Audited financial results for the quarter and year ended 31 March 2018 Press Release

PAT increased 231% in the full year

Fourth quarter performance highlights:

• Reported net sales increased 7% as strong growth in the Prestige and Above segment as well as the benefit from lapping the impact of demonetization and the highway ban were partially offset by the one-off impact of the operating model changes. Underlying* net sales increased 9%.

• Prestige & Above segment reported net sales grew 16%. Underlying* net sales were up 14%.

• Popular segment reported net sales declined 4%. Underlying* net sales grew 2%. Net sales of Popular segment in priority states grew by 10%.

• Gross margin was 48.8%, up 461bps, due to the one-off impact of operating model changes as well as price increases and productivity gains more than offsetting the adverse impact of GST. Underlying* gross margin improved by 257bps.

• Reported EBITDA was Rs. 274 Crores, up 5%, driven by increased gross profit, partially offset by timing of staff costs and increased marketing investment. Reported EBITDA margin was 12.6%, down 27bps. Underlying* EBITDA declined 11% and underlying EBITDA margin declined 283bps.

• Interest costs were Rs. 59 Crores, 31% lower driven by favourable rates and mix of debt. • Profit after tax was Rs. 211 Crores, up 302%.

Full year performance highlights:

• Reported net sales declined 4% mainly due to the one-off impact of operating model changes as well as the adverse effect of the highway ban. Underlying* net sales were up 1%.

• Prestige & Above segment reported net sales grew 3% with 2ppts positive price/mix. Underlying* net sales were up 4% with 1ppts positive price/mix.

• Popular segment reported net sales declined 16% mainly due to the one-off impact of operating model changes. Underlying* net sales declined 4%. Net sales of Popular segment in priority states grew by 2%.

• Gross margin was 47.5%, up 465bps, due to the one-off impact of operating model changes as well as price increases and productivity gains offsetting the adverse impact of GST. Underlying* gross margin improved by 294bps.

• Reported EBITDA was Rs. 1,022 Crores, up 5%; reported EBITDA margin was 12.5%, up 114bps primarily driven by increased gross profit, partially offset by marketing investment that increased by 18%. Underlying * EBITDA declined by 1% and underlying* EBITDA margin remained broadly flat.

• Interest costs were Rs.261 Crores, 29% lower, driven by favourable rates and mix of debt.

• Profit after tax was Rs.562 Crores, up 231%.

Anand Kripalu, CEO, commenting on the quarter and full year ended 31 March 2018 said:

"Our performance has substantially improved in the fourth quarter as several regulatory challenges are now behind us. Underlying* net sales growth during the quarter was 9% largely driven by a strong performance of our prestige and above segment whose underlying* net sales were up 14%.
The improved performance in the fourth quarter contributed to deliver an overall underlying* net sales growth of 1% in the full year. The Prestige and Above segment underlying* net sales grew 4% supported by the continued success of our brand renovations including McDowell’s No.1 whiskey, Royal Challenge and Signature.
In the year underlying* gross margin improved 294bps, despite the negative impact of GST, which we managed to more than offset by positive mix, pricing and a relentless focus on our productivity program. We have also continued to invest behind our brands with marketing investment up 18% during the year.
Underlying* EBITDA margin for the year was broadly flat as gross margin improvement was offset by increased marketing spend; since we chose to invest in future growth.
Our continued focus on reducing interest costs and monetizing non-core assets, coupled with lower exceptional items, have resulted in an overall PAT increase of 231% for the year.
Overall, in this fiscal, we have overcome some of the biggest challenges the spirits industry has ever faced including the highway ban and the introduction of GST. We have continued to execute against our strategic priorities and I am pleased that despite this challenging environment we have managed to deliver top line growth as well as margin expansion while also increasing investment behind our brands. This gives me confidence that the work we are doing to execute our strategy will enable us to capture the long-term opportunity in the spirits market and to achieve double digit top line growth and improve margins to mid-high teens in the medium term."