Key highlights of the call

The net sales inclined by 25% to Rs 143.27 crore while net profit declined by 18% to Rs 9.53 crore. The profitability has been subdued largely due to an unanticipated increase in input costs.

OPM came down from 16.9% to 13.1% for Y-o-Y basis due to bulk alcohol business which saw its capacity coming on stream in last few quarters, which has less margin. Also rise in grain prices which is its raw material has impacted its margin, which will also effect Q2. With ban on rice export by Government, prices are expected to come down which may take margin up around 13% to 15%.

In Q1, Branded IMFL volume declined from 0.17 to 0.11 million cases (55%) with sales of Rs 7.8 crore (86%), IMIL (country liquor) grew from 2.6 to 2.63 million cases (-1%) with sales of Rs 78.8 crore (-7%), franchisee IMFL grew from 0.35 to 0.41 million cases (-15%) with sales of Rs 1.2 crore (-8%) and bulk alchol grew from 3.79 to 10.21 mn bulk liter (-63%) with sales of Rs 38.8 crore (-63%)

The management said that Q1 saw slowdown in IMIL market due to inflation pressure and bad monsoon. This effect will be there in Q2 also. From Q3 onwards, some relief is expected. Also IMIL volume declined due to Haryana, which is its main market for IMIL, which has seen sharp decline in volume, while Rajasthan has seen small rise in volume with Delhi registering a flat volume growth.

The company is pioneer in branding IMIL, developed Nimboo, Rs 350 crore brand at retail level. The company is launching Nimboo in Rajasthan.

The capacities have stabilized as seen by an increase in volumes of 169% Y-o-Y in the bulk alcohol space.

Franchisee IMFL business is also witnessing an increase in volumes post the revival of bottling operations for Jagatjit Industries and the signing of a new agreement with United Spirits. The company has tie ups with industry majors like ABD, Jagatjit and USL for bottling 3.75 mn cases per year, who control over 45% of the relevant markets

The brown-field project for 35 million BL wash to ENA plants are on track and expect these plants to be operational by the second half of FY13.

The company's Greenfield project are coming up in Bihar and Jharkhand with each distillery having capex of Rs 75- 100 crore.

The company's distribution for IMFL is present in 8 states, covering ~40% of the industry

The company will launch its IMFL brand in Bihar market in Q2 or Q3.

Hannibal Rum has qualified for CSD registration, but the company is waiting for formalities and expected to get business from second half of FY13.

In Bulk alcohol business, ENA has seen good demand in Q1 while rectified spirits has seen slump in sales. ENA production is running at full capacity but due to rectified spirits, bulk alcohol business capacity utilization is around 70%.

The company's cost of debt is 12%.