United Spirits Q1FY13 Earnings Conference Call - July ... - UB Group

United SpiritsJuly 31, 2012Moderator:Thank you. The next question is from Nishit Shah from Ambika Fincap. Please go ahead.Nishit Shah:Congratulations on good set of numbers and more importantly on expansion in margins and Ihope that this journey on margin expansion continues. Ravi, my question is on whatever you doat the EBITDA level most of it is eaten away by the interest cost. How do you plan to addressthat issue?Ravi Nedungadi:I think that management has said consistently that there are a number of opportunities to look atrecapitalization and de-leveraging the business so at the appropriate time we are very muchconscious of the level of debt and the need to reduce it, just leave with us for a little bit whilelonger and I think you will good news on that front coming along.Moderator:Thank you. Next question is from Vivek Maheshwari. Please go ahead.Vivek Maheshwari:Sir two questions. First on the CAPEX side what is the plan either on primary distillation sideor anything you were looking at in the past in terms of the glass bottle or anything?P. A. Murali: Glass bottle, we are not looking at this point in time, we have kept it on hold given thepressures on the capital. What we are looking at in terms of regular capital expenditure is stillwe are able to correct the debt level as Ravi said our concentration is to have maintenanceCAPEX which would be around 100 crores during the current year if I don't correct the capitalstructure during the current year.Vivek Maheshwari:And on the working capital side you mentioned about the debtors part, what about theinventory? Does that mean that on the fact that you are focusing or you are going to focus onthe profitable brands, does that mean that inventory levels will be under tight control as well?P. A. Murali: Absolutely, we have always been because willy-nilly our capacity to store at the distilleries arevery limited and therefore we need to definitely operate within what we can store at thedistillery level. Even though our capacities and volumes have gone up over the last 3-4 years,we have not expanded our storing capabilities within the distillery and therefore we need tovery carefully manage the stock levels at the distillery appropriately. So I don't expect a hugespike on inventory level as such The only spike that you will get on inventory level will be thebulk stock that we purchase from Whyte & Mackay at the fresh filling level which we keeppurchasing for our future use which may spike to the extent of almost about 80-90 crores ayear. That is the only spike you will see but not at finished goods level or raw material, storagelevel in various manufacturing.Vivek Maheshwari:Okay and so leaving aside the de-leveraging part your working capital is to be under tightcontrol and CAPEX side you plan to send 100 odd crores. So that means that ideally the debtlevels for the company have peaked out at this point of time. Is that fair understanding?Page 12 of 20