Ladies and gentlemen, good day and welcome to FY 'twenty one Annual Investor Presentation and Earnings Conference Call of United Spirits Limited. We have with us today Mr. Anand Kripalu, Managing Director and Chief Executive Officer and Mr. Pradeep Jain, Chief Financial Officer, United Spirits Limited. As a reminder, all participant lines will be in listen only mode, And there will be an opportunity for you to ask questions after the presentation concludes.
Please note that this conference is being recorded.
I would now like
to hand the conference over to Mr. Anand Kripalu. Thank you and over to you, sir.
Thank you very much and well a very good morning everybody and welcome to this results call where we will also review our full year performance and talk about some of the initiatives that have underpinned that performance. I'm Anand Tripalu. At the very outset, I want to extend on behalf of all of us A very warm welcome to our incoming CEO, Hina Nagarajan, who will take over from the 1st July 2021. Welcome, Leena, and over to you to give a brief introduction of yourself to our investors.
Thank you, Anand, for inviting me to be part of this session. Good morning, everyone, and welcome. Prior to taking on this exciting opportunity in India, I was leading the Africa Regional Markets, ARM as they are called, for Diageo as Managing Director. Since joining Diageo in 2018, under my leadership, Regional Markets became a significant growth driver for Diageo Africa. I drive to deliver results and I'm I'm known for building strong teams that deliver outstanding outcomes with a strong commitment to Diageo standards and compliance.
I have also been an active and passionate advocate for inclusion and diversity in Africa and more broadly at Diageo. Prior to joining Diageo, I have spent over 30 years in the consumer packaged businesses and had several senior marketing and I'm a commerce honors graduate from Delhi University and hold an MBA from the Indian Institute of Management, Ahmedabad. I also have a diploma in hotel management from the PUSA Institute, Delhi. I am truly honored and delighted to lead one of the most Exciting markets in the world for our industry. I know I've joined at a very difficult time, but I'm really energized and proud of USL results in such a tough year, riding on the strength of great brands and people and on the foundations of what Anand and the team have created.
I also look forward to interacting with each one of you in the next set of discussions, and I thank everyone for your time today. Thank you very much, And back to you, Anand.
Thank you, Hina. Very warm welcome again. So, S21, What a year we have had. I think if you had to script back To a year, nobody could have predicted how this year was going to unfold in front of us. From almost a complete lockdown at DICEF's fiscal year to near Towards the end of the fiscal, albeit with somewhat lower footfall, It's been just a journey of change through the year.
Despite things being pretty open during the March quarter, the quarter just completed. As we know, there have been no big banquet, no big weddings and none of those big consumption occasions that are really important for our business. Through this period, we've also Certain changes that have been visible. The first is that alcohol behaves like a semi essential category In a consumer share of wallet and therefore we expect it to recover faster than other discretionary category. Scolches will continue to grow faster than IMSL.
On the back of the fact that consumers who consume these brands are less price sensitive and people have found and discovered that in home consumption is cheaper than house of home. Whiskey continues to grow from beer, particularly in the lower prestige and mid prestige segments, And this is expected to continue certainly as long as the pandemic persists with the fact that the entree is going to be relatively closed. Repertoire consumption declined during the pandemic and people and the biggest SKUs. Moderation for icobab is the norm Rather than downgrading, irrespective of which socioeconomic class you're from, And that's because alcohol plays the role of an identity marker for consumers and therefore Reduction in occasions and quantity is preferred over down saving if you're trying to balance your expenses. And finally, in home casual get together are the most sought after occasions during the pandemic.
I'm sure that many of you who are on this call Are now seeing that is becoming a reality. So the real question is, How do you respond to a crisis? And our philosophy on this has been to focus on your circle of control Rather than your circle of concern, simply focus on what you can do and must do at a time like this. The first thing, of course, was to manage the crisis. And I talked last year about the 6 Cs in our strategy for managing the crisis.
1st and foremost, care. This is the heart of UScell where employees and their health comes first. And we are committed to the well-being of our employees and have launched significant programs to ensure that our employees are as safe and in the best as much in the best of health as possible. 2nd, communication. During the crisis, You can only under communicate and you need to extend your communication not just to employees, but also to the wider ecosystem that depends on you.
3rd, the consumer keeping your fingers on the pulse of shifts that are taking place and being agile and adapting as best as possible. 4th, putting your customer first and ensuring that you support them and they feel supported, particularly during these lockdowns when their business has come to a grinding halt and you do that through constant engagement with them. 5th, cost, dramatically reprioritizing and reallocating spend based on ROI, Dialing up productivity, so keeping your foot on the accelerator of cost savings and productivity across the lines of the P and L having a laser sharp focus on slashing non essential spends. And finally, cash, The 6th piece, cash. Cash is no doubt king.
A single-minded focus on receivables and managing credit, Managing advances, rigorously managing inventory and optimizing CapEx spend based on business criticality and ROI. So the 6 Cs that we focused on to manage the crisis care, communication, consumer, customer, cost and cash. But the second leg has been to say that once this passes, We will emerge stronger as a company or even in the windows that you have of the undulating Increases and decreases of the pandemic with every window we will emerge stronger. And for us, Emerging Stronger was on 2 legs. 1st, what will people say about our company when this pandemic passes.
Did they say that this company stood up and emerged As a corporate citizen and did what they must do to help their people and the communities around them, that for us Is look back reputation? How will we be judged at the end of this crisis? And the second leg of emerging stronger It's to say that we must perform better than others in the marketplace. Now, Praveesh is going to take you through detailed financials a little later. But here's a snapshot of how we have Formed in the previous 4 quarters.
Now what you can see from the segment on the left is our MSD growth And our growth was 19%, if I remove Andre Pradej from the base In the most recently concluded quarter, which is quarter 4, and our P and A business without AC grew by 31 Now this performance, albeit on a somewhat softer base, We believe it's strong and in many ways it just reflects the resilience of this business to bounce back in terms of our mantra of emerging stronger. I think importantly, we have seen a recovery of margins as well. And I think that really bodes well for the future of the business. So with that context, Let me dive a little deeper into today's agenda. So I'm going to talk a bit about what's beneath those results through our Strategic priorities, then hand you over to Pradeep to talk about our financial highlights in some more detail, and then I'll come back to move from looking through the rearview mirror to looking through the windscreen.
So As you all know, our performance ambition is to be one of the best performing, Most trusted and respected consumer products companies in India. And this is what drives the passion with which we every priority in this business and I'm sure when you read this, you will be able to connect with some of the stuff that we have done during this pandemic. The delivery of this performance ambition is built around 5 strategic priorities To strengthen and accelerate our core brands, to evolve our route to consumer from being a push driven Organization to a full driven organization to drive selectivity so that you can invest in growth and also deliver improved margins, corporate citizenship and finally to build an organization that is not just ready for today, but ready for the future. And let's look at each of these in some detail. 1st, Our brand portfolio is built around some of the biggest passion points for all Indians.
1st, Johnnie Walker is all about progress and that's a very emerging market mindset to saying whatever happens each passing generation must progress and Johnnie Walker is built on a legacy of making positive progressive choices. Black and white whiskey rise on the passion point of food, where pairing food and whiskey Missing is a kind of match made in heaven. Relaxing and unwinding with Black Dog where it inspires achievers to assign pause so that they can savor their journey of success. Crickets and Royal Challenge Whiskey hugely boosted by the association with 2 brand asset icons, Virat Kohli and the Royal Challengers Bangalore P50. And finally, music, which are key brand McDowell's number 1.
So let's see what are some of the things that we have done around each of these brands. On Johnnie Walker, we focused our effort this year to inspire consumers to walk back to their favorite bars With the walk in with Johnny activation, it was a simple invitation to walk into the to walk into the bar with any glass bottle and then these would be reforged into bold Striding Man installations that will be kept in many of those stores. With the help of renowned glass artists, We were able to bring to life Stridean Mansion Solutions across some key partner bars. On Black and White, we created an engaging short film and if you haven't seen it, I encourage you to do that. It's Quite an engaging film.
On sharing during the lockdown, on the Inclusion and diversity, a renowned musician, a mixologist and a fashion stylist came together over a brunch with black and white To go back, Witcher, which shares stories and experiences. And then finally, black and white pictures and platters, On Black Dog Whiskey, topical contents with India's top comedian, Givdas and product led content centered around the work from home theme. Our efforts On the Hipster pack, continue to deliver momentum on this very, very interesting SKU and it's now available across All planned market in the country and I'm really happy to say that the momentum on the hipster pack really continues. The integration of RC with RCB And as you can see a special edition RCB Players Jersey ICL pack, right? So if you look at those packs, It looks like the players' journey, a jersey and that was surrounded by mGround activation across outlets For the time that we could keep those outlets open and also getting some key stars from our RCB team to do Digital activation.
Importantly, we won a YouTube Creator Award for surpassing 1,000,000 Strivers, for RCB and by the way on social media, RCB was one of the most followed sports teams and most Active sports teams in the world. And I'm sure over the last few seasons, you would have also enjoyed RCB's performance on the field, both in September October and in the more recently suspended ICL. And finally, Yari and music and content published under the number 1 Yari Dampine won 14 awards across categories during the course of the year. Supporting all this Have been innovation and renovation that we've often spoken about. You can see the big bold change in terms of the RC pack.
You can see the change in the number one pack between the left and the right pack, so that's the new pack. Also the pilot of introducing number 1 in a can. And finally, something that's Just beginning to roll out as we speak, a breathtaking new all new in fact, Black Dog Whiskey Emboldened with a 14 year old variant as well and you can see the difference on the right of your screen between the Old packs of Black Dog and the new pack that's there below it. So that's what's happening on our brands. Let's Focus on our need to consumer and what are we doing on that journey.
As you know, We think of India as at least 3 Indias, right? India is too large and complex Think of as one India and we think of it at the minimum as 3 Indias, an affluent India or people who have globally traveled, They seek luxury experiences and unique ways to reach these people. The Middle India who are brand conscious, willing to pay for value And this represents the bulk of the prestige segments. And then of course, aspiring India, which are people who are price conscious, Right. And we are just entering the consumption cycle and that's where a large part of our mass business popular brand Really, really sick.
And we have a tailored strategy and a tailored organization structure to deal with each of these three segments. So let's talk about some of the things that have happened during the course of this year. Starting with Cost Whiskey, we've had focused interventions to win at home and We have enabled in home consumption through do it yourself drinks on digital, winning in the store where we have gone in a focused way after Duty free sales and how do you capture duty free sales in duty paid retail outlets within the country? And then winning the entree where we have leveraged our Raised the Bar program extensively to bring consumers back in. Festive season, so the good news was that during the festive season, the markets were Kind of more open than closed.
We created limited edition packs, as you can see on the left hand side and also some Turning new visual identities for our key brands that came up in stores during the festive season as well. And finally, despite markets being closed, the renovation of McDoubles number 1 has had a big impact in the marketplace. And honestly, you have to see some of these stores to actually believe the impact that they have. Moving on to our 3rd strategic priority, which is about productivity. We have continued our journey of focusing on driving productivity across every single line of the P and L.
On net revenue management, ensuring that our spends deliver ROI and focusing on premiumization to deliver stronger pricemix. Continuing to optimize our supply footprint and we have taken several interventions including factory closures during the course of the year. Making sure that our marketing spends have a productivity program to at the minimum negate inflation, Continuing our journey of prudence and overheads in the new effort now will be on office consolidation, Given the new future of work thinking and finally on cash, a massive debt reduction during this quarter And many of you will recall, we started our journey with more than INR 8,000 crores of debt in this business, right? And we have come a long, long, Long way since then, really bringing down the cost of capital and the interest costs for our business. Our 4th priority is on corporate citizenship, and I'll come back to you more of it later.
But Apart from things like sanitizers and other support that we did, as you know, we have been rolling out Raised A Bar, which is a 2 year program and we're coming towards the end of only the 1st year and we have extensively worked for the revival Of the on trade with many of the critical customers who've been going through a very, very difficult time, Good news is that we will be continuing to do that through the next fiscal. But we haven't taken our eyes off The environment and sustainability, which we also believe is a critical part of corporate citizenship. So our efforts to continue to promote positive drinking and the ethical market shares of alcohol, our efforts to build a more diverse and inclusive Organization not just within ourselves, but over time within our ecosystem and continuing to focus on the planet, optimizing water consumption and reducing greenhouse gases. And finally, on building a winning organization and really four things here. 1st, We have continued to raise the quality of our talent by the right hires And also through the right development efforts for helping talent that we already have to reach their potential.
We've tried to build a culture that is more open, more non hierarchical, more fair, more apolitical And above all inclusive, so that's not just for genders, but People must be on gender, people with who are different people, people who have different viewpoints, All feel very much included. We are continuing the process of simplification. We have done Huge work in reducing the complexity of this company and we continue to make strides on simplifying our business. And one of the examples of this was reducing the number of layers from 16 to 9. And finally, We are continuing to engage and energize our teams through progressive policy that puts people genuinely first.
I just want to conclude on this slide by saying we recently had our all employee value survey. More than 90% people participated, so it's a very wide representation and a highly quantitative Survey and I'll tell you this, despite this pandemic, our employee engagement scores has never been higher. We are operating at the highest levels of engagement in this virtual world and The level of pride in working for Diageo and for United Spirits has actually never, never been higher. So we really do believe that we have managed the crisis as well as we could have And we have emerged stronger even though the crisis is not over yet. At least thus far, we've emerged stronger both In terms of our reputation and being standing up as a good corporate citizen and also with each passing quarter in terms of our competitive performance.
I'm going to now hand you over to Pradeep to take you through the financial highlights In a bit more detail, Praveen, over to you.
Thank you. Thank you, Anand, and a very warm welcome to our investor and analyst, Pradun Singh. Let me just walk you through the financial year 2021 financial highlights, right. Okay, so this slide is, I mean, what you see on the left are our full year number, right. But I think the story is all about the sequential quarter on quarter recovery that the business has staged.
Anand has already spoken about the quarter on quarter recovery, so I will not want to repeat that. And maybe what I'll quickly move on to is the next Slide where I decode the full year 2021 net sales performance based on some 2 or 3 Consistent themes that we have been talking to all of you about, right. So on the can we move to the next slide, please? Yes. So ladies and gentlemen, here I'll make an attempt To decode the 13.2% decline that you're seeing on a full year basis on our net sales, right.
Now the 13.2% decline roughly Leads to about a INR 1200 crores net sales shrinkage, right. From that, I back off about INR 250 crores of bulk Scotch sales sitting in our financial year 20 19, to make it absolutely comparable, right. And then there are 3 things that I want to kind of feel out the impact of, right. So one is the March 23 up to June 30 impact of the lockdowns in the prior Right. Now we are getting a benefit of the 9 days of March in our current quarter, right.
But then it's the April June quarter, which which took the entire brunt of the lockdowns last year. So that's roughly a INR 700 crores shrinkage, net shrinkage. It's a gain of INR240 crores in the current quarter, but it's a loss of about INR 1,000 crores, INR 960 crores that we take that we took in April June, right. So that's roughly about 8 points of growth. AP market access, we've been speaking of The last three quarters, the reassuring thing is that we have finished the lap up now and hopefully going forward this will not no longer be an item of variance in our number.
That's roughly INR330 crores. And the third one that we've talked off in the last two quarters is the West Bengal excise policy and especially its impact On the Popular segment, right. So that's roughly about INR150 crores. I think the what I want to leave the Leave all of you with this that leaving aside the quarter one impact and the 2 states that I have called out on the slide, We are extremely pleased with how the business has performed quarter on quarter and especially with the momentum with which we are exiting Q4, right. Exactly the same thing for our P and A business And roughly what you see in the extreme right hand side, that's roughly the number that you will see for the last three quarters on a combined Let me move to the next slide, right, which is our EBITDA performance.
Yes, Anand, we can move to the next slide. Yes. So headline level, the EBITDA margin actually shadows the net sales performance, right. Again, on the top right hand side, if you see the quarter on quarter from a negative 8% in Q1, we are exiting Q4 with an 18.5 percent EBITDA margin, that 18.5% is driven on the back of Slightly muted E and P spending, but we'll talk about that as we come later. Overall, I think we are exiting with a significant momentum on our EBITDA margin as well.
The left hand side shows the broad bridge in terms of our financial year 2021 EBITDA over 20 nineteentwenty 20. Now there's 2 big blocks if you see in terms of the margin are what we lost in the quarter 1 of 2021, the sheer scale of the net sales that we lost, right, the gross margin of roughly INR550 crores, That's about 150 bps. And then the 2 blocks on the right hand side, when you lose net sales value of that quantum, the operating deleverage that it produces, Right. At a headline level, there are two factors that have impacted our 2021 EBITDA performance, the Q1 lockdown, all right, which led to the net sales value decline And therefore, the EBITDA loss on account of that and the Andhra Pradesh market access, we've already spoken about the unwinding costs associated with Andhra Pradesh And the large franchise business that we had in that market, right? And obviously, that has come down to absolutely 0.
We can move to the next slide. At a PAT level, again, it mirrors Completely the EBITDA performance, right? I think the one thing that needs to be called out is that last year, we were currently, We are overlapping 2 exceptional items in our tax line last year. So therefore, the tax kind of provides us a bit of a kicker. Having said that, we are also taking the exceptional Items of about INR 150 crores in our PAT line.
So overall, our PAT overall reduces from INR 700 crores to about INR 310 crores. Adi and want to provide comfort that we are exiting Q4 with PAS margins that are almost in line with our established run. We'll move to the next slide, which is about the cash. As Anand mentioned, extremely pleased with what we have Managed to achieve on the cash front in the year financial in the year 2021. Apart from the EBITDA of INR 1,000 crores INR900 crores roughly on account of working capital efficiencies.
Now the INR900 crores of working capital efficiencies are a combination of two things. We are lapping a slightly inflated base as on March 31, 2020. But apart from that, right, I think The focus on productivity and extracting efficiencies through all elements of our working capital, right, and the fact that All the state corporations, right, have continued to pay us well on time And our top line momentum across the geographies has ensured that the money is rotating faster for our distributors And our wholesaler, which is reflecting in our base sale outstanding efficiency. We'll move to the next slide, which yes. So, Anurag has already spoken of that INR 1500 crores of debt reduction.
This is the maximum we have achieved in the last 6 years, I think 2015, 2016, on the back of a one time gain, we had a higher debt reduction, but after that, this is the highest debt reduction that we have achieved in 1 financial year. Also pleased to share, we had spoken of it, I think, in the last quarter that Crystal has reaffirmed its So AA plus and A1 plus rating for our bank facilities and our debt program. The debt equity ratio continues to come down. It Stands at 0.1% on 2020, 2021. Interest savings, while you see only about a 13% to 14% reduction on a full year basis, But again, if you look at the quarter on quarter numbers, I think our Q4 numbers have reduced by about 40%, 45% compared to Q4 of last year, especially after we have refinanced our non convertible debenture of about
INR 700 crores in the
last quarter, right. Interest coverage ratio has come down a little because of our overall profit numbers coming down, as I explained a little while earlier. But like I said, that's only moment. We can move to the last slide. Again, once you leave the investors on a reassure input, if you look at our earnings per share progression, Up till 2019, 2020, we have roughly been in the INR10 per share kind of earnings per share, and we are again exiting with a similar momentum.
If you back off the exception I think our earnings per share for the last two quarters has been in the range of about INR 3 to INR 3.2 to INR 3.3 And that's well and truly in line with the run rates that we were operating on earlier, in fact, marginally better than that, right? Return on capital employed has come down because of the overall profit for the financial year. But again, not to keep saying the same thing, We are exiting at healthy levels and hopefully that should sustain going forward, right.
So that's the ladies and gentlemen
A summary of the financial highlights, I will now hand it back to Anand to wrap up the presentation.
Thanks, Puneet. Thank you very much. So as I said, moving from the rearview mirror to looking through the windscreen about what is ahead. Now there's no question that we are back to having to manage the crisis in the short term, both for our employees and the communities that we serve. And I just want to say that, at the end of the day, if you don't keep your employees safe, then you have no business.
And at a time like this, you have to go beyond just helping them professionally, you have to help them personally. And what we have tried to do is to make sure that we do whatever we can as an organization to keep our employees at the Center of the policies that we create. So we've created things like giving almost on the spot salary advances, Supporting and enabling vaccination, COVID care leave, that would be 14 days COVID care leave for self independence, Ensuring domestic medical expenses go well beyond what's covered through the insurance policies and we will cover any expense That's related to COVID, so that employees are covered. Providing employee assistance for their overall well-being, not just physical and medical, but mental Well-being, pre teleconfessions with doctors, enhanced medical reimbursement, Right. That is necessary and providing self isolation rooms in partnership with some hotels.
And sadly this time around as many people Last time, wave 1 was about numbers, this time it's about mail. And sadly, in the case of a demise, Apart from a large payout that will come from insurance, We have committed to adding another year's salary to help people tied in some small way with at least the future of their lives. But equally for the communities in the society and we have today just announced this Morning, a whole new set of efforts and initiatives and investment to support the communities within which we operate. So for instance, we are making sure that in at least one district in every state or union territory, we will make an intervention. So we are creating 16 bed mini hospitals in 15 most needy districts and these are mini bed hospitals that are Self sufficient, but also that can be moved around to other more needy biscuits, as and when needed, and we are investing on this.
Providing oxygen plants to nodal government hospitals in 21 districts and across 10 states in the country providing medical equipment consumables, oxygen supplies, ICU beds and so on as requested by I just want to say this that Diageo is committing a further 45 crores Towards this effort to help India at this time of need, Of this INR 45 crores, INR 35 crores or £3,500,000 will be funded directly by Diageo Plc And INR 10 crores will be contributed by USL. But just if you add together what we've done in wave 1, Our Raising the Bar program and what we're doing now, Diageo in India or Diageo as a group would have committed Almost 130 crores towards COVID relief. I really actually, I must say, feel very proud That our company is willing to open its first string at a time of dire need like this and help those who we depend on in the world outside. So that's what we need to do in the short term. And as we said, the medium term, this quarter, next quarter, you can see The state of the nation, right, successive lockdowns, I mean nobody is breathing easy.
So the reality is We are in choppy waters again, right? And we are not immune from these choppy waters. However, right, and therefore there is going to be some short term impact on the business, right? And that's to be expected. But as the lockdowns emerge and as we start feeling in calm waters again And as the sun shines brightly as again as it will, we need to make sure that we're as focused on the long term As a company and as a management team, as we have been on taking care of the short term crisis that we've been in.
Therefore, we are renewing our commitments to the planet with our Society 2,030 Spirit of Progress Commitment, And we are making some significant commitments as part of this. Achieve net 0,000 emissions across India operations by 2025 achieve net water positive impact in India by 2026 and ensure 100% use of only So this is something that every responsible company needs to do. But the long term opportunity in this remains optimistic. And I have to say, it is very, very optimistic. And yes, there have been lots of these Funnies as we call them that will happen from year to year and sometimes quarter to quarter.
But the fundamental consumer opportunity of 17,000,000 Low penetration, particularly amongst women, low per capita consumption of alcohol, in particular spirit, Assimil barriers to alcohol, breaking down with alcohol being more open and more accepting and more acceptable to people. And finally, consumers looking for better experiences. All this means that the consumer opportunity, right? It is intact. To add to that is the opportunity for long term premiumization and you have seen how our strategy Focusing on prestige and above and scotch has continued to play out in this market, right?
We are Playing in line with how consumers are evolving, there's an exploding middle class, there's improving purchasing power and Not only that, people are willing to open their parcel. Okay, my apologies folks. I'm not sure where I left off, but was this slide covered in the presentation? Can somebody just text me and tell me whether this Slide was fully covered? Yes, Anand, this
was covered.
Yes, Anand, this was covered. Slide 44 was covered.
Okay. Slide 44 was covered. Okay. So folks, so I just wanted to say that the consumer opportunity, the premiumization trend, the But equally, I just want to say that, not only the assembly environment, but also our business has never been in better shape. And I just want to demonstrate that the external environment remains strong, the long term prospects remain strong and our business Has never been in better shape and I'm going to use today's opportunity to just recap some of the things We've done over the past 7 plus years that have certainly been around.
We have transformed this complex and fragmented USL business That'd be as you acquired, it's not just a business, but I believe an institution, which is built on strong reputation and a cohesive and consistent strategy. Okay. Now firstly, we focused on profitable growth We visited around premiumization and productivity. The growth was focused on scotch, On Prestige and above, which is now 70% of our business and renovation and innovation as a cornerstone of our strategy to build those brands. We supported this with productivity and efficiency across Every aspect of the business, we demonetize a load of non core assets.
We have halved the number of manufacturing sites. We Half the headcount, we have moved to a more asset light franchising model for some of the popular Art Master Master's brand. And of course, we reduced debt very well significantly. Secondly, we have transformed the reputation, I believe not to this business, but of this industry. We have shown that business Can be done and we have genuinely changed the way business is done in this country and in this industry through ethics, Governance transparency across every aspect of our business.
We have changed the nature of engagement with State and Federal Conference have moved from a negotiation to more of a collaboration and have a seat at the table because we can add intellectual test and experience and help them to craft a win win strategy. We were seen as a liquor company. I do believe we have moved from a liquor company to corporate citizen now and we have transformed the reputation for our corporate brands and our employer brand, which is Diageo. And finally, we have created big shifts In balance and culture, an aspirational culture integrating the best of the erstwhile USL and Diageo. Building an organization that's future ready in terms of organization design, capability, career development And being a functional rather than a regional operating model.
And in specifically diverse culture, many of you know that there was not a single woman on the leadership Very, very confident women at every level in this organization, so I must hasten to add, there is a lot of work to be done. And then having progressed Strong highs from prestigious Indian and global companies across diverse sectors and we've continued to develop the internal pipeline. Very often in the past, I used to talk of the early years with yourself when we were, I used to say we are Flying the plane while repairing the engine, okay. And I just want to say this, that I feel that the plane It's today robust and its engines are in good working condition. With what we have managed to do in the industry, I believe we have constructed also a Solid Monday and this game that we have built now is fast seeing and almost accelerating.
And I really believe that in the times to come, this game combining the potential of this industry and the strength of this business We absolutely have every potential to take out. So with that, I want to thank you for your time,
Thank you very much. We will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhneesh Roy from EDELWEISS. Please go ahead.
Yes.
Thanks for the opportunity and congrats on the good recovery. My first question is versus industry, if you could tell us how much faster you have grown because you commented that you have grown faster than the See, when I see the numbers in the last two quarters in P and A, the sales is almost flat, which is commendable given that Bath are shut and COVID scenario. And on marketing spend, it's at a multi quarter low. And last Quarter also on a Y o Y basis, there was some saving as a percentage of sales. So is there a structural lower cost environment currently, Even a lot of events activations are not possible?
Yes. So thanks Avnish for the question. I just want to say this, first of all, I can't tell you precisely, right? You'll have to wait to look at other results and try and triangulate the data. But From whatever tracking we do and personally I cannot share that more publicly, we believe we have outperformed competition in each of the last four quarters, Right.
Despite the quarter having been fairly subdued because of the environment in the way it was. Yes, marketing this quarter is actually low, But I'd like you to look at marketing costs on a full year basis, right? And we are probably about 90 bps behind what we were in the previous fiscal. We like to spend money behind news and this quarter we have testifies money to spend behind some Significant activities, which because of the conditions, we couldn't fully execute, right? And you will see that spend coming back.
I also would like you to think of AMC spend the way we think about it. AMC is just a pure advertising and marketing that you see. We also think of are we investing behind our brands in terms of products and packaging and competitive performance and delivery, Right. And we treat that it doesn't come under the accounting line of ALC, but we treat that as bank investment, all right. And sometimes we might move money From there to here or if we are taking a pricing action in a particular state, right, we treat that When we totally talk, we add all those levers together and say, this is the total amount we are getting ahead of.
But in terms of A and P, the way you should Think about it is that, I think 8% to 9% will be broadly the range that we would spend in a normal year, right? And spend maybe size right now shops are all shut in half the stage. So we're not going to be spending L and P money. So if you think about on a full year normal basis
8% to 9% is what we'll spend, which will
always mean a strong double digit
2nd and last question is on gross margin. So good improvement on a Y o A basis. But quarter on quarter, it's gone down by 70 bps. So any comment there? And on outlook, given inflation everywhere and the fact that the sentiments are weak, could you see some risk
So we're not going to comment on guidance on gross margin, at least you know that. I mean, we have always said guidance is about operating margin. Now having said that, we have been and don't reach too much into quarter to quarter because there are lots of money right now. But the fact is that the gross margins are at a reasonable level and they've been enabled by a relatively benign COGS environment And benefited from our productivity program continuing to be driven really, really hard, okay. Now as you look ahead, you've got to expect some inflation is going to come in after a benign year like this.
I don't think you're going to see a big hit on COGS in this April to June quarter. I think we know that this quarter is going to be reasonably okay. But you've got to believe that some level of inflation will set in. The counterbalance to that is the fact that With the pandemic again in full fury, there's going to be a big supply demand on commodities as well, whether it's gas or E and A and so on, right? And if the overall demand is down, then the prices could also soften as a consequence of that.
But that's the basic situation. I don't think you should read too much into the GM movement. We reiterate our commitment that when times are normal, when the ship is Sailing in calm waters that we will deliver mid to high teens margin with a consistent improvement in operating margin. And that's all we really can see, Amish.
Sure, sir. That was very helpful. And thanks
a lot and all the best. Thanks. Thank you.
Thank you. The next question is from the line of Avi Mehta from Macquarie. Please go ahead.
Hi, Anand. Hi, team. Congratulations on exceptionally strong cost control this time and productivity benefits clearly flowing through. My question was essentially on what you told just now. We have almost, I mean, in my view, kind of reached that mid to high teens Mark, clearly this quarter, do you think there is more juice still and that target is still something that high teens It's
a much higher number in
your view. Could you kind of give us some sense, how should we look at margins on a sustainable
Yes. Thank you. So listen, there's always more juice in every business and there are always opportunities, right? But having said that, I'm saying, listen, we need to deliver this performance consistently before we go back and take guard again on Scoring the 2nd Century, okay. And we need to be out in the woods in terms of the choppy environment we're in.
This is not the time for us to be relooking at guidance and therefore I would really, really resist from doing anything at that time. I think in the future, once we deliver consistent performance, once the cloud's peak, right, I'm sure there will always be an ambition In every business, including ours came through, but for the foreseeable future, this is the guidance, right? And I don't think we can add Any more value to that guidance today, Abhi? I'm sorry.
So sorry, if I hear you correctly, this number is something that you think is sustainable, Right. Would it be fair
at least in near term?
I mean, I understand that we are in an uncertain world, but at least given whatever visibility you have, Except the ad spend when it kind of moves up logically, the recovery should also be playing out. So you think that should balance? Is that what would be the aim of the management?
Don't look at quarter to quarter margins, first of all. Okay. Right. Please look at our performance on a full year basis. We don't run the business on a quarter to quarter basis, and I said that before.
So this quarter, we may have done less A and P, previous quarters may have been higher A and P. But we're running the year, right? And that's how it's going to be. And therefore, I'm saying you have to look at our guidance as the goal, right? Okay.
And that's our guidance. So don't start extrapolating, right? I mean 1 swallow doesn't make a summer. So please look at our business more holistically than just 1 quarter is what
I would Perfect. I hear you. Okay. So full year is what I'll hear. The second question essentially is there's a lot of pain I kind of pick up we hear in the smaller peers In the industry, especially given the working capital stretch that has happened, the tax increases, I wanted to understand, is this an opportunity that is worth looking at or is the profit pool to an attractive given the segments that they cater to Your thoughts on that?
So we have already announced our strategic review for parts of our popular portfolio, okay? And I think we are very clear actually and we have been clear right through this last many years that the future profit pool is moving towards procedural about. And that's where we want to focus and there's enough to be done there, right, across your stage and across parts, Okay. Now it's possible that some of the smaller players may have a hard time and we still have, I'm saying our popular portfolio, right, and we see I'm taking a call on what exactly we're doing with it. And therefore, if there are opportunities to mock up volumes because Somebody else cannot supply?
Oh, we absolutely remain committed to the portfolio that's there with us. Okay? And you know very well that we have retail business for which we look at it more strategically and franchise business, right, which we allow third parties to manage. So absolutely, we will mop up any opportunities that are there. But I think the way we have to think about this is, What is our strategy?
What do we want to do as a team rather than be, I would say, opportunistic? Because that you might be a short term opportunity, but if you take your eyes off the big prize, then that's not going to be wise in terms of how management will spend its Simon, where management will invest resources, okay? So that's how I would want you to really think about
Got it. That's very clear. And just a bookkeeping question for Pradeep. There has been an increase Actually, Rit, increasing the excise duty payable in the balance sheet, is this a timing thing or is It's more structural in nature. That's the only bit.
Thank you. I'll come back.
Ravi, this is Jaini.
Okay. Perfect. Thank you, Harish.
Thank you. The next question is from the line of Aditya Sohman from Goldman Sachs. Please go ahead.
Hi, good afternoon. Just two questions from my end. So can you just throw some more light on the scotch performance, particularly BIO, Scotch, over the past quarter and the full year as well. You'd indicated in the previous call that brands like Red Table did exceptionally well. Any additional color you can give us on that?
So I can just tell you that, Spots is doing strong double digit, right, very strong double digit. It's the fastest growing segment within our business, including in this previous quarter that we have seen, okay? And within that, DII was growing much faster than DII. And DIO is growing faster, partly embedded by some soft tissue registry sales, as you know. Partly, we have had some regulatory unlocks On pricing, right, in several states actually where DIO decrease in pricing therefore have kind of rationalized.
And I'd like to believe that our teams have also done some really good jobs on the ground to exploit that opportunity, okay, And drive that opportunity hard. So I would say it is the first and going part of our business at this Without getting into more details on that, that's big numbers of it, yes.
Thanks, Amal. And then just a follow-up there, I mean, You talked about regulatory unlock. Can you just give us an example or throw some more color on what exactly has changed?
It's basically tax rationalization and therefore some pricing correction across quite a few states in the country. Okay. And it is so if you remember, there was a big drop in prices in Delhi some time ago, Right. Then it's closer into line with Haryana prices. There's been some rationalization in UP.
There's been some rationalization in the few other states. And there are some states where we still are trying hard to get it actually high, okay. And I think one thing that you all may be reading about too that's connected to this Is what's happening on the UK India free trade agreement, right? And whether that should lead at some point in time Some significant unlocks on duty rate for imported spirits, particularly Scotch and Scotch whisky, right? And I can tell you there's a lot of dialogue happening and you read about it in the papers as well, but we will both sides on seeing what's possible in this
Thanks, Anand. And secondly, in terms of the strategic review of Popular Brands, When do you expect that to sort of get completed?
A little bit, we've said By the end of this calendar year, right, and I can tell you we are running absolutely unfair to make it happen right.
Very clear. Thank you. Thanks, Anand, and all the best.
Thank you. Thank you so much.
Thank you. The next question is from the line of Persi Panthaki from IIFL. Please go ahead.
Hi, good afternoon. My question is for Hina. Since you have spent time in the African geographies, what similarities do you see there with India, which can be sort of read across or kind of applied learnings to the Indian geography?
Tina, you want to take that? Or do you want to just hold until you're firmly in the panel?
Yeah. I would actually, I'm not an active part of this panel. I'm only an observer today, so I would prefer to skip it. I mean, there are
The question is, with the 2nd wave of COVID, what is the kind of impact you are seeing on the business? I would assume that it is not as bad as The first wave last year around?
Well, it can't be worse than the first wave when there was 100,000,000 lockdown and there was 0 business, right? So it can't be As bad as that, thanks, Puneet. Sure. As you've seen the previous quarter, March was high by and large, right? But I think as we are now getting into this quarter, I mean, we are definitely seeing an impact, right, through this quarter, right?
So we exited strong in the previous quarter. We are seeing a slowdown. I don't want to put a number to it, honestly. But the reality is many states are 100% Right. Many states are shut, but thankfully, home delivery is happening, right?
It's where Narasthan will be involved, okay? And some states are open, but they are open from 6 to 10 in the morning or 6 to 11 in the morning, which is not normally commensurate with the people going by. And of course, the off trade or the on trade is largely shut. So I think you have to think about the fact that there are Significant barriers to consumption, right, as we speak. So the impact in the short run, right, It's significant, but no idea what it was when there was a full lockdown.
I think the only silver lining this is that like I said earlier in the presentation, It's more as a semi essential casualty and many states have allowed retail to keep Open, like 6 to 10 in the morning or 6 to 11 in the morning or allow home deliveries rather than shutting things down free. And I think the space also needs the revenues and they're not seeing any value in keeping alcohol completely shut. So why they keep it grocers and other people open. They're also finding a way to make sure people who want to buy alcohol are able to access.
So Anand, like in the first wave, the Problem was mainly the restrictions on supply. But this time around, while of course there are some supply restrictions, are you worried about any demand impact Because the caseload is much higher, it's much more widespread across India. And therefore, in this kind of an environment, The recovery from a demand perspective may not be as immediate as, let's say, whenever the supply restrictions end.
So first and foremost, I must tell you that we've seen many markets around the world and we've seen many incidents of this kind happen in our industry in the past. There could be the category is resilient, right? And the category always bounces back without seeing. Now having said that, there is some short term dampening of attitude, dampening of Spirits of people and therefore I would see some dampening of demand, but it's hard to read how much it is because of accessibility and shops being shut And how much of it is because these spirits of people are little damper because many more people have got impacted, many more people Has got affected by this pandemic, okay. So I think you could believe that there is some dampening of spirits and therefore some dampening of demand.
There are also supply challenges by the way, because many factories are getting into lockdown zone, many factories are able to work with limited people, Limited timing, reduced number of shifts. So it isn't only demand led or retail opening led. There are also cases where We aren't taking the supplies fully because if you have infected cases, then you have to go through a whole process I'm filling up your plant and then you may be given permission to only open a ship for 2. So we are in the situation we are in right And I think we'll just have to wait for this to pass. The only investment we'll lead to is, I really do believe this industry is like an elastic band.
Its ability to recover, right, is huge. And I think we should just remember that as we think about the
Right, sir. That's all from me. Thanks and all the best. Thank you.
Thank you. The next question is from the line of Ashit Desai from MK Global Financial Services. Please go ahead.
Yes. Hi. Thanks for taking My question is on other overheads. If you look at the other overheads for this quarter or year, We've been largely flattish versus last year, in a year which has seen revenue decline in double digits. And also when we compare this to the other consumer sales, we've seen a good amount of savings over here.
So if you could highlight, I mean, what has driven this why savings have been low over here? And Are there any one offs that we should be aware
of? Pradeep, you want to take that?
Yes, Anand, I'll take that. Yes, so Ashish, in the India As we have explained earlier also, the entire sizable component of the Andhra Pradesh unwinding costs Sit in the other overhead line. If I kind of make it like for like, we continue with our run rate of about 5% to 6% efficiency on a year on year basis on the overhead line, right? That's broadly
the run rate that we have established.
And in fact, in 2021, because of the COVID led restrictions, because travel, etcetera, was restricted, we would have delivered slightly higher than Right. So that's what the noise is on account of. The Andhra Pradesh unwinding costs have gone in 2 sections. One is about the gross margin line to the extent of the franchise business that we have to surrender and all the unwinding costs sit in the other Pradeep, can you quantify how much are these unwinding costs? We normally don't share that throughout the year.
Yes. We normally don't share that, Ashish, but do get in touch with Richa after the call. She will be able to help you out. Okay. Okay.
And if I may take one more question, I had a question on working capital. Rodney, if you look at the improvement in working capital, this has been driven by increase in payables and other current liabilities Are these sustainable? So firstly, are these sustainable? And secondly, do you see any room for improvement in reducing inventory and Yes. Prashu, let me take that, right.
See, comparing the absolute So may not be the right bench. The scale of the business has come down versus last financial year, right? What I would want to share is that if you look at the last 3 to 4 year progression, our working capital has always run net working capital, right, has run at about, I would say, around 30% of our net sales value, and we have ended 2021 in the range of about 26% of net sales value, right? And obviously, the NDF accounting kind of determines a lot of things, On an underlying basis, we have improved our working capital across accounts receivable, inventory marginally and across accounts payable, right. So roughly, you will see a 3% to 4% improvement.
Like I said in my presentation, The improvement part of it is driven by the fact that all the corporations have behaved, right? All the corporations are paying off on time. So therefore, it becomes a slightly high base to lack. But as Anand has mentioned and we have maintained that We continue to extract efficiencies across the value chain. It's an ongoing journey, and we will task ourselves to continue to extract working capital
Thank you. Next question is from the line of Harit from Investec. Please go ahead.
Yes, hi, good afternoon. I just had three questions. Firstly, on the it's been 1 year since you've We launched McDowell number 1 in Royal Challenge. I understand it was a bit truncated because of COVID. But if you could just give us a sense of As per your action standard, how both these brands have kind of performed in their relaunch now over the last 12 months?
Okay. I will please just stick to 2 questions, otherwise others are going to be very unhappy with us. So as far as the renovations are concerned, I would The following, number 1 has been extended almost everywhere in the country and has done exceptionally well in most parts Okay, right. So we are very delighted with that. As far as RC is concerned, the rollouts have been more limited.
It has not managed to get to At this place that we wanted to get to and there have been some other moving parts. So I'll say this that in some case RC has met action standards and done well. And in many states where there have been other things that have happened like Pricing movements and so on, the performance has been below what we would have ideally liked. But it's a very unstable sign And we still believe that it has potential to deliver, but right now it's still a bit mixed.
Okay. So is there I mean, just a
follow-up to that regarding ISV, while Indol has done well. Regarding ISV, is there a Are you kind of relooking at it or you're just waiting till the environment kind of settles down till you get actual bet more A little more on in terms of demand led data on how things are panning up?
Well, listen, we are constantly It elevates seeing how brands perform, right? And I think the team will then come back with whether we need to change something or just wait for market to Smoothen out and invest more and do whatever is necessary. So I mean I can't tell you more than that, but just recognize that We have our finger on the pulse and if something needs to be done, if it needs to be we need to persist with what we have then we will do that. But that's getting too much in the future. I'm just a little current.
Okay. Then second question was on So data point on franchise income. So, in 3 weeks, you could just help us understand what has been the kind of dip in franchise income for this year? You had mentioned in the beginning of the year that There'll be a significant reduction. If you could just help us understand what range has it been at for F21?
Yes, Pradeep? Yes.
So look, we haven't shared the exact franchise numbers, but what I do want to share is and, Ati, we took this question 2 quarters ago. We have a master franchisee in the south part of the country, right? And it is not just one geography. The franchisee operates across 4 or 5 days, right? And Andhra was a big, big component of that master franchisee, right?
And therefore, with Andhra going away, that has not just impacted the Andhra business, but the franchisee's ability to kind of performed sustainably in the overall cloud geography. So we have taken a bit of a hit, right? Now we've never shared historically the exact number, So I don't want to kind of divulge more details on that one, but it's been
a sizable number. That's all the right
Okay. Okay. So ex Andhra or probably ex SAU, would you have seen more or less You know, more or less Yes, yes. Yes, yes. Barring for the April, June lockdown period, I think our franchise income is absolutely stable, Next call.
Okay. That's it for me. Thanks and all of us.
Thank you. Thank you. The next
question is from the line of Tejas Shah from Spark Capital. Please go ahead.
Good afternoon. Thanks for the opportunity. My first question pertains to Agra's scenario. So in past you have spoken about couple of states like Chatushkar Transele where our sales had gone to almost 0 and then But in AP, we seem to be winding down for good, it seems at least as of now. So just wanted your perspective on
See, I have said this before, right, in this industry, what I have learned is that one door shuts, one other door is open, Right. And this is a constant game that happened, right. You know, that is the issue, right, in the Middle East. Utra said that our sales have come down And we're performing very well in that state and so do we intend
to do that.
Now, AC, all I can tell you is that our current business is pretty much not correct. Yes. So sorry to interrupt,
but your voice is not clearly audible, sir.
What do you do with this mobile phone connections nowadays? That's why one uses Wi Fi now. Is this any better?
This is better, sir. Yes. Thank you.
Okay. All right.
So we are continuing our engagement with the AP government and talking to them. And we are also thinking about what are the other unlocks that we could get, right, which includes using other routes that are available to us As per the laws of the land, all right. And this is not just true for me, by the way, it's true for largely Like minded industry that wants to do business the right way. Okay. So there's nothing more to say on this, right?
Right now, The only silver lining in our AP has come off the base for us, okay? And that's what we'll see real performance on that base without AP. But it's not as we are right. We are doing what we can. But right now options are limited.
They just are.
Sir, but I just want to follow-up on that. So is it the same for other peers, key peers as well or is it our call as of now and others are continuing?
Largely through Largely true give or take a bit for the multinational peers, right? Some people are doing a little bit more business than others, Right. We're doing almost nothing, right. And I think we are more governed by whatever we do, we'll do it right. Okay.
And that's it. But I would say by and large for most of the international players, It is become a is no business at all. And I think that's true even in the beer business by the way, but anyway.
Sure. So second question is on ethanol blending policy. So now it's been placed for 1 or 2 quarters now. Sir, any visible impact of the same on E and S sizing?
I mean, I'll just say this and then if So I'll tell you, if not a genuine policy is something that I've also learned, don't predict, because you just don't know When a new policy comes with a new price, okay? All I can tell you right now is that and it does come, Right. And then there will be a fraction, upwards or downwards depending on the policy of the E and A pricing. And we have seen that happen historically. And that's how E and A prices went up significantly because of the push towards ethanol blending.
Now is this possible, I think, that oil prices going north And so on, and fuel prices hitting what they are in India, it's always possible that the government will relook at ethanol blending policy. Yes. 2 things from our side, I'll say is this. One is that the immediate future seems okay And some inflation may come, but it's regular inflation. And we can't build our plans based on a discontinuity on the ethanol bending policy.
And the second thing is that we are progressively increasing our in house distillation to make yield, Right. So that we can securitize ourselves better in the times to come on this particular raw material. And That's the only way of hedging against some of these policies in the fullness of time.
That's all from my side, sir. Thanks and all the best.
Thank you. Thank you.
Thank you. The next question is from the line of Alok from Ambit Capital. Please go ahead. Yes.
Hello, sir. Thank you and opportunity and congrats on the share of cost savings Nikkanisha? Mike, two questions. First question is on the realization. So is it possible to elaborate further on what led to this Strong realization improvement in P and A, is it more to do with the duty free versus duty paid stock that consumers have bought or any price hikes or And secondly, within the states where home delivery has been allowed, can you share how are the numbers taking up, how is the growth, etcetera?
Thank you.
So home delivery, listen, it's happening today in 6th or 7th day, Right. Today, all the sales in Maharashtra home delivery. Basel Bengal is doing reasonably well. We have this space. It's kind of small and a bit of a triple, But we know that some of these things just take time for them to evolve.
I'm hoping that home delivery is there to stay, right? And more and more states We'll open this up. We have continued to talk to states. They have an existence because of concerns from The retailers particularly and the retailers are worried about the home delivery or more importantly, e comm business Sealing some of that business and that's the tightrope we're walking. Your first question is not clear.
Was it about EMA or BIO or what was it or scotch? I'm not sure what the question was.
Sure. So I So I'll just repeat it. So it was more to do with the realization growth that we have seen in the P and A portfolio. So I wanted to check Whether it is more a function of some statement exchanges, some price hikes or you think it's more of previously duty free paid Stock being bought by the consumer, which is now that demand is moving to DTK. Yes.
From DTK.
The PMA realization per case is what you're asking for? Yes. Yes. So it's really all of the above. All the reasons we have said have contributed to this, right?
First of all, there's a premiumization in the portfolio. Scotch Going much faster. As you have said, there is some price increases that we've got. Contrary to our thinking, as we were entering the pandemic, we thought We'll not be able to get any pricing, but we have well, I would say I'm pleasantly surprised that we have not issued some pricing. But there are a few more difficult states that We're still trying to attract.
And stage mix, I cannot confirm to you because I haven't looked at that data Closely enough, right? But certainly, brand portfolio premiumization and pricing are key contributors And also the fact that yes, sorry, yes, basically that.
No, sir, please go ahead. Please go ahead.
No, that's all. That's all for me. Prabhish, anything to add on that?
No, Ananda, I think you've covered it. I think The premiumization is working at 2 legs.
Within the overall portfolio, the P and A
Salient is going up and within the P
and A Salient, the Scotch portfolio going up, right?
So it's Literally 2 levers of premiumization within the overall portfolio.
Yes. Got it.
Thank you a lot for the answer. Thank you very much.
Okay. Thank you.
Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead.
Hi, thanks for taking my question. First question was, we just kind of entered into the excise cycle for FY 2022. So Any kind of positive outcomes in terms of pricing or taxation from any of the major states or any states where you have a worry other than West Bengal where I There are challenges, but from an FY 2022 perspective, how is that looking from a tax and price point of view?
So I would say we have not had any significant adverse taxes, right? There have been small movements here and there, But nothing significant to be a disruptive, okay. I think that's the first thing which is good news, Pricing, like I said, there have been some positives on pricing and I think more than a dozen states We have received some level of pricing on the other, right? And not just talking about
the FY cycle, but in the run up
to the FY cycle as well, Including some price increases that the market has taken in the state of Maharashtra, okay. So I would think that that's all good news. Yes, remember, like you said, we still have to fix the policy itself and we still have Karnataka Where we have not been able to crack pricing, which is a very important state for us. And we are at it. We still believe there's a possibility of getting it before the 1st July, but on pricing with the state government, you never know for
Sure, Anand. And just last question for me. So if I look at your 4Q related number, It's about 3%, 4% higher than what you had done in the Q2. And why I'm taking second quarter is that I know Q3 is a seasonally strong quarter, so not a high competitor. So with all the reopening happening, is it that as the on premise reopening happens, there is a compression in the retail sales?
Or Is it more of a West Bengal effect which is playing out in 4Q, which was possibly not the case in 2Q? If you could just help us understand that sequential movement And the revenues as the reopening happened?
It's very hard to read this because even though the on trade was open, it was open with very low footfalls, Okay. And we know that when the on trade has been completely shut also, the off trade has been pretty robust, Right. And pretty strong. So honestly, it's not easy for me To respond to your question. Yes.
Maybe I can just give a
headline response, Anand, which is that Q2 and Q4, the 2 lap up issues are very, very different in scale, right? The West Bengal policy Sometime around October 4th Pujo, I think, right? So that impact is very high in Q4, right? And similarly, I think the Scale of the impact of Andhra Pradesh, right, has diminished as we have progressed over the quarters. Okay.
Thanks. Thanks, Pradeep. That makes sense. Okay. Thanks a lot.
All the best Amit.
Thank you so much. I think, Stephen, I think we are out of time. So I'd request you to close the call.
Sure, sir. Over to you for any closing comments.
No, I just want to thank everybody for their continued interest in the company for their insights with questions as always. And I look forward to continuing to engage with you at least till the time that I'm here, which is the next 5 weeks or So till then, stay safe everybody and thank you for dialing in.
Thank you. Ladies and gentlemen, on behalf of United Spirits Limited, that concludes this conference. We thank you all for joining us and you may now disconnect your lines.