Unaudited financial results for the quarter and nine months ended 31 December 2020

Sustained recovery momentum and improved margins sequentially backed by positivity in consumer sentiment and operational resilience.
Third quarter performance highlights:

• Reported net sales declined 3.6%, a sequential improvement from Q2 driven by continued off-trade resilience, gradual on-trade recovery offset by the contraction of owned and franchise business in Andhra Pradesh (AP).
•Prestige & Above segment net sales declined 0.8% partially as a result of lapping a high festive season comparative.
• Popular segment net sales declined 6.7%, led by a decline of 5.7% in priority states. Increased consumer prices impacted demand in this price conscious segment and unfavourable State mix further contributed to the decline.
• Gross margin was 44.6%, up 24bps versus last year, driven by benign commodities and continued focus on productivity during the quarter.
• Reported EBITDA was Rs. 384 Crores, down 9.5%. Reported EBITDA margin was 15.4%, down 100bps, primarily driven by lower fixed cost absorption and increase in administrative expenses.
• Interest costs were Rs. 38 Crores, down 17% driven by reduced debts and lower interest rates.
• Profit after tax was Rs. 230 Crores and PAT margin was 9.2%.

Nine months performance highlights:

• Reported net sales declined 20%; with improvement seen sequentially in third quarter vs prior two quarters.
• Prestige & Above segment net sales declined 15.7%.
• Popular segment net sales declined 22.4% and priority states were down by 19.7%.
• Gross margin was 43.1%, down 235bps versus last year, primarily due to due to contraction of owned and franchise business in AP and resulted impact on South franchise business, lower fixed cost absorption and obsolete inventory provisions.
• Reported EBITDA was Rs. 576 Crores, down 53.4%; reported EBITDA margin was 10.2%, down 723bps due to negative impact of fixed cost de-leverage. After adjusting for the one-off impact of bulk Scotch sale and restructuring costs, underlying EBITDA declined 50%.
• Interest costs were Rs. 138 Crores, 3.1% lower than last year, mainly due to lower debt and lower interest rates.
• Profit after tax was Rs. 143 Crores and PAT margin was 2.5%.

Anand Kripalu, CEO, commenting on the quarter and nine months ended 31 December 2020 said:

"The reported revenue decline of 3.6% in the third quarter reflects improving consumer sentiment over previous quarters, notwithstanding on-premise footfalls still being low, the route to market change in Andhra Pradesh and taxation led price hikes post Covid-19. Operational resilience, contextual marketing with focus on in-home occasions and renovation of our core brands supported the top-line recovery.
Prestige & Above segment net sales moderately declined 0.8% in Q3, albeit lapping strong normal festive base comparatives. Scotch performance continues to be encouraging.

The third quarter witnessed benign commodities which, along with continued productivity, facilitated marginal expansion of gross margin to 44.6%.
The company maintained its marketing reinvestment rate for the quarter @ a healthy 9.4%. Reported EBITDA margin for the quarter was 15.4% and we delivered a PAT of Rs. 230 Crores.

Overall, performance for the nine months remains impacted by first quarter disruption in sales and supply chain on account of the pandemic and lower fixed cost absorption as a consequence. Contraction of owned and franchise business in AP due to the route to market change further impacted performance adversely. Notwithstanding the resilient second and third quarter performance, our underlying net sales in the first nine months declined 18.2%, EBITDA margin contracted to 10.2%. with a PAT of Rs. 143 Crores.
Operating cash flow remained strong and external debt reduced consistently through the nine months. CRISIL has reaffirmed its 'CRISIL AA+/Positive' ratings on the bank facilities and debt programmes.
Despite a quicker rebound than originally expected, in the near term there are still reasons to remain cautious and consequently, the company is not providing quantitative guidance for fiscal 2021. Our business continues to exhibit strong fundamentals and our focus to “Emerge stronger” will hold us in good stead.