Key highlights of the call

The performance during the quarter is reflective of the company's focus on expanding the manufacturing capacities and emphasizing on value enhancement across the consumer facing portfolio. The net sales for Q2 was almost stagnant at Rs 166.95 crore while net profit inclined by 10% to Rs 10.67 crore. OPM inclined by 217 bps to 14.68% due to better capacity utilization

In Q2, Branded IMFL volume declined from 0.18 to 0.08 million cases (-56%) with sales of Rs 8 crore (-44%), IMIL (country liquor) fell from 3.23 to 2.64 million cases (-18%) with sales of Rs 78.3 crore (-13%), franchisee IMFL grew from 0.26to 0.42 million cases (62%) with sales of Rs 29.6 crore (3%) and bulk alcohol grew from 4.27 to 7.02 mn bulk liter (64%) with sales of Rs 28.4 crore (63%)

The fall in IMIL sales is due to delayed monsoon which result in less disposable income in rural people hands. However, going forward, management expects IMIL to pickup

The company has successfully commissioned Brownfield project for 35 million BL wash to ENA plants. The expanded capacities have now stabilized and the full impact of the expansion will be visible from FY14 onwards.

The company's present capacity now is 120 million BL.

The company is thinking of setting up Greenfield plant in Jharkhand and Bihar for which it has got approval.

The company's IMIL brand Limboo is now Rs 350 crore brand. The company has launched it in Rajasthan and planning to launch in other states also.

The revenue from branded segment (of IMFL and IMIL) contributes 48% – 49% of total revenue which is expected to go up future. EBIDTA of Bulk segment is 11% - 12% while that of branded IMIL is 16%.

The company's focus in the IMFL segment is geared towards value enhancement which is expected to augment performance going forward. The assured off-take from Franchisee IMFL business is not only enabling higher utilization of capacities but also improved margins compared to the sale of bulk spirit.

The company's ENA capacity utilization is around 90%, while overall capacity utilization is around 60% - 70%. Rectified spirits capacity utilization is presently low, as there is no demand for it in the market.

Production of ENA in Q2 was 120 lakh liters and in H1 was 270 lakh liters.

Franchisee IMFL business is witnessing steady volume in state of Rajasthan, where it supply to ABD. Presently, it supply 70000 – 75000 cases per month which is expected to go up to 80000 – 85000 cases per month. In Haryana state, it supply to ABD, Jagatjit Industries and United Spirits. For United Spirits, volume is expected to go up from present 20000 – 25000 cases per month to 70000 – 75000 cases per month , while for Jagatjit Industries, it is expected to go up from present 40000 – 45000 cases per month to 70000 – 75000 cases per month by year end.

The gross block for FY13 will be Rs 370 – 380 crore.

The mgmt said that since there is no price hike in IMIL, the margin for the next two quarters will be maintained at present level, while for next year, once new policy is announced, the company will hike its prices, which will improve the margin for FY14.