Ladies and gentlemen, good day, and welcome to the United Spirits Limited Q2 FY twenty-five earnings 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations, United Spirits Limited. Thank you, and over to you, ma'am. Thank you. Good evening, everyone. Welcome to United Spirits second quarter and first half ended September twenty twenty-four earnings call. Today on the call, we have with us our Managing Director and CEO, Ms. Hina Nagarajan, who is joined by our CFO and Executive Director, Mr. Pradeep Jain. As always, we will kick off today's call with Hina sharing her thoughts on operating environment and business performance. This will be followed by Pradeep taking us through the financial highlights of the quarter, post which we will open the forum for Q&A. We are cognizant that today is slightly busy for all of you with multiple results and calls. Against that background, we'll try to keep the call crisp and sharp. I request all of you to please refer to the financial releases available on the stock exchange and on company's website. With that, I now request Hina to commence today's call. Thank you, and over to you, Hina. Thanks, Shweta, and good afternoon, ladies and gentlemen. Thank you all for joining us on the Q2 FY twenty-five earnings call of Diageo India, United Spirits Limited. As always, I would like to start by giving a bit of macro context. Over the past few quarters, the consumer environment has remained challenging, starting with the slowdown in the mass segment, where the consumer was reeling under inflation pressure, and lately, the premium and luxury end, which has relatively moderated sequentially. This is like many other premium and lifestyle categories like cars, retail, electronics, et cetera. On middle India, we had indicated inflationary pressure almost a year ago, but now with normal monsoons and stable inflation, we are seeing stable demand in the middle segments of our category. However, to confirm any recovery with confidence, it will be prudent to wait with cautious optimism for the next couple of quarters to play out. On the performance of the quarter itself, our overall net sales value declined marginally year-on-year, and PNA segment was flat, reflecting an overall muted demand environment. The price mix of 4% in the quarter for PNA substantiates the relative moderation at the top end of the market, which I referred to earlier. While we had already called out expectations of a relatively slower quarter in the last quarter investor call, the growth numbers are indeed below our own expectations. One major route to market disruption in a key northern state, which is still ongoing, and a few other temporary disruptions that are all resolved now, have further impacted the performance in the quarter. In summary, at the halfway mark, I would say we are a couple of percentage points behind where we would have wanted to be on the top line growth. As also conveyed last quarter, we do expect, fiscal 2025 to be a story of two halves, as was fiscal 2024, only with the sequence reversed. H1 of fiscal 2025 has been weak, but we remain optimistic on the upcoming festive season and H2 on the back of the strength of our commercial calendar and the innovation renovation that has been put in the market over the last couple of quarters. Therefore, at this stage, we remain committed to our double-digit growth aspirations for the PNA segment on a full fiscal year basis. On the margin side, I'm pleased that we are delivering ahead of expectations this quarter. This is driven by a combination of internal and external factors. Overall, commodity basket inflation has remained benign. There is double-digit structural inflation in ENA, being offset by deflation in glass PET. Our ongoing COGS from productivity interventions and all three levers of revenue growth management, that is pricing, mix management, and trade spend productivity, are also helping on the margin. Some updates from the policy front. I'm delighted to share that we have commenced business in the state of Andhra Pradesh towards the second half of September. This is after a gap of nearly five years, and I'm immensely proud of our teams that have worked tirelessly on ground to open the market for us in record time. We truly value and welcome this new development, and the team is thrilled to have our high-quality portfolio products back in the state. We have also firmed up our consumer engagement and activation plan to resurrect the equity of our brands in the state. It also reminds us once again of what we firmly believe in: No door is permanently closed, and we have seen markets come back after being inaccessible for a period. A brief update on the portfolio. Touching upon first the recent innovation renovation, starting with the new X Series, our non-whiskey offering from the House of McDowell's. The X Series has now been rolled out to three markets: Maharashtra, Goa, and UT. While it is too early to comment on the consumer response, we are encouraged by the fact that the consumer is appreciating the product and packaging as premium, yet feeling it is at an accessible price point. On tequila, Don Julio core variants are now available across all major markets in India, and Don Julio nineteen forty-two is currently available across three key states: Haryana, Maharashtra, and Goa. We are in the process of rolling this out further to other high-salience states. So far, the progress on Don Julio, Don Julio core variants is good. Volume is being led by Reposado across the country on the back of consistent and scale activation, which in turn is helping generate trials among most consumer cohorts. On Godawan, we have launched an exciting partnership with the Taj Group of Hotels based on our aligned goals of promoting luxury with a conscious approach. A limited edition of Godawan, crafted exclusively for the Taj Palaces, was launched at Taj Palace Mumbai. This initiative will significantly enhance our visibility across key markets. In addition, Godawan has successfully scaled to 16 markets, with recent launches in West Bengal and New Delhi. This expansion reflects our commitments to tapping into new consumer bases and increasing brand presence. I'm also thrilled to announce that we are launching three new flavors of Smirnoff Vodka: Mirchi Mango, Minty Jamun, and Zesty Lime. These are being rolled out to key markets as we speak. All three flavors are inspired by the Indian palate and have tested positively with consumers. This launch aims to expand our portfolio in more consumer occasions in a fun, accessible, and experimentative way, as we ride the inflection point of growth for overall premium whites categories. Another key milestone during the quarter was the launch of The Good Craft Co. flavor lab at Bangalore. This is designed to be a hub for startups and craft community to foster collaboration and education about the world of craft spirits. This initiative embodies our commitment in highlighting the best of India, while fostering innovation, excellence, and community within the craft spirit sector. Coming to the prestige portfolio, House of McDowell's brought back its intellectual property, the Yaari Jam. The Yaari Jam was held in Mumbai at the NSCI Dome and had a star-studded lineup. For Friendship Day, we launched the Yaari Hai Imaan Mera song remake in collaboration with Saregama. On Royal Challenge, we are doing several media and on-ground activations, resulting in positive consumer sentiment and acceptance. We've also scaled up on-brand trials through the Dubai Mega Sweepstakes promotion campaign. This was a huge success and witnessed the highest ever redemption. The high intensity drive on the brand will continue into the October-December festive quarter. We've also launched the brand new Royal Challenge pocket pack, the Hipster in Assam, ahead of the festive season. On Royal Challenge American Pride, we conducted eight national events with over twenty-seven, with over twenty-six thousand footfalls. These were widely promoted on digital, garnering over fifty million-plus reach. The brand also had a scale approach to driving trials, activating over seven and a half thousand off-trade and on-trade outlets with the Tickets to Vegas campaign. Signature has extended its partnership with Ziro Festival and will take the tour festival to more cities. During the quarter, we did the Ziro Festival of Music at Arunachal Pradesh. We also activated seven hundred plus outlets across the east as part of the pre-amplification drive with a consumer promotion, inviting consumers to win a chance to attend the Ziro Festival. We also continue presence on TV through our impactful campaign with Ayushmann Khurrana. Coming to BII and BIO, within Scotches, Black & White and Johnnie Walker Blonde continue to receive positive response and traction in the market from consumers. We have continued to actively invest behind our brands with focused activations, which has helped recruit consumers across cohorts. Some of the notable interventions include Black & White and Johnnie Walker showing up in the marquee events such as English Premier League, Union of European Football Associations, the UEFA Cup, US Open, et cetera. On Tanqueray, we have collaborated with the global Netflix show, Emily in Paris, for the release of Season three and Season four. This is the first time that an Indian alcohol brand has collaborated with a global Netflix show. Touching briefly on key awards and recognitions, Godawan continues its winning streak with 67+ awards now. It recently won two liquid medals, one gold and one silver, at the Spirits Selection CMB 2024, which is an international event that awards spirits from across the world. Baileys and Don Julio won Silver Category Award at the 30 Best Bars Awards for 2024, for being the most popular brands at premium bars and restaurants in India in their respective categories. So looking ahead, in summary, I would say we do recognize the growth challenge, but are cautiously optimistic about the demand environment and confident about our activation plans for the upcoming festive season. Our focus will remain on execution excellence to bring back growth to our aspiration level and maintain the long-term competitiveness of our portfolio. With that, I will hand over to Pradeep. Thank you, Hina. Very warm welcome to all. As always, it's a delight to interact with this cohort. Before calling out the quarterly financial performance highlights, we'll request all of you to please refer to the results press release posted yesterday evening. As Hina has already mentioned, it is indeed a muted quarter in a softer-than-expected demand environment. Overall portfolio NSV for the quarter witnessed a marginal decline of 0.8% year-on-year, within which the PNA segment remained broadly flat with a 0.3% growth. Price mix for the quarter at 3.7%, was on account of low BIO volume. We have realized headline pricing in Maharashtra and West Bengal in the IMFL prestige segment. As we had called out in the last quarter call in July, that the first quarter received favorable growth due to couple of extraneous factors, and that was to duly normalize in the second quarter. In addition, certain RTM-related disruptions that Hina referred to further impacted growth adversely. However, considering all the above factors, we would still say that at the halfway mark in this fiscal, we are a couple of percentage points behind our own expectations. I would also like to call out that the net income this quarter does include Andhra Pradesh sales revenue of approximately INR 25 crores, which commenced towards the second end of the quarter. Gross profit for the quarter was at 1,285 crores, with a gross margin of 45.2%. Ongoing productivity initiatives across the value chain and revenue growth management interventions have enabled the margin expansion. While inflation on ENA remains stubborn and high, glass deflation continues to keep the overall commodity basket inflation at reasonable levels. Our marketing reinvestment rate during the quarter was 9% of net sales. This was a step up in line with investments ahead of the peak season of October-December, to keep our virtuous growth cycle intact and drive consumer engagement. The reinvestment rate for the second half of the fiscal will be much higher, in line with the established spend and business feedback. EBITDA for the quarter stands at INR 507 crores, a growth of 7.9% over the prior year same quarter, and an EBITDA margin of 17.8%. The strong discipline on overheads, aided by a high base in prior year, coupled with growth margin expansion, has enabled a good flow through in the margin delivery. But as we move into the festive season, and in line with the new seasonality, A&P investment rate would scale up to support the brands, as I mentioned earlier. Overall, our tax for the quarter is INR 335 crores, with a tax margin of 11.8%. To conclude, I would like to say that we are confident on our core growth drivers of renovation, innovation and overall premiumization, and we will continue to execute on our key strategic pillars and thereby confident to capture growth. It is also encouraging to see new markets opening up and overall improvement in policy environment in the existing markets. All taken together bode well for business prospects and overall growth in the medium to long term. With this, we can now open the floor for Q&A. Thank you. 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 the 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. The first question is from the line of Jay Doshi from Kotak. Please go ahead. Yeah. Hi, team. Thanks for the opportunity. My first question is, you know, we understand your, you know, base effect for first half and second half, and then hence optically, you always guided higher growth in second half this year. But sequentially, during the course of this year, especially in second quarter, have you seen any change in the demand environment for your category? If you, you know, and excluding the, you know, new opportunities like Andhra Pradesh or tailwinds that you have. You know, underlying basis, have you seen any change at all in the demand environment, or it's broadly in line with your expectations, last three, four months? I would say, hi, Jay. I think, look, we were saying that the growth has moderated, right? In the category for the last three to four quarters, as is evident from the results of all the major players. However, the one thing I did say for the last two quarters was that the premiumization ladder has been intact, right? So, you know, the upper end was growing faster than the lower end. This is the first quarter where the top end is lagging the mid-end, in terms of performance, and this is also evident in our muted price mix during the quarter, right? You know, considering the overall macros around luxury consumption in India across multiple categories, as of now, we believe this is a temporary blip and not structural, and we also believe that on rolling the four quarter basis, the top end will continue to outperform the overall category growth. Apart from that, I would say that not a significant change anywhere else. Thank you so much. And the second question is, somewhat related. So you did mention in the opening remarks that, you know, first half growth was a couple of percentage points lower than what you would have liked to be, but you still maintain your guidance of double-digit growth, for PNA, at a full year level, which means that you're targeting or, you're confident of delivering 15% growth in second half. So, you know, so the difference is, you know, you're less in the first half, but you're still confident of full year level. Does it mean that you're probably, you know, the tailwinds that you have from Andhra Pradesh more than offset, the shortfall of first half as well as, you know, perhaps some, demand, you know, softness in demand? What is the level of confidence you have at this point of time, based on the visibility you have on, you know, delivering the 15% growth in the second half? I would say, Jay, that we are, we should be able to get to the double digit growth on the PNA portfolio if the October, November, December season shapes out well. There are, a couple of reasons. You mentioned Andhra. Definitely, Andhra will help. And the second thing is we really have firepower in our commercial plans to recoup the deficit. We are firmly focused on the season and beyond for, the execution of these commercial plans. We have put out quite a few innovations and renovations, I just spoke of them in my opening, and these, you know, we are focusing on scaling up these over the subsequent quarters. So at this point, you know, we believe that if, you know, the festive season goes well, October, November, December-... We should be able to, you know, continue to deliver the double-digit growth on the PNA portfolio. Thank you so much. One final, if you can offer some color on, you know, the progress in Karnataka post reduction in prices for prestige and above. Thank you. That's it from my side. Thanks. Yeah, it's early days in Karnataka. We definitely welcome, you know, the policy change, and we definitely welcome the drop, which actually helps us overcome the losses that happened, you know, in July 2023, when we had a negative impact on the policy. I mean, it's early days. The prices in Karnataka in general, and firstly PNA, right? So PNA is a very small component of the market in Karnataka, very, very small. And, you know, despite the decrease in prices for the portfolio, the prices are still higher than, you know, many key markets around India. So we do expect some uplift, but, you know, given the scale of PNA in Karnataka, I don't think it will be a significant impact on our overall portfolio. Right. Thank you. Thanks. Thank you. Thank you. Thank you. The next question is from the line of Abneesh Roy from Nuvama. Please go ahead. Yeah, thanks. My first question is on the Andhra market. So in India, dry states are there, but, for example, in Bihar, last week, one petrol tank tanker was caught full of liquor bottles. So my question is on Andhra market, how much is the real opportunity from a one to two years perspective? I'm not asking next quarter, even the Q4 or Q1, because the things in liquor, when they come back, it takes some time. Second is, do you have all the clarifications in terms of policy which are needed, already is it there? And when you compare Andhra liquor policy to a adjoining very, very similar state, like a Telangana, what are the gaps? What are the positives? If you could elaborate on all this. PJ, do you want to take that? Yeah. So Hina, let me start. So Abneesh, thanks. Hi. Right. So, so look, you know, as we mentioned earlier, Andhra, when we exited, in two thousand nineteen, twenty, right, it was roughly about 4-4.5% of our national PNA salience. And I will reemphasize what I said, what we, Hina and I said, last quarter as well. Over a period of time, I would say it's probably 18-24 months, if all stays, well, Andhra should reach about, you know, 4-4.5% of our national PNA salience, right? So that's broadly the, you know, number, at least in my mind, right? Now, having said that, right, you know, the sales team is executing with its full rigor, and, you know, we'll have to see quarter and quarter where we reach, right? So that's one. On your second question on the policy, yes, I think the new policy is fully in, and all our labels and brands are registered, and, as of now, we don't see any concerns. In fact, you called out the right state. It is very, very, you know, the policy is pretty much a mirror image of, of the Telangana policy. And, therefore, you know, we look forward to kind of executing, as we speak. Sure. But Telangana is a low-margin business, also, right? In terms of the state mix, is it a low-margin business? So Abneesh, you know, Telangana also, you have to appreciate in the last five years, we've got free pricing features, right? So I think that tends to change a little bit, you know, as we get, you know, one or two pricing features you get, right, that helps the intent to change. So I won't say Telangana is in the highest bracket, but neither is it in the lowest bracket now. It's somewhere in the middle. It's somewhere in the line of the portfolio margin, and that's where Andhra, you know, comes into it now. So my second question is on the broader engagement with the regulators. So now what we are seeing is the competitive politics. So for example, Maharashtra currently has this Ladli Behna Yojana, almost one lakh crore kind of a budget outlay. Similarly, Karnataka, sixty-two thousand crore, Congress promised in terms of five promises. So how worried are you on this freebie culture? Because the next four years, coalition government at center clearly will continue, and all parties are now competing with each other in terms of how many freebies each can give. Now, in Karnataka, I do see that in the top end, there is a reduction in the taxes, which is a good news. When you engage with the government and regulators, and when you see all these promises being made and new state government every few months, how worried or how positive are you on tax implications? Abneesh, I would say we do not comment on, you know, politics, and we do not, you know, even bring these topics in our advocacy. Our advocacy is absolutely focused on, you know, pricing, which is an ongoing discussion, right? Ease of doing business and tax harmonization, and you know, we know that, given our contribution to the state revenue, you know, we are going to remain important to the state and that, you know, we also want to build win-win with the government. So I would say at this stage, you know, we are not looking at it. We are just uniquely, vocally focused on growth for our portfolio and uniquely, vocally focused on our advocacy agenda of ease of doing business and pricing. Sure. Last quick question on the slowdown. Every company is highlighting that. You have also seen a slowdown, and you have been very proactive in terms of seeing that in Q1. My question is in Q2, is the on-premises consumption slower than your overall numbers because the travel and rains, all these would have impacted? Second is when you see the top ten metro cities or top eight metro cities versus rest of India, would rest of India have grown faster than top eight metro cities? So I mean, overall, yes, the environment has been muted, and, certainly the rains and flooding have played a role. I mean, they always do on trades, right? So, certainly that has an impact on the quarter. I mean, in general, we have seen that the, you know, towns outside the metros have for the last few quarters, right, been faster growth, faster growing, and the aspiration levels are higher there. So I think that overall trend continues, Amish. The metros are, slower. The boomtowns have, you know, we call them the boomtowns, as they move to. They have been growing faster, and I think on a relative basis, I would say that trend would continue. Sure, thanks. That's all from my side. Thank you. Thank you. Thanks. Thank you. The next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead. Hi, hi, Percy. Hi, Pradeep. I just wanted to understand on margins, how should we look at it? Because, despite such a relatively weak top line and, operating leverage on account of the top line declining, we have posted a very good margin, close to about 18%. So if basically we are going to do a double digit top line in second half, is it possible that the margins will go closer to 20%? That is part one of the question. And part two of the question is that, if we look at ahead from FY 2025, let's say if we look at FY 2026, 2027, et cetera, on whatever base we have made for FY 2025, should we still be taking further margin expansion? Or you feel that the margin expansion has been front-ended and after FY 2025, we should see very minimal kind of expansion? Okay, so you know, let me take that, and then we can probably build on that. So first part of the question, Percy, look, you know, if you look at the last three years, I would say, right, post-COVID, right, it's a kind of new normal. I would say, you know, the A&P reinvestment rates between the first six months and the second six months of the fiscal are dramatically different, right? Because... And that's in line with the business sales seasonality, right? And if I'm not wrong, the delta A&P reinvestment rate between the two halves is somewhere between three and four percentage points, right? So you normalize for that. I think we are back, Percy, to our full year margin expansion in the broad range of, you know, I would say anything between 70-80 to 100 basis points, right? And that we've always maintained that as a forward-looking organization. Over the next two-three years, we do want to reach a sustained, high teens, right? Which is what our guidance has been for the last five-seven years, right? So that remains very much our objective. And that's a perfect segue for me to respond to your second question as well. You are right that once we reach, let's say, that sustained high teens kind of a margin, probably the margin expansion will, you know, moderate significantly, though we will still want to target a little bit of expansion year on year, but it's going to significantly moderate, right? So, yeah, that's where I'll probably leave it. I would just add, PJ, to that, that as we go along. I mean, I have mentioned this quite often, that, you know, we want to invest more in our brand- Yes. - and we will continue to invest in growth, in innovation, renovation, as we, you know, sort of multiply. So Percy, we would want to invest more behind our brands and therefore balance between the margin and investments, right? So, hopefully that answers your question. Got it. Very helpful. Just one more question on the other expenses part. So in the first half, we have seen a 5% decline in the other expenses of maybe around 5% or so. That also ties in with some of the cost efficiency initiatives that you have been talking about. So if you can explain this line item and what is the story behind it as to how you are seeing savings on this, and where you are in that journey of savings. Do we see most of it sort of rectify this year, or do you have a sort of horizon of the next two to three years, where some more initiatives would also come through? Yeah. So Percy, two parts again, right? But let me take the broader point first, right? I think in the May annual investor communication we had shared a status of our multi-year supply agility program. If I remember, we had said that 40% of our benefits had already been incorporated into the PNL up till March of 2024, right? The full benefit of the program will come only by March 2027, if I'm not wrong, right? So you're absolutely right, right. That journey continues, and obviously some add-on initiatives would have come as part of that program, right? Now, to the first part of your question, we are lapping a slightly higher base of other expenses in the prior year, same quarter. Right now, that has not impacted us in the current year. Let me say, right, that was a bit of an inefficiency in the last year, first quarter. We made the necessary process interventions, and we have kind of, you know, eliminated that cost, right? So that has also given us a benefit in this, you know, in this quarter, and that will probably stay that way. ... Right. And lastly, just one data point, if you can give me, at an overall industry level, what is Andhra Pradesh sales as a percentage of India? I said that it's about 4.5% when we exited, and, you know, our share in that market was exactly in line with our national share, so it kind of would also mirror the industry. And do you think you can ramp that up, like, very quickly in a couple of quarters, or do you think that's more of a medium-term thing? Yeah. Yeah. So we are confident that, look, our brands have not been there for the last five years, so it'll take a little bit of time, right? So we believe that we should be able to reach. Andhra should be able to reach that 4.5% share, hopefully over the next 18-24 months. I don't know, Hina, what you feel about that, but that's broadly my sense. I mean, our aspiration would be to do it as fast as possible, but reality is that, yes, we have to, you know, bring back the equity of the brands. They've been out for a while, so I would agree, PJ, that, you know, I would imagine, you know, eighteen to twenty-four months is the right frame. If it comes faster, you know, damn good. Yeah. Thanks, Hina and Pradeep. Very helpful. Thanks for your answers. Thank you. Thank you. Thank you. Thank you. The next question is from the line of Krishnan Sambamoorthy from Nirmal Bang Institutional Equity. Please go ahead. Hi. Yeah, hi, Pradeep. Pradeep, you've mentioned that you were a couple of basis points off in terms of your targeted growth. How much of this impact came through the route to market change in the northern state that you have highlighted? Could you quantify that? And also, how significant is it as a proportion of the national volumes, and could this also impact the third quarter numbers? Okay, Hina, you want me to take that, or you? Yeah. Sure. Sure. So go ahead. I'll add to it. Yeah. Yeah, okay. So, Christian, I think it's important for me to again reemphasize what Hina had, what Hina and I had communicated last, you know, last quarter, which is that twenty-four, twenty-five fiscal will actually be a story of two halves, and our second half growth will be much higher than first half, right? With that said, and that having been understood, you know, by our stakeholders, I would say that almost a lion's portion of what we are saying as a couple of percentage points behind is on account of the disruptions, right? I hope kind of that answers your questions. Yeah, sorry, Hina. If it will continue into the quarter, so I would say all the disruptions barring one are now resolved, so you know, there is a disruption in one of the northern states, which is continuing, and that could impact the quarter, but the others have now been resolved. So- Yeah. You know, we expect that this will not impact Q3. Okay, my second question is on realization per case, which has been healthy. It's usually this kind of realization per case is usually kind of seen in the third quarter. And you also indicated that there has been lower BIO sales. So is this state mix which is leading to better realization per case as well as overall profitability? I mean, I would say probably, you know, the fact that we mentioned that the BIO salience is lower in this quarter. I would expect logically your BIO has to come back in October, December, if we are to deliver on our promise, right? And right now, we are banking on the fact that it will come back in October, November, December. And if that happens, actually the realization per case will get an uplift, you know, right? As we also mentioned, our price mix is actually a little lower than our historical run rate for the quarter. So Christian, my point would be that if BIO does come back, which we are expecting it to come back, et cetera, the NSP per case will get an uplift, actually. That's it. And lastly, on last quarter, we called out a couple of one-off from a cost perspective, material cost and other expenses, if I'm not wrong. Any one-off that you want to call out from a cost perspective for this particular quarter, which led to elevated margins? No, nothing in this quarter. It's just that, as I mentioned to, I think, Abneesh's question, or Percy's question, I think, which is that last year, the second quarter, had some one-offs in the overheads, right? Which were not one-offs, really. They were inefficiencies, which we have addressed, and therefore those have been eliminated, and therefore, the margin pickup is looking very promising. Got it. Thanks, Pradeep. Thanks, Hina. Thank you. Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead. Hi, Harit. Yeah. Yeah, good evening. So just two questions. You spoke about middle India and, how the demand is stable. You know, is that view also coming from the fact that, you know, for last year around November, you said that, you know, some of the inflationary pressures were impacting demand, and as you lap that base up, you know, you expect that, you know, growth kind of revise a little bit, largely on account of base effect. Is that the way you're thinking about it? There would be a little base effect, but I think in general, I would say that, you know, for the last couple of years, we were seeing a lot of upgrade at every level, right? And then we started seeing some inflationary pressures in middle India. I think, you know, the sense of inflation stabilizing and then the expectation of good monsoon, you know, giving expectation of good consumption, et cetera, we could see stable demand and, you know, consumption seems to have sort of got itself concentrated in that middle segment of the market, right? So we're, you know, the top end is a little bit slower, the lower end continues to sort of reel under inflationary pressure. But, you know, like I said, I mean, even during this phenomenon, people don't go away from our category, right? So they will just adjust the frequency of drinking or whatever. So at the moment, I would say it's just concentrated in those, you know, sort of mid-prestige, upper prestige categories. And, we are continuing to see stable demand. So it's not just base effect. I just think that because of, you know, the pressure there, it's just concentrated there. Got it. Got it. And the second question is on the cost side, especially on the RM costs. So, as I understand, you know, in the quarter four onwards, you know, and you're probably just a couple of quarters away from lapping up kind of a high, the high base. Is the way to think about it that, you know, as you lap that base up, it's if prices stay stable, you know, you could be entering into a phase where, you know, this kind of significant double-digit inflation in ENA is kind of behind you, or is that too much of a hypothesis, and you have to wait for some of the external policies, et cetera, to play out? Yeah. No, no, Harit, so let me correct you there. First of all, ENA inflation still remains in the 11-12% range. Yeah. Even in the July-September quarter, we have rate to rate, rate per BL to rate per BL, it's an 11-12% inflation, right? So it remains very high. Like I said in my opening comments, what is providing an overall cushion in the commodity basket is the deflation in glass and things like, you know, closure of the PET-related items also being depleted, right? So that's helping, right? But you're right, right? The ENA inflation has been high, so therefore, what is critical to wait and watch now is the new crop, right? Good monsoon. I've also picked up some comments about the paddy acreage being high, right, the sowing being high, et cetera, right? So let's wait for the new crop to come in December, January, right? And hopefully, if all stays good on that front, you are right. If the new crop is good, we could see some relief on that front in the, I would say, February till the June kind of period, right? So let's wait. The only addition I would make, PJ, though, is that, I do think that, you know, structurally, right, I think the policy and the aspiration to really accelerate the blending rates, et cetera, right? That's true. It's still on the government agenda. Yeah. Right. So structurally, I don't expect that ENA will, you know, slow down on inflation, at least in the short term, like short to midterm. So, you know, we'll watch, and if there are any policy upsides, that would be great for us. But, I mean, my personal expectation is that it will not, you know, show up in the next at least eighteen to twenty-four months. Yeah. Got it. Very helpful. Those are my two questions. Thank you. Thank you so much. Thank you. The next question is from the line of Tejash Shah from Avendus Spark. Please go ahead. Yeah. Hi. Hi, good evening. Thanks for the opportunity. My first question is, our growth target for second half is robust mid-teen. So just wondering, is it largely driven by our low base effect which will play out, or is it more to do with Andhra agreement that we'll be seeing now, or are you actually seeing some early signs of consumption buoyancy for the second half? I think we sort of said it in a couple of you know answers earlier. Basically, I think it's a combination of base effect, it's a combination of Andhra, and it's also our confidence in our commercial plans and the scale-up of our innovations, renovations, and the competitiveness of our portfolio. You know, demand, significant trend of change is yet to be seen, and like I said, we need to wait a couple of quarters to you know sort of comprehensively say whether there is a change or not. But definitely, I think you know our own plans, the fact that Andhra you know has opened up, and the base effect. Yeah. Sure. And, Hina, a hallmark of your tenure, so just staying with that innovation part, has been strong focus on innovation. So just wanted to know, in your observation, is this helping to attract new customers, or is it more about premiumizing the existing customer base? I would say the answer is both, right? So, I mean, and let me give you some examples, right? So Johnnie Walker Blonde, for instance, is attracting new customers into Scotch, just because it is a very accessible liquid. It is a Scotch, but a very accessible liquid, very mixable, right? And new generation consumers like those kinds of liquids. So it is definitely attracting new consumers, but it is also helping to premiumize, say, from, you know, primary Scotches or even upper prestige, right? So it is actually doing both. Got it. And if I may squeeze, last one. You mentioned some disruption in northern state. Could you elaborate the nature of the disruption and the significance of the state to our business? PJ, would you like to take that? Yeah. Okay. So, so look, it's also got a very key state, right? And we don't want to call out the name, right, but I think your channel checks will anyway kind of allow you to get to the name, right? Very, very rich in mix, right? Top end is very, very salient, et cetera, right? And effectively, I would kind of- ... call it down to that, some constraint from ease of doing business in the shorter term, right? So, the efficiency with which the permits would, you know, used to get issued or the labels used to get registered, et cetera, so that continues to be a bit of a barrier. And we do expect this to kind of debottleneck itself over the next two, three months, et cetera. But it has been on for the last five to six months, which has impacted us in the April/June quarter as well as the July/September quarter, right. Got it. Very clear. Thanks, and all the best, and happy Diwali to the team in advance. Thank you. You, too. Yeah. Thank you. The next question is from the line of Himanshu Shah from Dolat Capital. Please go ahead. Hi, Himanshu. Hi. Hi, thanks. Thanks a lot for the opportunity. So one of our competitor is looking to sell its core lower prestige brand. Can management tell you what their thought is on this particular portfolio? Would we be keen to acquire, considering our balance sheet strength and one of our largest portfolio saliences in that particular category? And even if we don't acquire, should it help us as the competition presumably defocus on it or something? Himanshu, I would say that, our own brands, right, have, is flagship for us in our portfolio and has, as you know, a leading position in that category. And for us, I mean, I don't really want to com- you know, comment on competition. I think what we are focused on is, really building our flagship brand and, you know, we're focused on the strategy that we have, which is that we see legs of premiumization for the brand. And, and as you can see that we have launched, you know, the X series, which is, sort of in the higher price point non-whiskey portfolio, right? So, you know, I wouldn't-- We're not banking on, you know, getting any benefit from any action that anybody else might take. We are just very focused on growing our own brand through the premiumization and through the investments that we are making on the core offering, and Godawan will continue to remain a very flagship part, you know, sort of portfolio in our, sort of overall portfolio with significant scale for us. Okay. And it can't complement us if we add another brand, ma'am, in the same category? No, I don't think we need another brand because we have, you know, we have the brand possibility to expand with its own offerings. So we would, you know, we've been trying to simplify our brand portfolio, as you know, since the time I've come in, and even since the time of acquisition, right? I mentioned, I think we have been mentioning that we used to sort of support, you know, 30-odd brands, then we brought it down to 18. And since the time I've come in, we sort of said that we will, you know, focus on our mega brands, and we invest in eight or nine brands, so we would be interested in growing our existing brands. Absolutely. Yeah. Sure. Thanks. Thanks, you know. That's it from my side- Got it. And all the best for second half, and Happy Diwali to the management team. Thank you. Happy Diwali to all of you. Yeah. Thank you. The next question is from the line of Latika Chopra from J.P. Morgan. Please go ahead. Hi, Latika. Yeah. Hi, Hina. Thank you for the opportunity. You know, just one question, I had was on your views on, you know, single Indian malts. You know, if, you know, do you want to expand and have a bigger presence in this category? How are you thinking about the growth trajectory for this sub-segment? And, you did then talk about, you know, white spirits to the extent of some new flavor launches with Smirnoff. Any, any more color on the gin brands, you know, that, you know, you acquired in the recent past? Thank you. Yeah. So two questions. First, let me address the Indian single malts. Look, we see a very good growth trajectory for Indian single malts overall, and I think they are certainly adding to the luxury repertoire in India, right? And, as a luxury sub-segment, we feel there is enough headroom both for our, you know, global single malts and the Indian malts to sort of grow and improve penetration. I mean, we've got Godawan, and, we are super confident that Godawan is basically, you know, superior in terms of product. And I talked about 67 plus awards and more coming all the time. So we are very focused, Latika, on expanding the distribution and growing our Godawan brand. And as I mentioned, you know, bringing more variants within the Godawan portfolio, like the special one that we have brought with the Taj Hotel. So yes, the answer is categorically yes, that we would like to grow our presence in this category, and that we do have, you know, a winner of a brand in Godawan to do that. So we will definitely keep focusing on enhancing our presence in the category. Your second question on gin. Gin is a fast-growing category, and, you know, we've got the brand from Nao Spirits, which upon they manage, but they are, you know, Greater Than is the largest volume brand within that portfolio, and they are continuing to focus on that brand. We are building Tanqueray. Tanqueray has a significant place in the gin portfolio. You know, we expanded the portfolio of Tanqueray variants with Malacca and Rangpur quite recently, and we are, as I mentioned, we are activating, you know, to scale. We have tied up on Emily in Paris, so we are looking to grow that end with Tanqueray. And of course, now Nao Spirits is continuing to grow, you know, Greater Than. So we have a, you know, a portfolio ladder, which plays very well in the gins category. ... Sure, thank you. I'm just trying to understand, you know, how big probably over a period of time, these single malts, Indian single malts could become, you know, the part of your business. Not sure if you want to launch more brands, or you just think Godawan is good enough to build your, you know, shares in this particular segment? Yeah, look, Indian single malts, by virtue of the preciousness of the liquids, right? They tend to remain much smaller than the mass brands, right? So, I mean, they are rare liquids, they are more aged liquids and special liquids, so that is why, you know, while they're growing quite fast, I mean, on the absolute basis, you know, it will just be a few hundred thousand cases, right? And I don't expect that nature to change as it hasn't for global single malts, right? So it will be about bringing precious liquids. It will be about bringing the rare liquids, the really fine liquids that we have in our portfolio. I would want to grow the Godawan brand for the reasons I just outlined on the previous question, which is that, you know, we would like to have, you know, a limited number of brands that grow within those brands, strategically, because it is quite difficult to build new brands in India. So, you know, we have a very powerful brand in Godawan and huge scope for bringing many more variants under it. Understood. Thank you. Thank you, Latika. Thank you. Thank you. As that was the last question, I now hand the conference back to Miss Shweta Arora for closing comments. Thank you. On behalf of United Spirits Limited, I wish you and your loved ones a very happy and safe Diwali. Please feel free to reach out to me, shall you have any further questions. Thank you all for joining. Have a good evening. Thank you, everyone. Happy Diwali! Thank you. Thank Thank you to all. Happy Diwali. Bye. Bye. Thank you. On behalf of United Spirits, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.