United Spirits Ltd (UNITDSPR) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to United Spirits Limited second quarter and first half of fiscal year 2027 earnings conference call. 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 your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Arora, Head of Investor Relations, United Spirits Limited. Thank you, and over to you, Ms. Arora.
Shweta Arora (United Spirits Limited): Thank you, Andrew. Hello everyone, good afternoon, and welcome to United Spirits Limited second quarter and first half of fiscal 2027 earnings call. Before proceeding with today's call, I would like to remind the listeners that during the call, there may be some forward-looking statements. These statements are based on our views and assumptions at this point of time. However, this is not a guarantee of our future performance, and results may materially differ from those expressed in or implied by such forward-looking statements. I request all of you to please refer to our financial and press releases posted yesterday. Both are available on stock exchange and company's website under the Investor section. Moving on, today on the call, we have with us Mr. Praveen Someshwar, MD and CEO, who is joined by by Mr. Pradeep Jain, Executive Director and CFO. Praveen and Pradeep will take you through the business and financial performance of the quarter, followed by the Q&A session. Thank you, and over to you, Praveen.
Praveen Someshwar (United Spirits Limited): Thank you, Shweta, and very good afternoon to everyone. Thanks for joining us today. As always, it's wonderful to connect with all of you. A very, very happy festive season to all of you and your loved ones. We've had a resilient quarter lapping a high prior year comp
Praveen Someshwar (United Spirits Limited): and dealing with the regulatory headwinds. When I mean regulatory headwinds, FSSAI issues, which impacted the organization's bandwidth and focus. That said, I'm happy to share that we have emerged stronger and stayed on course to serve the consumer with the right choices. Quick snapshot of the macro environment and consumer sentiment as we see it. With the prolonged and continuing West Asia crisis, softer monsoons, and inflation, consumer sentiment is not very upbeat and the same is reflective in various consumer confidence measures. Rural may not have fully absorbed the impact of the weaker monsoon yet, but the bottom end of the urban consumer is feeling the inflationary pressure. Therefore, in our parlance, we speak about India 1, 2, and 3. India 1, the bottom end, the consumer, India 1 consumer, which is a target audience for the lower half of the IMFL portfolio, is showing signs of fatigue due to the impact of inflation on its val- wallet. India 2 and India 3 are robust and holding up. Overall, I am resiliently optimistic on the India consumer story. This brings me to my last quarter reference for inclusive premiumization. We remain focused on delivering the right value proposition through a well-calibrated price-pack architecture across our portfolio that caters to consumers spanning all the three Indias. While keeping in mind that premiumization is a powerful long-term trend in India, yet, being cognizant with the reality of the value-conscious consumer in India. In this context, here is our first initiative. We have relaunched our international whisky trademark J&B Scotch as a compelling consumer proposition enabled by the India-UK FTA. This offers consumers a 100% Scotch product at a very attractive price point and will help drive recruitment of younger LDA as well as deepen Scotch penetration. We believe it's a winning proposition going in to the peak festive season. We are also broadening our portfolio to unlock new avenues of growth. More recently, with the launch of Smirnoff Ice Ready to Drink, RTDs bring together flavor, refreshment, and convenience in a ready-to-enjoy format. Smirnoff Ice has rolled has rolled out in Goa and Bombay Mumbai and shortly will roll out in Bengaluru at 4.8% ABV and 8% ABV. RTD is the fastest growing segment globally and has seen recruitment from adjacent categories like beer and wine. And is now beginning to pick up pace in India. Our outlook for RTD is buoyant and we'll continue to develop our portfolio in this space. Coming to the most-awaited McDowell's transformation. It's reached 80% to 85% of the salient markets ahead of the season. Initial response at a national level is mixed as should be expected from a relaunch of this size and scale, where the liquid, the packaging, including the core packaging of glass and PET, and the brand communication are being renovated. Overall, I can say with confidence, consumer KPIs are up on McDowell's. It has received very good response in some of the bigger markets like West Bengal, Rajasthan, and is also ahead of our expectations in markets where we are not leaders, that's UP and Haryana. In the more conservative markets where we are leaders, there was some concern on acceptance of the new proposition. We've closed the feedback loop with nimbleness and agility. Some of them are responding to the interventions and others, where the glass is just entering the marketplace, we'll start seeing improved performance here onwards. The consistent feedback on liquid and packaging is outstanding, which is indeed very reassuring. So, as I mentioned always, so, as I mention always, we need
Praveen Someshwar (United Spirits Limited): to stay resilient in this, and give it time to settle down with the consumer. We will talk more about this in the coming quarters as we see it unfurl. Let's come to Smirnoff. Delighted to share that the Smirnoff trademark has continued its strong momentum in the current quarter, and we remain firmly on track to achieve our 1,000-plus crore NSV aspiration for the fiscal year '26-'27. Adding further to the exciting Smirnoff flavor world are two brand new offerings: Kache Mango, Kacha Mango, and Coffee Toffee, both going to the market as we speak. Both flavors are fantastic and add diversity to the existing Minty Jamun and Mirchi Mango. I would encourage you to try and discover your own favorite flavors. Coming to our quarterly performance now, we've closed a resilient growth quarter overall, both on top line and bottom line. P&A NSV grew by 6.3% in Q2 '27, lapping a growth of 12.7% in the same quarter prior year, bringing the half grow half '27 growth to 7.8%. And the EBITDA margin in the quarter was at 19.7%, despite a very healthy increase in the A&P investments that has been consciously front-loaded ahead of the peak season. Our reinvestment rate for the quarter was at 11.6% versus 7.6% in the prior year same quarter, reflecting healthy investments behind our brands. PJ will cover financial performance in detail in his comments. Bright side is the sustained momentum in the top half of the portfolio, with strong growth in luxury and acceleration in the premium segment on the back of primary Scotches, which includes the relaunched J&B, and Smirnoff, the Indian flavor innovation. The clear must-do task for us remains McDowell's, and having already made agile interventions based on consumer feedback, we look forward to the peak festive season, while remaining committed to turning the momentum trajectory. With our innovation, renovation calendar, and ahead of the season brand investments, we are excited for the festive season and remain confident on our P&A double-digit growth aspirations for the fiscal year. Coming to a brief update on the RCSPL transaction, BCCI due diligence is underway and at an advanced stage, while the Competition Commission of India has already approved the transaction. We await BCCI approval and other statutory clearances. Looking ahead, as the consumer and regulatory landscape continues to evolve, we will stay anchored in our consumer-first approach, adapting our portfolio to changing preferences with disciplined and agile execution. With this, I hand over to PJ for a quick update on the financial performance for the quarter before we come back to answer your questions.
Pradeep Jain (United Spirits Limited): Thanks, Praveen. And good and wishing all of you a wonderful festive season ahead. Thanks for joining us today for the second quarter and first half of fiscal year '27 earnings call. Always a delight to connect with all of you. Would request all to please refer to the financial and press release posted last evening. Would want to highlight one small reporting change. The P&A segment now includes the brandy portfolio. This change is reflective of the consumer MRPs in key states that are broadly aligned with the lower prestige whisky segment. Consequently, the current quarter and the first half, as well as prior year's respective bases, have been reported and restated accordingly. As Praveen mentioned, we delivered a steady quarter amidst regulatory challenges and lapping a strong prior year base. The organization stayed resilient and focused on the key business priorities. We are now all geared for the festive quarter with optimism and excitement. The quarter growth has witnessed healthy demand momentum in India 2 and 3, and consequently, our luxury and premium portfolio has delivered a very strong performance, which is reflected in the strong price mix for the quarter at 7.4% for the P&A portfolio, P&A portfolio. I would also like to highlight that the festive season is relatively delayed this year compared to the prior year given the timing of Puja in East India. Hence, October, November, December will capture the
Pradeep Jain (United Spirits Limited): benefit of festive demand in the current fiscal year. Praveen has already covered the top-line performance in detail. So, we'll not be repeating anything on that front. I will just briefly touch upon the popular segment. While it continues to be a small part of our business, accounting for less than 10% of the revenues, and in this quarter, approximately 6%. It is important to provide some context for the quarter. The segment has faced two policy-related headwinds, which all of you are well aware of: the continuation of the Maharashtra adverse impact and the full impact of the changes in the Karnataka policy. The downside due to the latter is being captured in the P&A portfolio of the relevant state. On the cost side, this quarter continued to be absorb the impact of the West Asia crisis, broadly a range of about INR50 crores. While this impact is against the pre-March '26 prices, it does become a little irrelevant and more business-as-usual when the supposedly temporary disruption carries on for more than a couple of quarters. Impact was across the lines of glass, energy, packaging, and logistics. Neutral alcohol spirit has now started to get inflationary, driven by the El Nino impact on the monsoons and therefore, the associated crop inflation. The marketing reinvestment rate during the quarter was 11.6% of net sales, which is an expansion of 400 basis points compared to prior-year same quarter. While this may appear higher for the quarter, it should be viewed in the context of our heavy innovation/renovation calendar and is expected to represent the new normal for the current fiscal year. As already mentioned by Praveen earlier, we have also consciously front-ended the higher investments ahead of peak season to get maximum mileage from the same. Consequently, driven by the conscious higher A&P investments in this quarter, our EBITDA declined by 4.3% at INR643 crores, and EBITDA margin was at a healthy 19.7%. Reported profit after tax for the quarter was INR462 crores, down 2.1% with a net profit margin of 14.2%. All other relevant numbers and information is well contained in our press release. With this, we can now open the floor for the Q&A. Thank you.
Moderator: Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their 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 comes from the line of Abneesh Roy with Nuvama. Please go ahead.
Abneesh Roy (Nuvama): Yeah. Thank you. My first question is on the popular segment. So you had done this evaluation few years back and sold a large part of the business. Now, it is 6% of the revenue this quarter. And my sense is margins would have come off sharply given the operating deleverage. And India continues to premiumize a lot. So my specific question is, why continue on this 6% of the business where long-term, I think viability and presence, does it make a lot of sense? So wanted to understand can again a recalibration evaluation of this end happen?
Pradeep Jain (United Spirits Limited): Yeah. So Abneesh, hi. Yeah, I think we've answered this earlier, right? You know, the 6% portfolio is largely the McDowell's trademark, right? The McDowell's rum part of the business, right? So it's the same trademark, right? I mean, we've been carrying on with the segmentation historically. That's why we report the numbers. But we look at it pretty much, you know, as a, you know, as an overall trademark, right? So that's the reason we don't want to kind of do anything, right? I guess our insight 4 years, 5 years ago that the future profit pool and the growth pool is the Prestige & Above business, that's playing out in reality, right? So that's what it is. And I guess, to your point, it may continue to dwindle further and probably die a natural death, right? But, but yeah, as of now, we don't want to make any interventions.
Abneesh Roy (Nuvama): Understood. Second question is Karnataka, a lot of reforms have happened for the P&A. Let's ignore the popular end. Beer industry in Karnataka has seen 50% plus growth now for many months. So if you could tell us spirits which also saw good benefit of reforms in, so how has P&A done, what pricing initiatives you have done given the 16 slabs became eight slabs, so there's more flexibility. If some examples you can give. And are you happy with the performance? Has the competitive intensity gone up because of the reforms? Beer industry, a lot of consumption happening, obviously, India can't consume both beer and spirits equally so strongly. Someone may be growing slower. So if you could elaborate on that.
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