Ladies and gentlemen, good day, and welcome to Radico Khaitan Limited Q2 FY 2027 Earnings Conference Call, hosted by ICICI Securities 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashutosh Joytiraditya from ICICI Securities Limited. Thank you, and over to you, sir.
Thank you, Anam. Hello, and good afternoon, everyone present on the call. On behalf of ICICI Securities, I welcome you on Radico Khaitan Limited's Q2 FY 2027 earnings call. I would like to thank the management for giving this opportunity of hosting the call. From the management, we have Mr. Abhishek Khaitan, MD; Mr. Dilip Banthiya, CFO; Mr. Sanjeev Banga, President, International Business; Mr. Sudhir Upadhyay, Chief Sales Officer; and Mr. Saket Somani, Deputy CFO. I will now hand the call over to Mr. Abhishek for any opening remarks. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen, and thank you for joining us on Radico Khaitan's Q2 FY 2027 earnings conference call. The second quarter of FY 2027 has been the strongest in our history, with record volumes, revenue, and profitability. During the quarter, IMFL volumes stood at over 10 million cases, revenue at INR 1,746 crore, and EBITDA at INR 356 crore, with an EBITDA margin of 20.4%. Two quarters in, the consistency of this delivery gives us great confidence in the year ahead. Premiumization remains at the heart of this performance.
Our Prestige & Above portfolio grew 36% in volume during the quarter, well ahead of the industry, and continues to enrich our mix with every passing quarter. In vodka, the structural shift we have spoken about is gathering pace, with the category share of IMFL reaching 6.3% in Q2. Flavors are driving this change, and Magic Moments is shaping it.
In August, we launched Magic Moments Aam Panna, bringing a nostalgic flavor cherished in every Indian household into a contemporary format, supported by a digital-first campaign. Consumer response has been encouraging, and tertiary offtake across the Magic Moments family remains healthy. In whiskey, After Dark's modern new look is resonating well in the largest segment of the market, and we are extending it to more states. 8PM Premium Black continues to gain momentum and market share, while Royal Ranthambore continues to perform well across civil and CSD channels. Our luxury portfolio, including Rampur Indian Single Malt, Jaisalmer Indian Craft Gin, and Virasat Indian Single Malt continue to receive an exceptional response from connoisseurs in India and abroad, and we are steadily taking Virasat to new states. Brand advocacy remains central to this effort. During the quarter, we continued to partnership and premium shops in shop format at retail.
The policy environment across key states continues to be progressive and supportive, and we see this as a meaningful tailwind for organized premium-led players like Radico in the years ahead. Internationally, we also became the first Indian spirits company to be present across four major U.K. airports, a proud moment for the Indian whiskey in the home of Scotch, and we continue to progress towards our target of 100 travel retail outlets in the times to come. At the same time, the global environment has turned increasingly volatile. We are seeing continued volatility in the raw material and packaging costs. We are managing this through sharper procurement, value engineering, our integrated manufacturing platform, and a richer product mix. These levers give us the resilience to stay the course.
Looking ahead, we have upgraded our Prestige & Above volume growth to 30% in FY 2027, and we remain confident of sustaining an EBITDA margin of around 20% for the year. Before I close, an important update on our leadership. Effective today, Dilip Banthiya joins the board as Executive Director and CFO, bringing his deep financial, capital allocation, and alcohol industry experience to the board. Saket Somani has been elevated to Deputy CFO with an expanded mandate across strategy, financial planning, investor relations, and digital transformation. These elevations reflect our belief in nurturing talent from within. As we enter the festive season, I would like to wish you all and your families a very happy and prosperous Diwali. With that, I would now like to hand over the call to our Executive Director and CFO, Dilip Banthiya, for a detailed review of our financial and operational performance. Thank you.
Thank you, Abhishek. Thank you everyone for joining us on this call today. Before I begin, I would like to thank the board for its confidence in me. The momentum we built in the first quarter was sustained through Q2, with strong volume growth, higher profitability, and improved returns. Our performance reflects the resilience of our business model, driven by premiumization, operating leverage, and persistent focus on disciplined execution, even as the input cost environment has turned more volatile. During quarter two of FY 2027, we delivered a strong all-round performance with total IMFL volume of over 10 million cases, reflecting a 7% year-on-year growth. The Prestige & Above category continued its strong upward trajectory, recording a highest ever volume of 5.28 million cases at 36% volume growth. This performance was supported by a strong brand momentum and premiumization-led mix improvement.
Regular volume de-growth was due to a higher base in quarter two of last year, after the change in route to the market in the state of Andhra Pradesh, and the impact of policy changes in Maharashtra and Karnataka. On profitability front, gross margin during the quarter is 48%, representing 440 basis point expansion on year-on-year basis and 109 basis point compression on quarter-on-quarter basis. This improvement on year-on-year basis is due to the ongoing premiumization, product mix. Premiumization added 510 basis point, and the price increases added 35 basis point. This was offset to a certain extent by the recent volatility in packaging material, which resulted into approximately INR 27 crore of financial impact. The gross margin was impacted sequentially due to some cyclical brand mix change and inflation in grain prices. Despite an uncertain macro environment, we are confident of our margin trajectory in financial year 2027.
To mitigate the impact of increasing grain prices to a large extent, we had built a higher level of stocks, which has supported us through quarter two of FY 2027. EBITDA margin for the quarter stood at 20.4%, expanding by 462 basis on year-on-year basis. The strong improvement reflects the success of premiumization strategy, better operating efficiencies, continued cost discipline. It also highlights the benefit of our consistent investment in building a strong premium and luxury brand portfolio over the years. Building on our strong financial performance, both ROE and ROCE improved during the quarter, supported by higher operating profit and better assets utilization. As the premium and luxury portfolio continue to expand, we expect our capital efficiency and return ratio to improve further.
During the quarter, we made a deliberate investment in working capital to support the strong growth in our premium portfolio, new launches, and secure key raw material and packaging material amid the price volatility. This is temporary, and we expect to normalize during the second half of this year. We remain disciplined in our approach to capital allocation, with CapEx directed toward maintenance, operational efficiencies, and essential capacity optimization. Looking ahead, our priorities remain very clear. Driving profitable growth, maintaining a strong balance sheet, improving capital efficiency, and creating a long-term shareholder value. With this, we will now open the line for question answer. 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 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 will wait for a moment while the question queue assembles. The first question is from the line of Aditya Soman from CLSA. Please go ahead.
Yeah. Hi, good afternoon, and thanks for the opportunity. So two questions. Firstly, on this DRI investigation across the industry, can you explain a little bit more what the key issue here is, and how the various players potentially are impacted? Secondly, on the raw material impact now. Now we have seen obviously a significant increase in grain prices as well as packaging materials. So from a pricing perspective, what proportion of our portfolio would you say has pricing freedom? Typically, what would be the price lag or the lag between pricing and the input cost increases? Thanks.
Thanks, Aditya. Actually, as far as the matter relating to the industry scrutiny on this thing, we are very, very compliant company. We have always complied with the regulatory and issues. The Scotches which we were importing earlier, last 10, 20 years, are in the same HSN code as 2208. After July 15 also, we are importing the VMS in the same code. We have not changed any of our code, neither the connotation or the narratives of the material coming here. This is an industry issue which DRI is studying. We do not know how far it goes on others, but we are confident that what we are doing is as per the current laws. Thank you. To your second question regarding the packaging material and raw material scenario.
See, as we in the beginning and opening remark, MD also said that we continue to maintain our EBITDA margin guidance of 20% for this full year. Actually, this quarter also, there has been a negative impact of INR 27 crore, which is approximately 156-160 basis points on gross margin basis. However, with the kind of this thing we have been able to mitigate, and when we see that in the new crop season, which is starting from November onwards, the prices should stabilize, and at the same time, FCI allocation to this year's ethanol policy is also very elevated at 72 lakh metric ton, which will also stabilize this thing. From November onwards, we see this to play a very benign kind of role.
At the same time, on packaging material, there has been an impact on account of the West Asian war, and in particular basically on the bottle prices and the pack prices like that, and some laminate prices. It is very unpredictable, but looking into the current uncertain and volatile scenario, we continue to work on our premiumization, improve on our product mix, and continue to have that we can deliver our 20% guidance, which we have given. I think we are confident about our business and portfolio.
No, very clear, and thanks a lot for that. Just to summarize, with this whole DRI issue, no impact on Radico likely. Second, on the input cost as well, I think no change to the 20% margin guidance for the current year.
That is correct.
Thank you.
Thank you. The next question comes from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks. Congrats. Very strong set of numbers. My first question is on the U.K. FTA. Are you seeing any increase in competition till now? Because costing is affordable for all players, is there more intensity within existing players? How are you reading that part? Second is a question to your international head. In terms of the four airports in U.K. and further expansion, what kind of opportunity long term you see in that market because of the FTA and now better presence on ground also?
To answer your first question, with this UK FTA, we are seeing about close to 8%-10% reduction in the BII. If you see our portfolio, whether it is a Rampur or Virasat, it is a single malt, and it is already priced higher than the existing BII. I think it is more of a consumer preference. As far as the other portfolio, whether it is After Dark or Magic Moments, et cetera, that is way below the BII Scotch. As such, we do not see so much of a challenge in our portfolio at all.
Well, regarding the GTR, as you know, we just got listed in four U.K. airports. That is Heathrow, Gatwick, Birmingham and Manchester. The response has been very positive, and global travel retail remains a very important channel for us, especially for our luxury portfolio, both in terms of showcasing the products to a global audience as well as consumption for them, whether it is for their own consumption or for gifting purposes as well. We are currently in around 70 duty-free locations, and our objective is to get to 100 in quick time. We will continue to focus on this channel and try to expand it in quick time.
Sure. My second question is on the guidance. Two quarters, two upgrades. Overall macro versus three months back, six months back, entire country, entire world, more challenging. What is the specific reason, two, three if you can tell us, is it because shift towards vodka is higher than your initial expectation, or is it states like Karnataka or any specific state you can highlight? We do not know. The beer company said that Karnataka, they are growing 60%, for example. Is it specific state which is working much better, or is it just plain market share gain?
Sir, you are not audible.
Yeah.
Yeah. So I want to understand-
Yeah. To answer your first question is, if you see there is a structural shift which is taking towards the white spirit, which is Magic Moments, and globally also, if you see about 28% of the liquor market is Magic Moments globally. In India, it was very small. In 2025, it was 3.7, 2026 it became 4.5, and this quarter it is 6.3. So we are seeing a lot of shift, especially with the Gen Z and the younger generation and the women coming in, their liking is towards the white spirits because it is more easily mixable and plus it is much light and a flavored Magic Moments. So I think that shift is helping us, number one. Number two, to answer your question, Karnataka has led the way, and they have really seen after the reduction in the duties and free pricing.
To give you an example, say Radico, in the current quarter, we have grown more than 100% of our premium volume there. So Karnataka is helping us, plus we are getting overall growth from everywhere. That is why if you see the P&A growth of Radico is 36% in the current quarter.
Sure. One follow-up question I had on your P&A volume growth and your Magic Moments growth. If I dissect the numbers, it seems your non-Magic Moments P&A has grown around 23%, ballpark, it could be 1% or 2% here and there. Are you happy with this performance of non-Magic Moments P&A? And Karnataka, of course, has done quite well, which means non-Karnataka would have grown, say, much lower than that. Is Maharashtra dragging it down? Are you happy with this, say, 23% kind of growth performance in non-Magic Moments P&A?
I think we are more than happy because the industry itself has grown only 5.8%-6% in P&A. To have a 20% non-vodka growth, I think it is a commendable achievement. And vodka we have grown by about 49%. I think overall the P&A, we are very happy with the portfolio. As far as Maharashtra goes, our P&A, we have come back into growth in the current quarter.
What is the reason for that?
Did you ask about Maharashtra.
Maharashtra coming back.
Yeah. Our P&A. From our side, because as I said, the flavor shift is happening towards the vodka and now I think vodka is about close to Maharashtra industry.
Maharashtra.
11%. Maharashtra 11%.
In Maharashtra, the vodka has become 11% of the industry. Where we are market leaders, our P&A has grown very fast in the current quarter there. Abneesh, to your other point about Karnataka, while Karnataka has grown very strongly, our saliency from Karnataka is still 6%. While that has contributed, the other states are growing much faster and are contributing a lot more meaningfully.
Sure. Last quick question. On Tamil Nadu, your media interview, you gave some insights. The beer company also said Tamil Nadu seems to be opening up well on the right track. If you could discuss medium long-term opportunity, assuming some basic stuff here. On Telangana, again, everyone says the next quarter the hike is happening. What is the current understanding on Telangana price hike?
To answer your first question about Tamil Nadu, Tamil Nadu is the largest market in the country, and as far as Radico goes, our Magic Moments is the largest selling premium brandy there, and it is the second-largest market for vodka. What has happened in September, which is a very positive and a pleasant thing for the industry is orders have started coming on tertiary basis. Even for us, our volumes are up 20%, and also they are introducing a new thing that anything above INR 1,000 would be paid digitally. I think that is going to, and new brands we are allowing them to come. I think Tamil Nadu can be a very interesting and a good opportunity for the industry and especially for Radico.
As far as Telangana goes, we have represented to the government, but it all depends on the government about the price issue there.
Sure. Thanks. That is all from my side. Thank you.
Thank you. The next question comes from the line of Harit Kapoor from Investec. Please go ahead.
Yeah. Hi, good evening. Just one question on exports. I know P&A has done exceptionally well in the first half. Just wanted to get your sense on what's been the kind of exports growth for the first half of the year, given the issues geopolitically. How do you see this panning out over the next, say, two, three, four quarters? Do you see an easier situation, a slightly harder situation? Just trying to understand that whether this piece has not grown at the pace you would have liked, and hence there are likely opportunities going forward over the next few quarters for growth to revive. That's my first question.
In terms of exports, yes, the geopolitical situations in West Asia did have an impact initially when the whole thing started in February and March. For first couple of months there was a problem, but then it's bounced back now. Our shipments are going regularly into the West Asia market as well.
The only issue is logistics. The freight rates have gone up tremendously, but otherwise we are seeing a growth in all our export markets, so there's no letdown on our export business.
As of now, the issue is more a margin issue because of freight rates rather than a growth issue, which has rebounded already.
Yeah, that's correct, the freight issue. Part of the freight we are absorbing, part of the freight is being absorbed by the customer over there.
In some cases, there has been a little bit of increase in the consumer prices as well.
Got it. Second question, Abhishek ji, just wanted to get a sense from you. This doesn't look like a one-year or 18-month phenomenon on vodka. These are typically trends, as you mentioned, globally the shares are high of this category, and obviously you may not see 40%-50% growth rates, but do you expect this to become a multi-year driver for you over the next maybe three, four, five years? Where you may not see 40%-50% growth, but the growth rates will be significantly elevated compared to other spirit subcategories. Is that the way that you are seeing the market? Just wanted to get your read on how you're thinking about this.
Right now also, if you see total vodka market share is 6.3% in the current quarter, and I think globally it is 28%. Even a 1% shift adds close to about 4 million- 4.5 million cases of vodka. So what we see, plus the normal industry growth. We see that in the next three to five years, the vodka should outpace any of the categories, especially the flavored vodka.
Got it. Last question is, if you could just give an update on. Yeah, go ahead. Sorry.
Even in the last five years, if you see, the vodka has grown by 20% year-on-year. I think it's a trend which is there to stay now.
Understood. This last bit was, if you could maybe just You made several kind of launches in the last, say, 12 months or so. If you could highlight which of those you think has seen a greater response. I know After Dark and Black have done well, and those are slightly earlier than 12 months back. But the recent ones in the super premium space, if you could just call out maybe one or two that you are more satisfied with in terms of traction, that would be helpful. That's my last question.
I think among the new launches, which we are most excited about, I think the Virasat Indian Single Malt, because we didn't have a malt in the affordable luxury, that is about INR 3,500- INR 4,000 a bottle. I think that is seeing a tremendous response from every state. That we are very happy about. Second, we had launched Jamun. Jamun has become a craze. Now even Aam Panna what we have launched last month, the kind of tertiary and the kind of interest we are seeing is quite high on that. After Dark is still not rolled out in its new avatar in many of the states, so it has just started rolling out. I think that also should see a good traction. 8PM Black is back in growth after we changed the packaging and the entire look of it and the communication.
Great, thanks. Wish you all the best, and just a point of congratulations.
To Saket and Dilip ji as well for the elevation. Thank you.
Thank you.
Thank you. The next question comes from the line of Dhiraj Mistry from Jefferies. Please go ahead.
Yeah. Hi, good afternoon, sir. Congrats on good set of numbers. My first question, historically, what we have seen that second half is much better than the first half. And wherein first half you have done 36% volume growth, and looking at your guidance, definitely it has been upgraded. But our spread becomes 24, 25. If I look at the base also, it's not that high also. What's the reason for this conservative guidance? Are you expecting any moderation in demand momentum or how do we think about it?
Yeah, I think guidance is something where you are sure of. As far as the momentum goes, I think we are seeing great momentum, especially with the festive season on. I think the momentum is as strong as it was in the first half.
Okay. Sir, on going forward, beyond FY 2027, would you like to guide something in terms of volume for FY 2028, 2029 or medium-term basis for P&A band?
As far as FY 2028 and 2029 is concerned, we have already revised our guidance twice this year. We want to consolidate that growth, and there is no reason to believe that the momentum should come down, but we just don't want to ascribe a number to it at the moment. The strong growth will continue.
Got it. Sir, on luxury portfolio, how is the growth in this quarter, and are we on track to meet our guidance for FY 2027?
We have done a turnover of INR 475 crore last year, and we are well in course of meeting our guidance of 25% growth, 25% in terms of value growth.
Okay. There is no change in that guidance?
No.
Okay. And sir, lastly, on margin front, what will be the margin of IMFL business and non-IMFL business during the quarter?
The IMFL business' margins are, because of the luxury and the vodka being major share and all that, it is approximately 24%+ , and non-IMFL business is around 9.5%-10% for this quarter.
For the quarter. Okay.
Yeah.
Thank you. That's it from my side.
Thank you. The next question comes from the line of Rahul Agarwal from Ikigai Asset. Please go ahead.
Yeah. Hi, sir. Good evening. You commented on the non-vodka P&A growth. Just wanted some more color on how do you look at the whisky and brandy portfolio growth over a bit more medium-term, let's say two years. If you have to break this, let's say, 30% volume growth, which you've said for fiscal 2027, what would be vodka versus whisky versus brandy? And more medium-term, what is the outlook here? I am not asking for guidance, but just broad ranges will help.
As we have upgraded our guidance to 30% as an overall portfolio of P&A. So we believe that vodka, as we have already said, will grow much faster than other category as the industry is also growing. But on the whisky and brandy also, it is upward of 20%, which we expect as a portfolio. There, 8PM Premium Black, After Dark on the whisky side will take it, and Royal Ranthambore. And the other side is on brandy, the measure is Morpheus.
Got it, sir. And secondly, on the margin side, clearly this year is obviously a given that you are looking at maintaining this 20% range. But incrementally, if you have to look at additional levers, one is obviously the growth looks high, which is why you will have operating leverage benefits, plus the entire UK FTA benefit has to play out. Could you highlight just couple of top two, three points where margins could actually expand further in 2028, 2029? What could be the levers?
Like we said earlier, the faster-growing categories for us are vodka and luxury spirit, which have higher margins. While this year we have talked about 20% margin guidance, the margin doesn't plateau at that level. It's just that given the current volatility in the global macro led raw material and packaging materials, we are not putting a number to it. We have always said that the margin expansion will continue, and maybe down the line, one quarter or towards the end of the year, we will look at what the guidance for the next year is. But margin shall continue to expand.
Got it, Saket. Lastly, Abhishek ji, just one question. We are getting into U.P. elections next year. Typically, when this happens, how does the business behave? Should we be careful about, should we be more concerned about, or the business grows normally, as normal routine? Can you just comment on that please? Thank you.
The liquor revenue in Uttar Pradesh is very high, close to about INR 60,000 crore-INR 65,000 crore. It's a very big business, and the system is very well set. I think in the elections also, I think it's not a case of worry at all.
Okay. But typically, the business grows during election. Doesn't it slow down?
It does not slow down during election.
Got you. Okay. Got it, sir. Thank you, and all the best for answering the questions.
Thank you. The next question comes from the line of Nitin from HDFC Securities. Please go ahead.
Hi. Thank you for taking my question. My first question pertains to vodka, where we believe the growth has been healthy, and there will be increase in the competitive intensity. Just wanted to check on what is the salience of flavored vodka for us, and if you can highlight any future strategy around vodka.
Our flavored vodka would be about close to 75%. As we said, we have been innovators in making this category grow. We launched our Flavours of India, where we started with mango, Jamun, now Magic Moments Aam Panna. There will be one, two more exciting flavors which will be added on. I think the more the people come in, there is more noise for the vodka category, which will make the vodka category itself exciting. I think that is very good for the vodka category because when you talk about the white spirits, that is how the category grows.
Sure. Thank you. I just wanted to check, is there any example from the international market, like any further premiumization can happen in vodka? Anything beyond flavor we can do in vodka?
In terms of the international markets, we already have our flavored vodkas over there as well. Internationally, the flavored vodka is only about 25%.
75% is plain. It is very different than the Indian scenario. However, we are seeing a lot of traction for these Flavours of India in the international markets also. It is early days, but wherever there is an opportunity, we will push that.
Yeah, thank you. But my question was pertaining to any leads from the international market, like international 28% of the volume sitting in vodka. So, any innovation or any idea we can get from the international market which can work in India, or just the flavored vodka is the strategy for the near term?
See, there's a reason for why internationally it's 28%. India is also moving towards that, which is basically changing of the consumption occasions. Now, Indians are also consuming spirits in different shapes and form, whether cocktails, casual drinking, daytime drinking. So India is also moving towards that, and when that sort of trend happens, it moves towards lighter form of spirits, more versatile form of spirits. It's just that Indian palate is more suited towards flavors, and internationally it hasn't been the case. So I think we are reading the market. Currently, it looks like flavored is the way forward.
Sure. This is a really helpful explanation of the question. My last question pertains to After Dark with the new packaging and now authenticity with the master blender. I want to know, how's the brand doing and in how many states we have the relaunched After Dark active at present? Thank you.
So, After Dark last year has grown by around 60%. Last year number has been closed on that. And after that also it has been very progressive wherever it has been launched. Now after the new pack change, we had entered in the 10 states as of now, and we are getting the positive traction of the brand. The fact of the matter is that this is a huge segment altogether and there's a huge headroom which is lying there. So we are hopeful that it will further grow. So we have a positive side from the side of consumers and the customer.
Sure, this is helpful. Thanks a lot and all the very best.
Thank you. The next question comes from the line of Karan Kamdar from Choice Institutional Equities. Please go ahead.
Yeah. Thank you for the opportunity and congrats on another great set of numbers for the quarter. What I wanted to understand is that we've been growing from strength to strength. What challenges do we see in the current environment, specifically in regards to competition? Apart from innovation, how do we see our strategy evolving going forward specifically on marketing spends and advertising spends?
As far as we are considered, we are well-placed in almost all of these segments. When we talk about malts, we are talking about Rampur, we are talking about Virasat Indian Single Malt, and then the Sangam and Jaisalmer. So effectively in all these segments we are present there. So we'll keep on growing on that part because each of the segment is delivering result to us, and there is a huge headroom which is lying on. Vodka, as it has been mentioned in the earlier statements also, will be continuing with the growth because of the innovation of the flavors which we are doing.
Sir, what is our salience across vodka, gin, and whiskey? If you can throw some color, if not the exact numbers, especially for vodka.
Vodka is 30% of our volume. Whiskey is about 40%-45%, and rest is brandy and rum, and gin is still very small because it's only at the extreme top end.
Got it, sir. Sir, last question. What states do we see as tailwinds, and what states do we see as headwinds for the next six months to one year?
Headwinds. Let's first talk about the tailwinds. It's basically the progressive policies of different states. Any opening up in states like Tamil Nadu, et cetera. Then the entire overall consumer shift towards more and more premium, considering alcohol as a lifestyle category. Then vodka, of course, is a big growth trajectory going forward. In terms of headwinds, I think this macro environment is what is making the cost scenario a little volatile. But when you grow your premium product at 30%-35%, then it becomes relatively less meaningful on the margin side. But yes, that is certainly at the moment one thing to watch out for.
Got it, sir. Thank you and all the best, and congrats to the new appointments. Thank you.
Thank you.
Thank you. The next question is from the line of Harsh Sheth from ICICI Securities. Please go ahead.
Yeah, hi. Thanks for the opportunity and congratulations on the set. Just a couple of questions. Firstly on pricing, P&A realization was up about 3% this quarter, and you had mentioned 75 basis points of price benefit in Q1. For this quarter, how much of this realization growth is actual price increase versus mix? Going ahead, are there any state price revisions already approved for H2 that you should factor in?
As we said in our opening remarks that the pricing has improved by 85 basis points on overall basis in this quarter. Whatever price increase we have got in seven, eight states. On quarter-on-quarter basis, the realization improved by 2.2%. On a year-on-year basis, the improvement is much higher, around 12%, and it is mainly because we have grown 36% on our P&A category, and there is a de-growth of around 15% on our regular category. Otherwise, in a normal state of affair, this difference of the product mix and all that is going to remain between 5%-6%, which we expect in a normal circumstances. A price increase of 100 basis points to 125 basis points annually is the net impact.
Sure. Understood, sir. Secondly, on cost management, you had called out roughly INR 30 crore of packing material impact in Q1. What is the number in Q2? Can you talk about the value engineering you have done since things like shift to Hipster Packs, light weighting of glass, PET, et cetera. Just wanted to understand how much of gross margin resilience this quarter is from those interventions versus the mix. Also what is the hipster share of volumes today versus, say, a year ago?
The gross margin, as I said, first quarter was INR 30 crore, which was on account of the various packaging material. In quarter two, it is including the raw material and packaging material around INR 27 crore, which is roughly 1.6% on a net sales basis. As far as the value engineering is concerned, it is an ongoing exercise in the company. Wherever we find the opportunity to improve on our packaging or other things, then with the better parameters and all that, we look for it. I can't say at this point of time, but yes, as the R&D keeps on happening on that, whatever is being done and it is being tested, then we try to implement it.
Sure, sir. Just one last question. On regular segment, H1 is down 1.5%, and Q3 last year also had Andhra base effect. Is the decline mainly a base issue that fades from Q4? Or say, is it a deliberate pullback from low margin states that continues into next year? What should we assume for regular segment volumes going ahead?
At this point of time, the base impact from Maharashtra and all that will be almost nullified from H2. However, keeping in view of the raw material prices and all that, we also keep taking the views on the various listings. But you can take it as a plateau or the benign kind of growth from here onwards or 1% or 2% kind of growth on regular category.
Understood, sir. Thanks for that and all the best.
Thank you.
Thank you. The next question comes from the line of Aditya from Invesco. Please go ahead.
Hi. Thanks a lot for taking my question, and congratulations on a good set of results. My question is actually along the lines of the previous participant. I just wanted to understand that if we keep the product mix aside and the inflation that we have seen in the input prices across the board in the recent six months, I would say. The regulators and the individual states will take some time before they analyze and approve price hikes on the portfolio, right? That should come in the coming months or coming quarters. Just want to understand how this works.
As an industry body, this becomes an ongoing exercise, and this takes momentum before the new excise policy comes into effect. Most of the policies come in the month of February and all that. There we as industry body, we consider all raw material and packaging material inflation and put up to the Government Excise Department. Then we see that how much is the price increase comes, but it is a normal practice. At this point of time, it will start from November onwards in various excise by the industry representatives.
Thank you. Is it fair to say that as of now, this inflation has been absorbed by the industry, and maybe some relief is expected whenever the next revision happens by most states?
That's right.
Okay. Thank you. Rest of my questions have been answered. Thank you very much and all the best.
Thank you. The next question comes from the line of Pankaj Kumar from Kotak Neo. Please go ahead.
Yes, sir. Thanks for taking my question and congratulations on the very good set of number. Most of the questions are answered. Sir, one question on the luxury side, we are targeting 25% kind of growth in the current financial year. If you look at overall P&A category, we are registering more than 30% growth, and we are expecting to continue in the second half as well. So, what is your take on the long-term growth in the luxury category? Will it outpace the P&A? What are our strategy to grow it? Also, sir, on this brand Spirit of Kashmyr, how it is doing in the luxury category?
Yes, sir. As luxury is concerned, the base for the industry is very small at the moment, and we believe the kind of discretionary consumption that's happening in India, the higher-end lifestyle products, experiential products, are doing extremely well. We have seen how Indian single malt gin and other categories have performed over the last few years. So we believe that the strong momentum at the top end will continue. As far as Spirit of Kashmyr is concerned, I would request Mr. B anthiya to just say.
Yeah. So I think the matter is sub judice in the court, and I don't want to comment on that at this point of time. We will disclose it at appropriate time.
Okay, sir. Thank you for that.
Thank you. The next question comes from the line of Anurag Jain, an Individual Investor. Please go ahead.
Good afternoon, sir. My question is on the benefit from saving on Scotch import due to the duty reduction from 150% to 75%. I am asking this because the news reports related to statutory investigation seem to imply that duty reduction is not applicable to bulk Scotch imports, and is applicable only for the bottled-in origin segment.
I think the point is, there is a Ministry of Commerce which has done the FTA. This is being studied by the government department, and DRI is taking input from all the stakeholders, all the companies who are importing bulk Scotches and all that, and their inputs are also coming from Scotland. I think at appropriate time, they will clarify it. At this point of time, we cannot speculate what will happen, what will not happen.
All right, sir. Thank you. My next question is, recently on social media, there was an interesting data point. May I go ahead?
Yes. Yeah, please.
Recently on social media, there was a data point on the Indian liquor industry that the five southern states consume liquor in value terms much more than the rest of the country. Is this something which applies to target market of Radico also? How is Radico placed in these five southern states?
No, that is not correct. In the IMFL industry, South India accounts for about 60% of the industry because country liquor as a category or the local spirits are not there. While in North India and rest of the country liquor, IML, whatever you call it, that's a big segment. But it's not so hugely skewed towards South India as a whole.
All right. What would be the correct picture for these if we look at the spirit industry altogether?
Spirit industry altogether would be equally split between 400 million cases of IMFL, around 350 million- 400 million country liquor or local regional spirits, and around a similar size in the beer space.
All right. The market would not really be skewed so much towards South India then, if we look at in totality.
See, it would be not correct to look at it from an absolute number perspective. You have to look at each segment perspective. Our play is on the premium end, and that is what we look at mostly. Especially in South India, there are a lot of categories at the lower end below the regular category that we talk about, where we are not even present. If we strip that out, the distribution would be fairly even across India.
Fairly even across India. Sir, if you can give at a high level for our target segment, North, South, East, and West, what would be the split like for the target market of Radico? How would the four regions be split like?
See, again, we would have to probably take that offline because it is split between whisky, vodka, brandy, and different categories. Like for vodka, other than South, the rest of India is very strong. In case of whisky, again, it is fairly diversified, but in certain South Indian states, not that strong. So it is fairly complex that way.
All right. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we will take this as the last question for today. I now hand over to the management for closing comments. Over to you, sir.
Thank you. To conclude, our performance this quarter reflects the continued success of our premiumization strategy, backed by disciplined financial management and consistent execution. Looking ahead, expanding margin, improving return ratios, and healthy operating cash generation reinforce the resilience of our business and give us confidence in sustaining the profitable growth. With a robust balance sheet and a growing premium portfolio, we are well-positioned to capitalize on the industry opportunities and create long-term value for all our stakeholders. Thank you for joining us today and for your continued support. We wish you all a very happy festive season ahead.
Thank you so much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.