Highlights of the call

Tobacco industry is under pressure. General sentiments of economy, threat of health warning and ban of cigarette smoking in public places have affected the industry badly.

In last quarter, industry has seen a fall in volume of around 3%.

Industry growth may suffer if the excise duty hike takes place in the current financial year.

Industry has mostly stopped producing plain and micro cigarette. 95% to 96% cigarettes are in filter cigarette category.

The company's net sales have inclined by 38% to Rs 127.26 crore. The net profit has also inclined by 30% to Rs 21.79 crore. The growth in bottom line and top line is due to tobacco leaf export business. Tobacco export business has seen an additional Rs 30 crore of growth, which is Rs 55 crore in the Q3.

The growth in revenue is also due to growth in filter cigarette in new market and geography and launches of new products. Also the volume of the filter cigarette has gone up in Q3 compared to Q2 and Q1.

The company's 7% volume came from plain and micro cigarette.

Overall volume growth is down by 17% to 18% on y-o-y basis. It is down by 20% compared to Q1 and 8% to 9% compared to Q2.

The growth in top line was because of value growth, which happen due to lots of sales came from filter cigarette. There was no volume growth.

Till last year, plain and micro cigarette formed 20% of the volume of industry and for VST it was 58%.

Margin is under pressure due to growth in tobacco prices used in filter cigarette, which has gone up by 70% y-o-y. The company already had stock, which was able to reduce the impact of increase in raw material by 50%.

The margin in cigarette business will remain under pressure due to competition from established regular cigarette players and also due to tobacco leaf prices.

However the improvement in volume of filter cigarette and leaf tobacco export has resulted in the good EBIDTA margin for Q3 compared to Q2.

Leaf tobacco season will start in next 6 months and the management expects a future rise in prices because of global shortage and demand from China and Brazil.

VST is debt free company.

The company has cash of around Rs 200 crore predominately in disputed tax liability, which is around Rs 110 crore.

There was no price hike in Q3.