Robust top-line growth, resilient operating margins in extremely volatile, inflationary environment: USL MD Hina Nagarajan

United Spirits Ltd (USL), the country’s largest liquor company, posted a 7.3% increase in net profit during the fourth quarter ended March while revenue fell 25% to Rs 5783 crore. Profit after tax was Rs204 crore.

The company, however, said the performance was strong after numbers are rebased to account for Pioneer Distilleries merger and adjusted for slump sale and franchising of the reviewed popular portfolio for a like for like comparison.

Net sales grew 15.6% during the fourth quarter after adjusting for slump sale and franchising mass brands a year ago. The prestige and above segment grew 23.2% while the rebased net sales for the popular segment fell 6.3% as inflation continues to impact this price-sensitive consumer segment.

"We have delivered a strong year once again with robust top-line growth and resilient operating margins in an extremely volatile and inflationary environment. As an organization, we have exhibited tenacity and focus amidst macro-economic headwinds and regulatory challenges," Hina Nagarajan, managing director at Diageo owned USL said.

Underlying gross margin, after adjusting for a one-off credit on account of reversal of indirect tax provisions, was 42.6%, down 225 basis points from a year ago but improved sequentially.

The country's spirits market saw sales volume of 395 million cases during the year to March, a 12% increase over FY21-22, adding almost 40 million cases from its previous high about four years ago, industry executives said citing latest excise department data.

During the year ended March, USL's net sales saw a growth of 19.5% with underlying net sales volume growing 20.1% on the back of strong premiumisation trend, continued momentum in the off-trade, on premise recovery and sustained home consumption trends, it said.

"The stepped up contribution in growth from the upper and mid prestige segments lend credence to our portfolio reshape strategy," added Nagarajan.

Last year, USL sold 32 brands including Haywards, Old Tavern and White-Mischief for Rs 828 crore to Inbrew with a five-year franchise arrangement for 11 other brands, including Bagpiper and Blue Riband. Singapore-headquartered Inbrew also has a right to convert the fixed-term franchise arrangement into one with perpetual rights with a call option to acquire the brands.

Over the past six years, USL has moved towards the franchisee model in the popular segment with fixed-fee arrangements in more than a dozen states and this has helped expand margins. The company's P&A business now accounts for 87% of its overall sales, up from less than 50% six years ago, indicating a strong focus on premium segments.