Globus Spirits

Globus Spirits: A Trailblazer in India’s Liquor Industry

When you think of the world of spirits, it’s easy to get lost in a haze of brand names and labels. But amidst the sea of choices, one name stands out with a story that’s as rich and intriguing as its products: Globus Spirits. This beloved Indian brand has not only carved out its place in the industry but has also set new standards with its commitment to quality, innovation, and sustainability. In this blog let’s take a closer look at what makes Globus Spirits standout in the world

Industry dive In-

The Government of India aims to blend 20% ethanol with petrol by 2025. To achieve this, it’s estimated that 1,700 crore liters of ethanol production capacity will be needed by then, assuming an 80% operational efficiency.

Rice and maize price war- In the past six months, the price of broken rice has surged from Rs 22-24/kg to Rs 27-29/kg, and supplies are tight. Similarly, maize prices have jumped from Rs 22-23/kg to Rs 26-27/kg, with limited stock available.

Talking about Globus spirit, the main raw material which are used to produce Ethanol and ENA are broken rice and maize. The volatility in the price of broken rice and maize could impact gross profit of the company if they rise.

Q01FY25 con-call discussion- Management acknowledges the headwinds from raw material pricing volatility, particularly maize. The company is optimistic about the future. They are expecting margin recovery as maize cultivation increases driven by good monsoons and a normal paddy crop which will improve operational efficiencies.

Brand Development and Market Expansion- A new distillery is under construction in Lakhimpur, UP, with an investment of ₹120 crores aimed at ensuring consistent production and supply. The company has launched three brands: “Great Times” and “Brothers & Co.” in Uttar Pradesh, and “Not Out” in Delhi, which is managed as a separate legal entity. With plans to enter the Goa market soon, expanding their reach to seven states, the company continues to focus on innovation and is preparing for more brand launches in FY25.

Outlook- The company’s focus on deficit states in the ENA grants it strong pricing power and profit opportunities. Despite inflation affecting margins, shifting to maize for ethanol production and implementing cost-saving measures are expected to improve profitability in the medium to long term.

Price Movement- In July 23, the Food Corporation of India (FCI) suddenly stopped the supply of rice for ethanol production. Because of this, the share price of Globus spirit saw a downturn, and this affected the profitability and significantly reduced the margin of the business.

As an alternative they shifted its feedstock from surplus rice to alternative raw materials such as broken rice and maize. These raw materials can be used for production of extra neutral alcohol (ENA) and ethanol.

Government Initiatives to increase Ethanol Production- According to the Ministry of Consumer Affairs, Food and Public Distribution, “Sugar mills and distilleries are allowed to produce ethanol from sugarcane juice/sugar syrup, B-Heavy molasses as well as C-Heavy molasses during ESY 2024-25 as per the agreement with OMCs.” The government is making some changes to help increase the use of renewable energy and cut down on fossil fuel reliance. They’ve given distilleries the green light to buy up to 2.3 million metric tons of rice from the FCI for making ethanol. This move is all about ramping up ethanol production and supporting their wider plan to blend more ethanol into fuels

Major Development by Government: On 30th Aug 24, the center allowed the FCI to sell rice to distilleries for ethanol production. A maximum of 23 lakh metric tonnes of rice may be allowed for ethanol distilleries.

The stock currently is in a bullish mode. The current price is Rs. 1215 (as of 14:30, 13.09.24) This is a major resistance as per the chart shown below. The price is now expected to go upwards and can reach levels of 1300-1700. If the stock corrects, it will definitely be an opportunity to buy.
In summary, Globus Spirits has shown impressive adaptability despite facing challenges with rising raw material costs. The recent government move to allow rice supplies for ethanol production has given the company a boost, helping its stock price recover. With new investments and strategic shifts, Globus is well-positioned to navigate these hurdles and continue its growth in the liquor industry.