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Last Updated : Nov 26, 2015 11:45 AM IST | Source: CNBC-TV18

Good response to Indian made brands in Bihar:Globus Spirits

In an interview with CNBC-TV18, Shekhar Swarup, Executive Director, Globus Spirits says it plans to increase capacity by 70 percent, and will commission new plants in the first half of FY17

Alcoholic beverage maker Globus Spirits sees the second half of the current financial year being slightly better than the first half. In an interview with CNBC-TV18, Shekhar Swarup, Executive Director, Globus Spirits says it plans to increase capacity by 70 percent, and will commission new plants in the first half of FY17. The company expects new plants in the eastern part of the country to drive earnings growth, says Swarup.

The Indian Made Indian Liquor (IMIL) growth during this half of the year will be similar to that see during the first half, and the brands have got a good response in Bihar, Swarup says.

Below is the verbatim transcript of Shekhar Swarup's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: How is business looking like? Do you expect that the second half is going to yield much better in terms of sales and profits for you?

A: Second half of the year for Globus Spirits has typically been about 60 percent of the entire year for us compared to the first half gone by, it will be slightly better. Be that as it may, I think the story in Globus is more on the expansion that we are conducting in East India where we are setting up two distilleries and growing an installed capacity base by over 70 percent. One distillery is coming up in West Bengal and the other one in Bihar. Both of them are expected to be commissioned within the first half of next year and high capacity utilisations in second half of next year.

This is on the back of the increased alcohol demand in the country considering the alcohol mandate that has been implemented by the government of India. The demand of alcohol has grown by over Rs 200 crore litters per year and the industry now is trying to gear up its capacities.

Latha: Revenues apart, the profit in the first quarter was more sedate, it was only up 1.6 percent, 1.25 crore, will you all do much better in terms of profits for the current year?

A: As of now, the second half like I mentioned will be a ort of a straight line of the first half. The numbers will be up more 60 percent of full year will be the second half. The great increase in earnings is going to come from the new facilities that are being set up in east India.

Sonia: In the quarter gone by, your Indian Made Indian Liquor (IMIL) brands which is Nimboo, Narangi, etc, they did very well with 54 percent year-on-year (Y-o-Y) growth to 2.9 million cases in the quarter gone by, what is the expectation for Q3 and Q4 from the IMIL category?

A: IMIL is the heart of Globus' business. We operate our distilleries in Rajasthan, Haryana and we supply IMIL in those states. Haryana has recovered from a bad period in the market where the industry had slowed down. We have seen that the growth has come back in Haryana. Globus' brands will benefit from that greatly in the first half. Rajasthan on the other hand has also seen great growth. Globus' brands are eyeing 30 percent market share in the state of Rajasthan. We do believe this growth that we saw in first half will be sustained into the second half and of course next year as well. Since this is a growth of our brands and market share that we capture.

Sonia: So you launched the IMIL brands in Bihar in January this year. You sold about half a million cases in the quarter gone by, which is almost 20 percent of your total. So Bihar is also picking up for you. What kind of a contribution do you expect from Bihar in the quarters to come, what could the growth be?

A: Bihar as of now is a franchise play for us where we have franchised our brands to a franchise in the state of Bihar, in district of Patna. So as of now it is going to remain a franchise play in terms of profitability that is limited. The reason we have started doing this is is to see our brands into the district and of course as a distillery, it is operational early next year, the margins will increase because we will pick up manufacturing ourselves.

Latha: Give us an idea of how your earnings growth will look like? Last year you did about Rs 2, this year already in the first half you have done almost Rs 1.60 paise, so are you likely to double your earnings this year itself and what will it be in FY17 more importantly?

A: Like I mentioned, this year will be in a sense of straight line of what is of the first half that has gone by with slightly higher revenues in second half. When it comes to next year, we are adding over 70 percent capacity with the realisations being much better in East India compared to what we had in North India.

Therefore, I do believe that despite adding 70-75 percent capacity, our earnings will be higher than the growth in revenue or growth in earnings will be higher than growth in revenue.
First Published on Nov 26, 2015 10:08 am
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