Globus Spirits Limited — Q3 FY25 earnings call

Call held 12 Feb 2025

Management summary

Globus Spirits reported a mixed Q3 FY25, with strong growth in its consumer business, particularly the Prestige and Above segment which saw 245% YoY revenue growth and improved EBITDA margins to -10%. The manufacturing business, however, faced cost pressures, leading to a lower EBITDA margin of 1% and reduced capacity utilization of 50%. The company is strategically balancing its portfolio, focusing on premiumization, and expects improved manufacturing margins and debt reduction in the coming years, supported by new raw material policies and UP distillery commissioning in Q2 FY26.

Highlights

  • Prestige and above category revenue grew 245% YoY and 100% QoQ in Q3 FY25.

  • EBITDA margin for Prestige and above improved significantly to -10% in Q3 FY25 from -24% in Q2 FY25.

  • Consumer business (regular and others) delivered strong growth of 22% YoY and 8.5% QoQ in Q3 FY25.

  • Management expects manufacturing EBITDA margins to stabilize at Rs. 7 per liter for the coming year.

  • Strategic investments in route-to-market efficiency and new product launches are showing results, with FY25 revenue for Prestige brands expected to exceed Rs. 100 crore.

Concerns

  • Manufacturing business EBITDA margin was low at 1% in Q3 FY25, down from 4% in Q3 FY24, due to cost pressures.

  • Manufacturing capacity utilization was 50% in Q3 FY25, a decline from 87% in Q2 FY25.

  • Initial margins for the regular category in Uttar Pradesh will be lower until the distillery commences production in Q2 FY26.

Key financials

  1. Manufacturing Revenue Contribution 56%
  2. Manufacturing EBITDA Margin 1%
  3. Manufacturing Margin per liter ₹0.85
  4. Consumer (Regular & Others) EBITDA Margin 15%
  5. Prestige & Above EBITDA Margin -10%
  6. Manufacturing Capacity Utilization 50%

What they filed

Q1 FY27: revenue up 12.7%, net profit up 44.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue638 602 655 700 661 +4%717 +19%632 −4%789 +13%
EBITDA30 34 39 57 59 +97%75 +121%67 +72%78 +37%
Net profit1 0 5 18 22 +2100%30 21 +320%26 +44%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentEBITDA MarginRevenue Growth
Manufacturing Business1%—
Consumer Business (Regular & Others)15%22%
Consumer Business (Prestige & Above)-10%245%

Capital allocation

medium confidence
  • Capex Capex disclosed
    • UP multi-feed distillery project
    • Corn oil equipment installation at Bengal
    Our UP multi-feed distillery project is progressing well with commissioning expected in Q2 FY26. [...] corn oil equipment, as I mentioned earlier, has been installed at Bengal in this quarter and is awaiting commissioning.
  • Debt Debt disclosed
    a lot of that, given that there is no significant investment plan, will go into debt first, obviously. [...] we could be becoming net zero-debt company in the next two years.

Guidance & targets

Manufacturing Margin

  • EBITDA per liter from ethanol Manufacturing Margin · coming year · High confidence Rs. 5 to Rs. 7 per liter
    we now expect to achieve margins in the range of Rs. 5 to Rs. 7 per liter from ethanol with additional margins that ENA bring, we will be able to go back to our long-term average of Rs. 7 per liter.

    — Shekhar Swarup

  • EBITDA per liter Manufacturing Margin · next year · High confidence around Rs. 7 a litre
    Yes, that's what we expect for next year to be around Rs. 7 a litre.

    — Shekhar Swarup

  • EBITDA per liter Manufacturing Margin · coming year · High confidence Rs. 7 a liter average
    I foresee us reaching Rs. 7 a liter average for the coming year.

    — Shekhar Swarup

Manufacturing Capacity Utilization

  • Capacity Utilization Manufacturing Capacity Utilization · Q4 FY25 · Medium confidence improved
    Following this, we anticipate improved capacity utilization across all our factories.

    — Shekhar Swarup

  • Capacity Utilization Manufacturing Capacity Utilization · full year · High confidence as close to full tilt as possible
    So, the plan now is to be running at as close to full tilt as possible.

    — Shekhar Swarup

Consumer Business (IMFL) Revenue

  • Revenue Consumer Business (IMFL) Revenue · next year · Medium confidence strong growth
    However, next year is looking quite promising already with few excise policies that have been announced in Rajasthan and Uttar Pradesh. And next year, we should look at strong growth.

    — Shekhar Swarup

  • Run Rate Consumer Business (IMFL) Revenue · year end · High confidence excess of Rs. 200 crore
    However, we will certainly be at an excess of Rs. 200 crore run rate if you were to look at where we end the year. But no, in the year, we will not cross Rs. 200 crore revenue.

    — Shekhar Swarup

Consumer Business (Prestige & Above) Revenue

  • Revenue Consumer Business (Prestige & Above) Revenue · FY25 · High confidence exceed Rs. 100 crore
    Revenues from brands in this category are set to exceed Rs. 100 crore in FY25.

    — Shekhar Swarup

  • Revenue Consumer Business (Prestige & Above) Revenue · 3-5 year window · Medium confidence about Rs. 500 crores
    So, from the current strategy that we have in place, we have a vision to take this to about Rs. 500 crores type of revenue. But the concern on that is I am not able to give you a timeline or an accurate timeline. But that's certainly in the 4-5 year kind of window, maybe 3-4 year window from now.

    — Shekhar Swarup

Consumer Business (Regular) Volume Growth

  • Volume Growth (Rajasthan) Consumer Business (Regular) Volume Growth · next year · High confidence single digits
    So, Rajasthan is going to be single digits volume growth next year.

    — Shekhar Swarup

Consumer Business (IMFL) Profitability

  • Breakeven Consumer Business (IMFL) Profitability · next year (at least one quarter) · Medium confidence breakeven
    I think it looks like breakeven is around the corner for the division. I hope in the next year, we are certainly expecting to break even in at least one quarter, maybe more.

    — Shekhar Swarup

Consumer Business (Regular) EBITDA Margin

  • EBITDA Margin Consumer Business (Regular) EBITDA Margin · long-term · High confidence 16%-17%
    In my view 16%,-17% is the long-term sustainable margin for our regular and other segments.

    — Shekhar Swarup

  • EBITDA Margin Consumer Business (Regular) EBITDA Margin · next year (average) · High confidence 15%-16%
    Yes. Certainly 15%-16% I think so.

    — Nilanjan Sarkar

UP Distillery Commissioning

  • Commissioning UP Distillery Commissioning · Q2 FY26 · High confidence Q2 FY26
    Our UP multi-feed distillery project is progressing well with commissioning expected in Q2 FY26.

    — Shekhar Swarup

What to watch in Q4 FY25

UP Distillery Commissioning

Q2 FY26
Current Progressing well
Target Commercial operations

Why it matters

Commissioning of the UP distillery is crucial for improving margins in the regular category in UP and providing supply security.

Our UP multi-feed distillery project is progressing well with commissioning expected in Q2 FY26.

Risks & concerns

  • Volatility of raw material prices

    medium

    Historically volatile, but new FCI policy and maize strategy expected to make margins range-bound and less volatile.

    Management acknowledged

  • Lower initial margins in UP for regular category

    medium

    Margins in UP for the regular category will be lower until the company's distillery in UP commences production in Q2 FY26.

    Management acknowledged

  • Government intervention on ethanol prices

    low

    Analyst raises concern about potential government cap on ethanol prices, but management sees it as not a significant risk in the medium/long term due to government's push for ethanol blending.

    Analyst downplayed

Q&A highlights

7 direct
IMFL business revenue target for next year Direct
In our internal budgets, we do not expect to reach Rs. 200 crores next year. However, we will certainly be at an excess of Rs. 200 crore run rate if you were to look at where we end the year. But no, in the year, we will not cross Rs. 200 crore revenue.

Clarifies the company's realistic revenue expectations for the IMFL business for the upcoming year, distinguishing between run rate and full-year revenue.

Asked by Viraj Mehta

Manufacturing business utilization and EBITDA per liter for next year Direct
Yes, that's what we expect for next year to be around Rs. 7 a litre. The other thing is, there's this new policy that has been announced and contrary to some of the statements I've made on earlier calls about volatility of margins, we now expect margins to be extremely range bound. My sense is an average of 7 for the year and maybe 20%-25% plus minus from there.

Provides clear guidance on expected manufacturing margins and utilization for the next year, highlighting the impact of new policies on margin stability.

Asked by Viraj Mehta

Volatility in manufacturing margins due to new policy regime Direct
So, reasons why volatility will be down, the largest reason is that FCI, which is, in fact, the largest buyer of rice in India, is now become a supplier of rice. And it is a new source of rice or raw material. So, in addition to the broken rice that we buy from the market or the maize we buy from the market, now we have the ability to buy raw material from FCI.

Explains the fundamental shift in raw material procurement dynamics (FCI's role) that is expected to reduce margin volatility and stabilize costs.

Asked by Dhaval Desai

Strategy for gaining market share in competitive non-premium IMFL segment Direct
So, we are focused on nine states of India. There are 30 plus states and Union territories. We are focused on nine. In those nine, the total addressable market of the luxury segment is 58% of the total India market. And the total addressable market of the mainstream non-luxury Prestige and above is close to 70% of the all India market. So, we picked these nine states basis a careful evaluation.

Details the company's focused, market-by-market strategy for consumer business growth, rather than a pan-India approach, indicating a targeted expansion plan.

Asked by Rohan Patel

Marketing spends for IMFL growth Direct
So, we have been sustaining investments in this division over the last 3 or 4 years between 15 crores and 30 crores per year for each year, different years, it's been different amounts. So, there's been significant investment that has happened. We are now reaching the critical mass that where our gross profits are able to take care of our marketing spends. So, as of now, nothing significant planned in terms of additional investment.

Clarifies that significant marketing investments have already been made, and the business is now at a scale where gross profits can cover these expenses, implying no major new ad spend is planned.

Asked by Ankit Gupta

FCI's role in raw material supply and price stability Direct
So, this I see FCI is a stop gap arrangement. I see FCI for one year, maybe two years to help the industry transition to maize. Maize cultivation too needs to grow. We have seen very good growth in the winter crop, but that's pretty much a South and West India focused crop. We are hoping for good growth in the summer crop as well.

Management views FCI's role as temporary, emphasizing their long-term strategy to rely on maize procurement and corn oil efficiency for raw material stability, reducing dependency on FCI.

Asked by Kiran

Vision for Prestige and Above revenue Direct
So, from the current strategy that we have in place, we have a vision to take this to about Rs. 500 crores type of revenue. But the concern on that is I am not able to give you a timeline or an accurate timeline. But that's certainly in the 4-5 year kind of window, maybe 3-4 year window from now.

Provides a long-term revenue target for the high-growth Prestige and Above segment, indicating significant growth ambition despite an unconfirmed timeline.

Asked by Anil Shah

Mountain Oak growth in Q3 Partial
Q3 versus Q2 growth of Mountain Oak is flat. It's a 1%-2% growth. Obviously, there are reasons behind it. It is end of Q3, the policy formation of different states starts coming, and there is a slower off take which gets accelerated from Q4 and Q1. So, the growth is the same.

Reveals flat QoQ growth for a key brand (Mountain Oak) in Q3, attributed to policy changes and slower off-take, which could impact short-term consumer segment performance.

Asked by Imran

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Detailed narrative

Q3 FY25 Performance Overview

Globus Spirits reported a mixed Q3 FY25. The manufacturing business contributed 56% of total revenue, experiencing a decline from 63% in Q2 FY25 and Q3 FY24. The consumer business showed impressive growth, with the regular and others category growing 22% year-on-year and 8.5% quarter-on-quarter. The Prestige and above category demonstrated exceptional growth of 245% year-on-year and almost 100% quarter-on-quarter, with FY25 revenues for these brands projected to exceed Rs. 100 crore.

Manufacturing Business Dynamics

The manufacturing business faced cost pressures, resulting in an EBITDA margin of 1% in Q3 FY25, consistent with Q2 but lower than 4% in Q3 FY24. Margin per liter stood at Rs. 0.85. Capacity utilization for the quarter was 50%, a significant drop from 87% in Q2, as the company prioritized ENA sales and undertook maintenance activities. Management anticipates improved capacity utilization in Q4 FY25 and expects EBITDA margins to stabilize around Rs. 7 per liter for the coming year, driven by new raw material policies and strategic maize procurement.

Consumer Business Growth and Margins

The consumer business continues to be a key growth driver. The regular and others category maintained a strong EBITDA margin of 15% in Q3, slightly lower than 17% in Q2 due to inflationary packaging costs. Price increases in Rajasthan are expected to boost revenue and profitability for this category. The Prestige and above category saw its EBITDA margin improve significantly to -10% from -24% in Q2, reflecting the positive impact of strategic investments and new product launches.

Strategic Initiatives and Future Outlook

Globus Spirits is focusing on several strategic initiatives, including creating a dedicated division for luxury brands (Terai, DŌAAB) and expanding in the UP market. The UP multi-feed distillery is expected to be commissioned in Q2 FY26, which will enhance cost efficiency and provide supply security. The company aims to grow its Prestige and above revenue to approximately Rs. 500 crores within a 3-5 year window. They also plan to achieve breakeven for the overall IMFL business in at least one quarter next year.

Raw Material Stability and Procurement

The market dynamics for raw materials are shifting, with FCI reducing rice prices for distillers and OMCs allocating ethanol from FCI rice at a fixed price of Rs. 58.5. This is expected to reduce price volatility. The company has secured warehousing capacity for maize and installed corn oil equipment in Bengal to enhance efficiency and reduce dependency on FCI in the long term. Management believes these measures will lead to more stable and predictable margins.

Capital Allocation and Debt Reduction

The company currently has no large CAPEX plans beyond the ongoing UP distillery project. With improved profitability and no significant new investments, Globus Spirits aims to prioritize debt reduction. Management expressed confidence in becoming a net zero-debt company within the next two years, indicating a strong focus on strengthening the balance sheet.

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