know, we had elevated spend in the previous quarter and we brought it back as on-trade came back to normalcy as well as peak season, right? I mean, the last quarter was our peak season. On a yearly basis, I would say that we, you know, look at a full year and we have, you know, talked about 8%-9% investment for the full year. This I consider to be a very good investment and, not a bad cost. You know, we would like to continue to invest in our brands and support our growth. You know, should we reach a stage where there's extraordinary, you know, change in environment, then of course, we will review every line of the P&L. At the moment, we see, you know, our plans are focusing on investment on our brands. Sure. That is very helpful. Thanks. That's all from my side. Thank you. Thank you, Abneesh. Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead. Yeah. Hi, Hina and team. My first question was, if I look at the prestige and above growth of 20%, 12% of that is realization growth because the volumes have grown at 8%. This is the second consecutive quarter you've seen very high realization growth. If it is largely mix driven, is it something that can sustain this kind of a YOY increase in realization? Do you worry that, you know, once the duty-free channel opens up maybe somewhere six-eight months down the line, there could be a significant change because people go back to buying the scotch in the duty-free channels. Thanks very much for your question. Look, I mean, premiumization, renewed strategic focus on the P&A category. Of course, a favorable regulatory environment which has unfolded over the, you know, last few quarters. You know, the muted global travel have all supported this strong, you know, price mix and growth. I mean, historically, we have seen, you know, about 4%-5% price mix, and now we are seeing about 10%-12%. Our expectation is that this will settle over the next few quarters at maybe, somewhere in the middle, right? Maybe 7%-8%. But with our premiumization strategy, we believe that is a sustainable price mix to deliver. Understood. Thanks. My second question was on your comment on input cost inflation. If you could just help us understand incrementally as you move into March quarter versus December quarter, what is the level of additional inflation across ENA and glass? Would you require significant efforts to mitigate it or it is more in a gradual curve and therefore, with productivity and things like that, you could be able to offset it like you've done in the last couple of quarters? Yeah. Arnab, I'll take that. Look, as Hina mentioned in our, you know, opening comments, inflation is on a rise, and pretty much the two commodities that you have mentioned, you know, we are clearly seeing an upward trend in that, right? And like we have always said, we are trying to do what is, you know, in our control, which is accelerate our productivity pipeline. We are trying to draw plans to increase that realization over the coming quarters. But inflation definitely on glass and ENA is inching up, right? We are making our best efforts to mitigate the same. Arnab, I would also add that we are making a very strong representation to state governments through the industry associations you know highlighting that this is a very you know inflationary environment and a unique year and therefore you know encouraging them to give us pricing flexibility just like you know other industries have and even the price controlled drug industry has. Our representation is ongoing and you know we're going to continue that through this new excise period that is coming over the next few months. That's right. The excise cycle is on, pretty much on from now till about mid-May. We are working with the association for the same. Pradeep, any quantification on the overall RM index level, what would be the inflation that you're incrementally seeing sequentially? Yeah. Arnab, our sense is that the total inflation in the coming quarters could range from about 4%-5% on the total portfolio. I mean, these are very broad ballpark numbers I'm giving, right? Okay, thanks. That's very helpful. That's it from my side. All the best. Thank you, Arnab. Thanks, Arnab. Thank you. The next question is on the line of Manoj Menon from ICICI Securities. Please go ahead. Hi, team. One of my questions was actually just taking off from you know what, Arnab's clarification and your responses. It was in fact one of the things I wanted to discuss. When I look at the policy changes you know implemented by many state governments over the last 12-24 months, it's extremely encouraging. Something which has never happened you know in a cluster it seems to be happening. There's something definitely changing top-down. Just wanted to check, push the envelope a little more you know on that. Can we assume that the you know willingness to you know change the historical templates and grant price increases and treat you know the alcohol industry different versus what it has you know? What's sort of that sense on the pricing component in the policy front on those states which has been adamant in the past? Manoj, hi. I think there are two different areas. You know, while we are seeing the overall policy changes being positive on the route to market side and, you know, duties on BIO particularly, and that is, I mean, basically to bring down prices comparatively with, you know, neighboring states, et cetera. I think pricing remains, you know, a discussion with every individual state. You know, our hope is actually that the government will understand that, you know, it is a very extraordinary year in terms of inflation. You know, we continue to advocate and represent on pricing as the association. Our intent is to work with them on a win-win where, you know, we are able to, balance the pricing and the volumes and their revenue for them, right? I mean, you know, there has been some positive, you know, price, development. In Assam, for instance, we got an out of turn pricing freeze. This is an ongoing conversation with, states, and I'm afraid I can't generalize one way or the other. Fair enough. I get it, actually. I get it completely. Just quickly, you know, Hina, two things actually. One top-down and one bottom-up, you know, if I may. Now, you know, after about nine months back in India since April last year, just your perspective that you have, you would have had certain expectations on, you know, the India which you left and then when you, when you're back. From a United Spirits lens, you know, if I take it, let's say from a functional lens, right? One is policy, sales, marketing, HR, you know, finance, supply chain. You know, which are the areas which surprised you positively, and which are the areas which, let's say, you know, there's more work to do? The last question, that's one. The second bottom up is, I know it's too early. It's just under a month, you know, after the implementation of the Maharashtra import, you know, duty reduction, et cetera here. You know, what are the price elasticity benefits early signs telling you basically what the consumer is telling you through his, you know, let's say, behavior? Thank you. Right. I mean, I would say that, overall, I think my surprises have been pretty positive in the sense that, you know, we worked on this strategy and announced it only very recently. I think the premiumization piece has surprised me quite positively. I mean, you know, just the consumer demand momentum, right? The market potential that, you know, is there for our alcohol business, has surprised me very positively. I mean, the speed of it. I could already see the premiumization trend as I came in. You know, the price reduction in BIO, for instance, the positive policy developments in three, four states almost coming one after the other, has also been, you know, a very pleasant surprise. I think there's more to do clearly on inflation, as I've mentioned, right? I mean, it is an extraordinary year. There is inflation on international logistics. There's inflation within the country. While productivity is embedded in our organization, you know, it's in our DNA, we definitely, you know, need to do more because of the headwinds. Certainly, I would say that, you know, continue to represent to the government those types of flexibilities, right? Would be more to do from my side. A journey on manufacturing footprint optimization that we have is well underway for us, but nowhere near finished, right? I would say, you know, these are the more to do areas. Understood. Sorry. Thanks for that. Just one clarification, if I may. I understand it's in the interest of time. Angle comes in. From 100, you know, factories now close to 50. So you're essentially saying there is still opportunity on cost-to-cost opportunities there? Definitely. I think there is still more to do. We have not reached an end state yet. This is constantly. Hello? Yeah, yeah. Yeah, please. Sorry. Yeah, I mean, to answer your question briefly, yes, the manufacturing footprint is not yet at its end state, and we think there is more to do. You had a question on Maharashtra, the price elasticity on BIO. The early signs are very positive. We've definitely seen, you know, consumer traction build behind the BIO brand with the price reduction. Our brands are actually going healthy double-digit growth. Thank you so much. Wish you good luck too. Thank you. Thank you, Manoj. Thank you. Participants are requested to limit your questions to two per participant. The next question is from the line of Avi Mehta from Macquarie. Please go ahead. Hi. Hi, team. Just had one clarification on the near-term challenges that you called out. With cases kind of moderating, have you seen demand environment also kind of improving? Is there any sense on that you could kind of highlight from that perspective? B, from a regulatory aspect, we've seen MP come out with a new policy. Any other new policy discussions where Delhi could lead to template? Thanks. I think the situation on cases is varied by state, right? Some are moderating, some are still going through the peak. We have... I mean, in some states, you know, the weekend closures, night curfews, et cetera, have impacted, you know, footfalls and, you know, slowdown. Like we saw in the previous waves, we expect that the recovery comes quite fast as, you know, things open up. As you are aware that, you know, this wave is not being seen as, you know, bad as the previous waves. You know, people are not panicking, et cetera. We expect normalization to come in very fast as these restrictions go away. I would say that, you know, there is some disruption in some markets where there are closures, but it is not hitting us, you know, as was the case in COVID wave two, where it was really very strong. You know, even internally with our people, we see a lot of absenteeism, but moderate cases, mild cases, and therefore we are able to manage those disruptions. Overall, I think as cases moderate, we do see positive momentum come back. Yeah. Avi, I mean, if your question was referring to the last quarter gone by that as the cases moderated, did we see a demand pickup? Yeah. Absolutely. Hina mentioned that in her opening comments that we did see on-premise almost come back to the pre-COVID level of footfalls, et cetera. That's kind of reflected in the quarterly call. No, what I was trying to say is that, is the sense then that more from a demand side, things probably are not as bad as we should kind of. Is that what we would kind of argue? Is that a comment as of now? I know things you know, there are a lot of things that might change, but as of now, it does feel like that. Is that a fair read-through of the comments? Yeah, that would be fair. A little bit of moderation in view of the restrictions that are coming in, et cetera, right? Yeah. Yeah. The first four-six weeks, right? As we kind of go into these restrictions, there'll be a little bit of moderation. Okay. On the regulatory front, you know. Yeah. Yeah. Yeah. I mean, MP has just about come in, you know. It's just been announced. We are looking at the full impact of that. I think that would make, you know, four or five states with big regulatory changes. At the moment, you know, no other big one being discussed. You know, the ones that have happened basically will, you know, need to fully roll out. As you know that, you may be aware that even Delhi, I think while the route to market has changed, all the outlets have not yet opened, right? That's still playing out, and West Bengal only started in November. There's a lot that will happen in these unfolding. I think the developments are very positive, even MP. I think, you know, it drives more affordability, prices will come down, right? Accessibility improves because, you know, now you have composite liquor outlets. I think these are very good templates that are being rolled out state by state. Okay, perfect. Add to that, Avi, which is what Manoj also mentioned. If you look at the last 12-18 months, there are a lot more positives on the policy front, right? Earlier it used to be more balanced between the pluses and the minuses. Yeah. Right? You know, call it, you know, Hina Nagarajan jokingly called it a signal of luck, right? Yeah, we are, you know, very happy with, you know, what we have. With that, if I can ask, is there any update on the UK trade deal as well, or nothing as of now? I mean, have you heard anything over there? No. I mean, the talks are underway, as you know, and, but we know this is on the agenda, but, you know, the timing, quantum, phasing is unclear to us still. There is no update yet. Okay. Thanks, Hina. Thank you very much for this. Thank you so much. Thank you. The next question is from the line of Alok from Ambit Capital. Please go ahead. Hi. Hi. Hi. My first question is, would you like to quantify if at all there was any impact coming from any market disturbances, be it say Delhi change in route to market or lockdown curfew in the last, week or 10 days of the quarter? Was there any impact that you want to quantify? I mean, difficult to quantify, but I can give you the, you know, Delhi example, right? Delhi has closed down, you know, the market for us. I mean, basically, I think the stores are only operating couple of days in a week, right? The weekend curfews are definitely impacting the, you know, footfall and sales, right? I mean, for sure there is an impact. Okay. No, where I was coming from is that, you know, this is a quarter where, you know, off-trade has largely been back to pre-COVID. Sorry, on-trade has largely been back to pre-COVID. Off-trade has only been improving. You know, after that, you know, while it's encouraging to see 8.5% ENA volume growth, but I think I would have expected a bit more. You know, that's why I was checking. Plus, you know, we have the positive impact of restocking of Black Dog and Signature also, right? That base benefit also we would have got. That's why I wanted to sort of clarify on any market disturbance impact. Yes. Yeah. Alok, it's a bit of a setback as Hina kind of laid out in May, you know. You know, I mean, we can't control the pandemic, right? We just have to get used to kind of working around it. We are very happy with how we've responded to the first two waves, and we believe we will absorb this also. Like Hina said, we don't expect the restrictions to continue for a very long time, right? Hopefully it'll be shorter duration. Yeah. Got it. My next question is on EBITDA margin guidance. Right now, we have been holding on to this guidance of mid- to high-teens. If we look at this quarter and the previous quarter, we are closer to 17.5%. Next quarter also, there is no reason to believe that, you know, we would be anywhere below 17% maybe. In that light, are we just trying to defer the guidance change because you're waiting for outcome of the strategic review of popular brands or anything else that you want to highlight on that? Actually it's nothing to do with, you know, the two things that you have mentioned, right? We believe that, you know, our current quarter, because of the peak season, it's the highest NSV that we clock during a year, right? Therefore, the quantum of operating leverage that we get in our P&L in this quarter is the highest, right? Now, if you take it for an extended period of time, we have by and large been in that range of about 16.5%, right? This is what we have maintained that, you know, mid-teens we've already achieved, right? On a sustained basis, right, we still have some work to do till we reach the high, right? Therefore, you know, we are just kind of, you know, keeping our milestones first towards that level. Once we achieve that on a sustained basis, then we will come back to all of you and provide, you know, the next- Guidance, yeah. The next level of guidance. Okay. If you may, I'll just have one clarificatory point on one of the earlier participant's question. If I can go ahead with that. Yeah, yeah. Please go ahead. Okay. You know, one of the previous participants asked a question on India-U.K. free trade. Now, of course, it's been in the papers. I just wanted to double-click on that. Is there something to do with state tax also and the central tax also? Or you know, whatever reduction happens directly flows into your calculation completely and there's no state involvement in that rate change? That's it. Let me take that. I mean, the component is central tax, right? It has nothing to do with state tax. It's the basic customs duty. However, we don't know how this will play out, right? Once the customs duty decreases, we don't know how much the quantum will be, what will the phasing be. We don't know whether the states will have any action, will take any action. You know, it'll have to be a balance between what gets reduced at the central level and, you know, what the states do, right? That's very difficult to predict, quite honestly. You know, overall, if you know, the customs duty reduced and you know, the states don't put any additional taxation, it would be a favorable outcome for us. The quantum and, you know, the timing will decide how much, right? It's quite difficult to quantify that. Okay, perfect. Ceteris paribus, if the central were to reduce from whatever, then assuming no state involvement, direct benefit goes to USL. Correct. No. I'll just carry on that. Consumer price will be. Yeah. Consumer- Yeah, absolutely. Yeah. Yeah. My bad. Yeah. There'll be no benefit. Benefit will come in terms of, hopefully a higher price. Higher demand, yeah. Volume, volume. Absolutely. Yeah, yeah. Thank you. Thank you very much for that. Thank you. Thank you. The next question from the line of Jaykumar Doshi from Kotak. Please go ahead. Hi. Thanks for the opportunity. A couple of questions from my end. First one is on, you know, there are some favorable policy developments on the BIO front, you know, at state level. If there is more favorable sort of, you know, reduction in tariffs through UK trade, then, you know, where do you see your BIO salience? If you could give some color, you know, what is BIO salience today as a percentage of your overall sales in value terms? Where do you think it can sort of go in the next three-five years along with your initiatives of premiumization and some external tailwinds? My understanding is that, you know, you would be making a distribution margin of somewhere around 10-odd% on BIO portfolio. Is that understanding correct? If so, then does it mean that if BIO salience goes up, you know, is it EBITDA margin dilutive if it ends up cannibalizing some of your DIO product? That's first question. Okay. Let me take that, Jay. I think we've responded to this in the earlier sessions also, but let me repeat it, right? Overall our scotch salience. Just a minute, Jay. I'll need to. Yeah. Can you hear me? Sorry. Yes. I think that overall our scotch salience between the Bottled in India and the BIO is in the range of about 22%-24%, depending on the quarter, right? That's broadly you know the salience of the business. It's split broadly 50/50 right now, right? Now, clearly, as Hina has articulated in her strategy, we want to just break out on the growth front on this. A simple logic of math, the salience will continue to grow up, right? That's my response to one part of your question. The range of EBITDA margin that you have mentioned is absolutely right, Jay. Broadly in the same. It varied, but broadly in the same range as a weighted average. That's absolutely fair. I think what we want to share, again, is that it's highly EBITDA INR per case accretive. I understand the percentage part, right? Yes, you're right. The percentage is lower than our portfolio percentage, but the sheer upweighting that we get on INR per case, that just provides a significant operating leverage on your entire business overall. Just bear that in mind, right? We'll be happy to share, you know, more detailed numbers in our, you know, one-on-one session, et cetera. But that's broadly the concept. Again, as we have mentioned earlier that we do not invest anything in fixed assets and long-term capital assets, right? For this part of the portfolio. It's again hugely accretive on our return on investment. Is there any room or any sort of potential for, you know, United Spirits, to, you know, negotiate or renegotiate, that with the parent? Is this a global norm in terms of 10% distribution margin? Yeah. I should have clarified that, Jay. Sorry to kind of butt in, but I should have clarified it. It's all governed by international transfer pricing now, right? Mm-hmm. Therefore, I don't think there is any room for negotiation, right? That just exposes the global corporation to huge tax exposure, right? It's all driven by the global transfer pricing now. Correct. That's helpful. Second, on home delivery, you know, which states are leading today? Do you have any data in terms of, you know, any color in what is the salience of, you know, delivery sales in the states that are leading and, you know, some colors if you can provide. Yeah. I'll take that. I mean, look, home delivery was a great unlock that came during COVID, as you know. It's been, you know, six states. Basically, I would say that these models, like, they always take time, right? My experience even from China tells me that e-commerce models, home delivery models undergo a lot of change, take a lot of time till they reach tipping point. Then one day they do and, you know, they become very attractive. I would say, of all the states, I mean, for instance, as an example, West Bengal is showing some traction. Basically, you know, West Bengal, I think 3%-4% of our sales are coming through home delivery, so that's very promising. The others are evolving. We remain very excited about this channel. Thank you so much. That's it from my end. Thank you so much. Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Hi, team. Congrats on a good set of numbers. My first question is on the premiumization trend, increase in the realization per case that you have seen at 11%, and you mentioned that it would stabilize at somewhere around 7%-8% versus a historic trend of 4%-5%. What I wanted to understand is two things. One is this 4%-5% going up to 7%-8%, is this overall industry phenomenon driven by the consumers maturing, or is this something specific to United Spirits? Secondly, if it is specific to United Spirits, at least partially maybe, can you give us an idea as to what exactly are the measures you have taken to boost this from 4%-5% going up to 7%-8%, what are you doing differently now versus a year or two ago? I would say, I think it's a combination of both, right? I think there is a definite, premiumization trend acceleration for the market, and everybody, every player will be, you know, taking advantage of that. I think there are a couple of areas where it is unique to USL, is that, one is that our, Prestige and Above portfolio, right, is growing ahead of popular. That is a shift from, you know, the, previous periods, right? This is a shift and the strategic focus we have driven now in our new strategy. Even within P&A, right, as I mentioned in my strategy, that we are now looking at broader-based, participation across, the various categories within prestige, so lower, mid, and upper, and we are strengthening our presence in all these three, right? With the renovations, innovations that we have driven, like, you know, the Signature renovation in upper prestige, which is very differentiated and, you know, will grow Signature faster, and similarly the, you know, launch of Royal Challenge American Pride, which will again, you know, make us grow faster in upper prestige. You know, with that will also give us the upweight on price mix. You know, there are a couple of factors unique to us and overall industry trend as well. Is BII/BIO portfolio within the P&A growing faster than the other subsegments of P&A? Definitely. I think that we've seen for the last two, three years, that phenomenon we've been seeing. Actually for us, you know, the renovation of Black Dog, for instance, has really accelerated the growth of that brand. You know, Black & White whisky is also doing really well. Definitely they are growing faster, yes. This 10% margin, distribution margin, does it apply to BII also, or that's relevant only for BIO portfolio? Sure. Yeah, yeah. Percy, for the global brands, yes, it applies similarly because the liquid comes from there, right, and it's a related party transaction, so therefore it applies. But for the USL brands, everything is housed in the USL. For example, Black Dog is a USL brand, right? So everything is, you know, we retain everything. Understood. Secondly, on cost inflation, I think Arnab asked this question and you had said that there is a 4%-5% kind of cost inflation. Just a clarification here, is it 4%-5% incremental March quarter versus December quarter that you expect? Or is it 4%-5% versus 12 months ago that what you are witnessing? Versus prior year. Sorry, I can't hear you. Versus prior year's import. Versus prior. Is there any additional sequential inflation versus whatever inflation you have seen in December quarter? Do you see any further inflation in March quarter on a sequential basis? Yes, Percy, right. Two things, right? I'm just, you know, I'll go with the headlines. One is, ENA was reasonably flattish, right, for the last three quarters, right? Versus prior year. Now, as we have always said that the inflection point is the ethanol blending price, you know, announced by the government, right? We know that the oil marketing companies have given some increase to the ethanol producers. That will lead to some amount of inflation in our portfolio, right? Similarly, you know, the imports on glass, right, be it soda ash, be it monopoly, be it LPG, they're just rapidly growing, right? In fact, they've gone up by almost 40%-50% in the last six to nine months, right? There is some amount of sequential inflation also. Yeah. Does this hit the bottom line or is there any way that you can sort of mitigate it through some measure? Percy Panthaki, that's, you know, that's the one which, you know, we all said, look, we run productivity on a quarter-on-quarter basis, literally on a day-to-day basis, what we call everyday efficiency, right? In a year in which inflation is a little muted, we carry some part of that productivity into our margin benefits, right? It gives us a little more strength to draw back for growth, et cetera. In a year in which, you know, the inflation is higher than the productivity, yes, you know, we take a temporary short-term kind of a blip, right? Like Hina Nagarajan mentioned, we continue to work with the state governments for pricing advocacy, right? Okay. We are at it. You know, whatever we can control, we are at it. Let's see where we stand up, right. Yes, you know, inflation is on the surge. Okay. That's all from me. Thanks and all the best. Thank you so much. Thank you. Thank you. The next question from the line of Latika Chopra from JP Morgan. Please go ahead. Yeah, hi, Hina Nagarajan and team. Two questions. The first is if you could share the brand spend breakup between BIO, BII and the other P&A brands. That's my first question. Also if you could share you know how is the share of different channels or mediums looking in the overall brand spend mix for you now? Yeah. Latika, let me take that. We don't divulge that, right? Yeah. I mean, all we can share is they follow pretty much the realized income, right? So our investment rates are obviously higher at the higher end, right, and lower at the bottom, right? That's all that, you know, we'll be able to share at this time, right? On channels, I mean, honestly, we just don't have that level of data granularity in the country, right, to be able to track it, right? Broadly, we know that our off-trade is roughly about, you know, 70%-75%. Yeah. On-trade is about, you know, 25%-30%. Right. Like Hina mentioned, that's what it was coming back to, right? October, November, et cetera. Now with the revised set of restrictions in the third wave, we could again see a little bit of a dent in that, right? But otherwise. No, no. Sorry, I think I didn't ask the question rightly. I was talking more about brand spend breakup for the channels, whether digital, you know, offline, those mediums. Yeah. Again, I don't think we have historically shared that right now. Yeah. Yeah, I'll, you know, we'll have to kind of reflect on this whether we want to share this, Latika, right? Sure. Overall 88%-89%. Our sense is that we won't be dramatically different from the rest of the industry in terms of the channel spending. Sure. The second thing was any specific or any meaningful changes that, you know, you're currently working on from a GTM approach, considering, you know, you will look towards a more stabilizing environment post-pandemic that you may want to highlight, which is also helping with this whole P&A growth being, you know, pretty good. I mean, one thing is, Latika, that with the positive developments on the regulatory side, I think the opportunity to create a much better shopper environment and retail environment is a really big opportunity, right? Obviously, as you know, the accessibility and affordability of our brands is growing in, you know, different states, which we talked about on the regulatory development, we are definitely looking to transform the retail landscape for shoppers and invest in that, right? That is a big thrust in addition to, you know, our premiumization strategy. We will continue to, I mean, we've done, you know, a lot of investments. Even for McDowell's No.1, we did RE points. We've invested, you know, for Johnnie Walker, for, you know, Black Dog, for Black and White, and we will continue to increase this investment, expand this investment as we see the opportunity. All right. Just lastly, any flavor on the CapEx, and you know, how should one think about dividend payouts, eventually now that you are debt free? Yeah. So for CapEx, no change. Pretty much will be the same, right? I mean, our philosophy remains of keeping an asset-light model, right? So that we will continue, Latika, and you would have seen that, you know, over the last three-four years, CapEx has been pretty much in a narrow range, and that's what will probably continue. That's one. Dividends, actually, debt free is not really the trigger. The trigger is unfortunately the wipe out of the accumulated losses. That's the company's tax requirement. Again, you guys are as close to the numbers as we are. Hopefully over the next three-four quarters, we should be able to wipe that out also. Therefore, we should be into the dividend distribution phase. Great. Thank you so much. Thank you, Latika. Thanks. Thank you. The next question is on the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Hi, good evening, Hina and Pradeep. Thanks for the opportunity. Just touching on the earlier question which was asked on Maharashtra policy change. I was more curious. You did mention it's growing double digit. Is it volume double digit growth we are seeing? Maybe if you can help me, what was the contribution from Maharashtra a year ago, and now, in terms of overall portfolio? Yeah. Shirish, let me take that, right? Then maybe, you know, Hina can build on it, right? I mean, we've never shared state by sales- Yeah Et cetera. That just makes it too complicated on an ongoing basis, right? We don't want to divulge on that, right? I think suffice to say that now that we have seen this rationalization of state taxes in the BIO portfolio in five, six states over the last 18-24 months or 36 months, et cetera, we get a significant multiplier, right? We get a significant multiplier on volume, right? Therefore, the growth becomes very, very healthy, right? I mean, that's all. I don't know whether Hina wants to add. No, I think that's, that covers it. Yeah. Pradeep, I got that what you're saying. I mean, I don't want the specific answer, but can you give the range? What is the lowest and what is the highest? I mean, is it fair to say that the growth is between 10%-50%? Yeah. It's more towards the higher end. Parallelly, when we see the mix change between BIO and BII, was it towards the BIO side, or it is more of the rub off effect which we have seen in BIO portfolio for us? I think it varies by, you know, state to state, right? In some places where, you know, the BIO prices are more favorable, sometimes the mix switches to BIO. I also think that there is a core group of customers who are being addressed by our different brands, right? I mean, you know, Black and White, for instance, is really addressing the young, you know, casual drinker, you know, food pairing, et cetera, whereas Johnnie Walker Red Label, it has its own set of customers. I think it's not possible to generalize, you know, this phenomenon. Does it switch massively? I think there is, in some states, a movement into BIO where the BIO prices become more attractive. Equally, there are a core, you know, set of consumers for each brand who remain loyal, right, to the brand. Okay. Just let me harp on it again to a little more deeper. This growth what you have mentioned is seen on on-trade or off-trade channel, or both are seeing the similar growth? Both. I would say the consumer demand momentum is there in both the channels. I mean, you know, when COVID closures happened on-trade, we saw the off-trade pick up the volume and in-home consumption became very big. As the footfalls have come back to on-trade, they are also, you know, picking up demand momentum. Both of them are growing. Okay, thank you. Just last question on Pradeep. With change in mix and portfolio, how one should look at the tax angle for next four to five quarters or maybe next two years? Which is? Tax. Mix change. Yeah, when you say tax, is it what? Indirect taxes? Direct taxes? Sorry, I didn't get the question. Tax rate for the company. Effective tax rate. Okay, that's This is the effective tax rate, the effective direct tax rate, right? Yes. Okay. That, by and large, it stays in that, you know, the 25% range only. We don't have any, you know, big variances. I mean, obviously at times things like, you know, when we have done Raising the Bar, et cetera, we obviously don't consciously claim a tax deduction on those kind of spends, et cetera. That's when the effective tax rate kind of goes up. But otherwise, the effective tax rate stays in a narrow band of about, you know, 25% and around. Thank you, Pradeep. All the best to you and the team. Thank you. Thanks. Thank you so much. Thank you. The next question is from the line of Prakash Kapadia from Anvil Wealth Management. Please go ahead. Yeah. Thanks for the opportunity. I had, you know, two questions. You know, post the duty reduction, what we've seen in Maharashtra, how are the prices comparable with key metro cities on, you know, some of the scotch brands? You know, how are consumers looking at BIO brands from your own? Because, you know, now with the reduction in the scotch duties, customs duties, Red Label is almost, you know, 25% cheaper than maybe a Black and White or a Black Dog. What happens to, you know, some of these BIO scotch brands? And is there a room for price reduction in the BIO segment to push from our end to the government? Are we thinking on those lines, working on those lines? Some thoughts will be helpful. I mean, Maharashtra, basically the prices, end consumer prices came down by about 35%. 35%. Right. 35%-40%. I would still say that if Delhi is the benchmark on pricing, Maharashtra is just marginally above the Delhi pricing and therefore now very affordable and you know, you don't see much need for interstate movement, right, of products. I know that you know, people in Maharashtra are really appreciating this price change. Obviously that is impacting positively on consumer demand. Like I mentioned, I think again, the interplay on categories is price, and it is on you know, loyalty to certain brands and you know, the reason for adopting these brands. I'm not sure what your question was on the price, regarding the price. Was it related to BIO brands? BIO. Because after the reduction of the scotch, imported scotch, now Red Label is, you know, 25% cheaper as compared to a Black and White or Black Dog. I'm talking more of Maharashtra prices. What happens from a consumer standpoint? How do they look at this segment now? I got that, and I said that we've been sort of seeing some shifts in some markets, but you know, a hardcore consumer group that stays with the brand. Actually our innovations also are driving, you know, continued engagement with, say, Black Dog, right? I think you had a follow-up question on working with the government on drop-off, and I didn't understand whether, because the drop-off in BIO. It was BIO. Is there a room for reduction in BIO prices from your own, say, a Black and White or a Black Dog? Because, you know- Talking of BII then. Okay. Yeah. Yeah, BI. Yeah. Right. I think that is something that we continue to work with the government on. I mean, you know, as per the pricing ladder that exists in the market, at this point in time, that is not a focus area for us. Understood. Thank you. All the best. Thank you. Thank you so much. Thank you. The next question is from the line of Chanchal Khandelwal from Aditya Birla Capital. Please go ahead. Hi. Thank you. Congrats, Hina and Pradeep, on the good set of numbers. Business looks really good now. On one quick question, it's since you have answered the 10% margin is what you would look at in BIO. If you look at EBITDA per case for this quarter, it's 217, probably the highest EBITDA per case you would have made in the last 18, 19 quarters. My question is twofold. One is, do you as an organization look at EBITDA per case for Prestige and Popular? And what is the fixed cost per case if you run the organization? The reason why I'm adding into the zoom that you decide on Popular, how much part of the cost will remain in the company where Prestige will have to serve that cost? What's the decision framework you will take when you are deciding on Popular? Whatever you can share at this stage will be helpful. Yeah. Sure. Let me take that. I mean, obviously we will, you know, we will not be able to divulge any details. But again, you know, long story short, we do take most of our decisions based on EBITDA per case, which is a fully loaded. You know, we don't take decisions only on marginal costing basis, et cetera. We do take an EBITDA per case decision because we genuinely believe that all costs are kind of, you know, variable in the longer run, right? Therefore, that's one sense of philosophy. The other one which you just mentioned yourself, which is that our EBITDA per case is the highest in the country, is the highest you know historically in whatever last 18, 20 quarters, et cetera, exactly driven by the operating leverage and the premiumization, right? The premiumization element, right? Even though in percentage, et cetera, it doesn't give a huge kicker because it's 10%, but the sheer impact it has on our rest of our overheads and profit, et cetera, it gives us a huge kicker, right? We will want to continue this trajectory. Will you be able to share the EBITDA per case between Prestige and Popular at some point? We don't share that, right? You know, I've given some examples of the BIO earlier, et cetera. You should be able to draw your, you know, broad estimate. Sure. Thanks. That's useful. Just one more question from my side. If I look at the advertisement spend again, which was highest in many quarters, and I'm sure you have invested a lot in renovation. The 8%-9% ad spend which you are guiding for, assume that it's 8%, then the margin guidance of mid-teens, isn't it lower? I'm saying that the organization has a right to have a 20%+ kind of margin in one-two years. Any thought? I mean, I think, look, our strategy is looking at accelerating top-line growth. You know, the principle is that we get operating leverage as we go along with that. In this, you know, in this run, we will focus on, you know, our key brands and invest behind them, right? The thing is that A&P doesn't necessarily need to be expanded to do that. We get a lot of A&P efficiencies and effectiveness through the operating leverage as well, right? At this point in time, we have sufficiency. Over a period of time, of course, I mean, we are guiding to mid to high teens. We've just started the strategy. It's going to take a few years to get there. When we are in a position to give the next guidance after a few years, we will definitely come back to you and give the next guidance. For the next few years, I think we are focusing on delivering this strategy and our guidance to you. Thanks. Wish you all the best. Thank you. Thank you so much. Jacob, we can conclude. Yes. All right. Thank you very much. I just wanted to say, we will now draw this call to a close. Thank you very much for your participation, and have a great evening, and please stay safe, stay well. Thank you so much. Thank you. On behalf of United Spirits Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.