Plan to open facilities in Bihar and West Bengal: Globus Spirits

In order to help alcohol manufacturers find better sales outside the state, Bihar today waved tax on export, bottling of Indian Made Foreign Liquor (IMFL) and beer.

Globus Spirits stock did surge in today's trading session, probably on the back of this development but Shekhar Swarup, ED of Globus told CNBC-TV18 that this spike can be on the back of the fact that the company is planning to commission two greenfield facilities in Eastern India.

He said that one facility is being set up in Bihar and the other in West Bengal.Below is the verbatim transcript of Shekhar Swarup’s interview with Latha Venkatesh and Anuj Singhal on CNBC-TV18.Latha: We are just learning that probably Bihar has waived some of the excise duties on spirits. Is that the reason why all these stocks are running so much?A: The story of Globus Spirits is possibly a bit different. We are in the process of commissioning to green field facilities in East India. Of course the one in Bihar is already commissioned, we had a bit of a setback due to the floods but we are in the process of re-commissioning that now. The other one at West Bengal too is in advanced stage and hopefully there will be some good news coming from there soon as well.Our model is based on Indian Made Indian Liquor (IMIL) and sale of bulk alcohol, we also take up manufacturing IMFL for other players.Latha: I will read out what the newspaper says. The Nitish Kumar cabinet has waived tax on export and bottling fee on IMFL and beer manufactured in the state to help the industry find better markets outside. So, is therefore your Bihar plant now becoming more profitable compared to a few months ago when the prohibition probably put a question mark on that plant?A: It was very clear from the word go in the Nitish government that excise duty on export of alcohol from the state will be waived. There has been a notification to that effect some months ago now. So, that has already been our expectation.We have recently signed up a contract with United Spirits to undertake contract manufacturing for them at our West Bengal unit as soon as that is commissioned.Besides that, our regular operations in North India, IMIL and franchise and bulk are doing very well as well. We have seen record growth coming in, in IMIL brands this year over last year.Anuj: If you could give us some numbers because last year was quite good for you and for the industry as a whole. This year, what kind of earnings per share (EPS) numbers can you report?A: That would depend on how soon the profit starts coming in from our East India unit. At this stage, I am unable to comment on what the EPS numbers would look like but certainly from our old operations, there is a very healthy double digit growth that is coming in and the new operations will further that significantly.Latha: Can you say whether your EBITDA will continue to grow at 22 percent which your first quarter showed; will your margins be over 10 percent?A: The Q1 numbers, Q2 numbers are certainly going to be improving as we go along because there are new businesses that are being added in this financial year itself, which are accretive to margins.