Ladies and gentlemen, good day and welcome to the Allied Blenders and Distillers Limited Q4 FY 2025 r esults conference call, hosted by Antique Stock Broking Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijeet Kundu. Thank you, and over to you, sir.
Yeah, thanks, Operator. It's our absolute pleasure to host the management of Allied Blenders and Distillers Ltd for the fourth quarter and full year FY 2025. Over to Mr. Mukund, Head of Investor Relations and Chief Risk Officer, for further proceedings. Thank you.
Thank you, Abhijeet. Good evening, everyone, and thank you for joining our Q4 FY 2025 results conference call. I hope you have received a copy of our results presentation. I would like to urge you to go through this along with the disclaimer slides. Today, we have with us from the management of ABD, Mr. Shekhar Ramamurthy, Executive Deputy Chairman, Mr. Alok Gupta, Managing Director, Mr. Anil Somani, Chief Financial Officer. Now, I would like to hand over the call to our MD, Alok Gupta, who will give you the summary of the company's quarterly and full-year performance before we open up for Q&A. Over to you, Alok.
Thank you, Mukund. Good afternoon, ladies and gentlemen. Thank you for joining us today for our Q4 and full-year financial results of 2025 earnings call. My apologies for the five-minute delay in starting this call. FY 2025 was our first year as a listed company, and I'm pleased to share that it has been a transformational year for ABD, marked by record performance, disciplined execution, and strategic progress across key pillars of our growth agenda. Despite a year of overall low growth, consumer love for premium products continued to fuel growth in the P&A segment. The sparkle of the festive spirit in Q3 also brought some cheer to the industry. The policy environment had its ups and downs but was largely favorable to the business, and a largely stable input cost environment helped the industry to deliver better gross margins.
ABD was well poised to capture these trends with our broad portfolio, pan-India manufacturing network, and strong national distribution footprint to deliver both value and volume growth with significant margin expansion. Now, let me share key highlights of FY 2025. Our consolidated income from operation was at INR 3,541 crore, up 6.2% on year-to-year basis. We reported highest-ever EBITDA of INR 451 crore versus INR 248 crore in FY 2024, a growth of 81.7%. EBITDA margin, therefore, improved to 12.7% in FY 2025 versus 7.5% in FY 2024. We delivered highest-ever PAT of INR 195 crore versus INR 2 crore in FY 2024. On standalone basis, revenue stood at INR 3,541 crore, EBITDA at INR 453 crore, and PAT rose to INR 200 crore from INR 7 crore in FY 2024.
These gains were made by multiple factors: strong volume growth of 13% in P&A segment, sharp focus on driving profitable sales through our profit governance model, cost reduction through a rate reset, packaging efficiencies, and a disciplined control over operating expenses. We also enhanced our A&P investment behind our P&A portfolio. In line with our dividend policy, the board has recommended a final dividend of INR 3.6 crore per share. FY 2025 was a year of transformation at ABD. We had four broad themes on which we worked. First, premiumization. Align our portfolio with the consumption trends to gain market share. We've also built our super premium to luxury portfolio in the high-growth, high-margin segment. Backward integration to ensure both supply security and margin growth. Margin expansion, deliver industry-parity gross margins and expand our EBITDA margin.
Our fourth theme, which is around governance culture, strengthening of our internal processes, including digitization in identified areas. A special mention for a special brand, Iconic White, which grew by 151%, crossed the 5 million case mark and recorded a sale of 5.7 million cases, and was also shipped to many countries, initiating its growth journey in the international market. Moving to Q4 FY 2025. In Q4 FY 2025, we delivered our strongest-ever quarterly performance. Our consolidated income from operation was INR 935 crore, up 21.4% year-on-year. We reported highest-ever EBITDA of INR 150 crore, which is more than double of Q4 FY 2024 EBITDA of INR 62 crore. EBITDA margin improved to 16.1% in Q4 FY 2025 versus 8.1% in FY 2024. We delivered highest-ever quarterly PAT of INR 79 crore versus a net loss of INR 2 crore in Q4 FY 2024.
Our top-line growth was led by P&A segment, which grew volumes by 32.7% and was well supported by our mass premium category growth of 13.3% versus Q4 in FY 2024. A stable policy environment, both in Andhra Pradesh and in Delhi, helped us regain market share and also reflect in our growth. Cost-benefit continued on the back of rate reset and packaging efficiency. The grain price also softened on the back of policy support from FCI. This resulted in our gross margin expanding by 436 basis points to 43.4% as compared to 39% in Q4 FY 2024. Our significant EBITDA growth is driven by sharp improvement in absolute gross margin and only a marginal increase in our operating costs. This surplus has flown through to EBITDA. The quarter also includes a one-time reversal of provision of INR 11 crore.
Excluding this, EBITDA from operations stood at INR 139 crore with a margin of 15.3%. Moving to interest cost. Our interest cost in Q4 FY 2025 was at INR 28 crore, broadly in line with Q3 interest cost of INR 27 crore. However, this interest cost is significantly lower as compared to INR 45 crore in Q4 FY 2024. Our net debt, as of 31st March 2025, is at INR 766 crore and is broadly in line with INR 763 crore as of 31st December 2024. This clearly indicates that in Q4 FY 2025, our cash flow from operations not just supported our working capital requirement in terms of growth, but also our investment in CaPex program and the acquisition of the Fullerton Brands. Our balance sheet is significantly stronger today. Net debt to equity improved 2.5% as of 31st March 2025 from 1.8% as of 31st March 2024.
Net debt to EBITDA improved to 1.7% as of 31st March 2025 from 3x as of 31st March 2024, creating room for future growth investments. FY 2025 was also a year of foundational investments. We made substantial progress on our CaPex program of INR 525 crore focused on backward integration. Our newly acquired ENA distillery in Aurangabad is running at 100% capacity, and the produce is being used for captive use. Our project on expansion of 61 million liters over the next three years is on track. Currently, it is under regulatory approval process. The PET bottle facility in Telangana, designed to meet up to 75% of our needs, is expected to be commissioned in Q2 FY 2026 and the EBITDA accretive thereafter. The integrated malt distillery at Telangana with 4 million liters capacity is expected to be operational in Q4 FY 2026 and is on track.
These initiatives are margin-iterative and are expected to deliver approximately 300 basis point EBITDA margin improvement over the medium term. We continue to strengthen our premiumization strategy with the introduction of Arthaus in the luxury whiskey segment and the acquisition of Fullerton Brand, Woodburn, Kumori, and also Rock Paper Rum. Our strategic distribution agreement with Rouse Corporation to introduce Russian Standard Vodka in India is a significant step towards expanding our premium and super premium vodka offering. Our global footprint now extends to 23 countries, up from 14 countries last year, reflecting the increasing acceptance of our brand beyond India. As we look to FY 2026, our focus will be on executing the investments we have made, scaling our premium portfolio, improving distribution reach, especially in premium on-premise, and maintaining our margin discipline.
The macro environment remains supportive with stable input costs, policy clarity in major states, and hopefully demand resurgence across categories on the back of high disposable income and other macroeconomic and policy factors. U.K. FTA is expected to be margin-iterative as ABD is one of the largest importers of bulk scotch. This agreement will also benefit our super premium and luxury portfolio by making it more accessible to the consumer. To support our long-term strategic roadmap, we are placing an enabling resolution to raise funds with multiple options such as equity shares, convertible bonds, debentures, and others to take advantage of opportunities as and when they come along. With our credit rating upgraded to A- with a positive outlook, we have the flexibility to raise capital efficiently should the opportunity arise. In summary, FY 2025 was a transformative year for ABD.
We delivered record results, improved profitability, strengthened our balance sheet, and laid the groundwork for future-ready growth. As we move into FY 2026, we remain focused on scaling our premium portfolio, maintaining our margin focus on mass premium, realizing the benefit of our CaPex program, continuing the cost focus, re-rating for lower interest costs, and driving sustainable value creation. I thank you for your continued trust and support and for your time, and we'll now open the floor for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Chetin from Systematics. Please go ahead.
Hi. Thank you for the opportunity. Firstly, congratulations on a great set of numbers. I have two questions. The first question is on Andhra Pradesh. How have the recent policy changes in AP specifically influenced the desired state, brand, or, say, SKU mix strategy for ABDN? Are there specific segments or brands within our portfolio that are disproportionately benefiting from the new market dynamics in the state?
All right. Thank you for your question. AP policy, we see as largely favorable to ABD. On the back of the policy, last financial year, we saw our ARR improve from 1.8 million to about 3 million. We see further opportunities, which I will share with you. On specific segments, I think there are two price points in the state of Andhra Pradesh that are now growing. The one that is really relevant for us is the price point where Iconic operates. This segment has captured the imagination of consumers in the state of Andhra Pradesh and is roughly about 500,000 cases a month. We were able to secure approval for Iconic in the month of November. We have since rolled out the brand, and the brand month on month is showing tremendous growth.
We are hopeful that we'll get to an ARR of a million cases in a short period of time. That's a very, very large opportunity for us in the state of Andhra where Iconic will continue to expand its sales. We have seen at the lower price point growth of Brandy as a flavor in the tender that is expected to be approved shortly. We have expanded our portfolio where we'll be able to operate in this reasonably profitable large volume segment. I hope that answers your question. Happy to take a follow-up.
Yeah, that answers my question. Thank you. The second question is on the luxury portfolio. We have built a portfolio of luxury brands—Zoya, Arthaus , the Russian Standard partnership, acquisitions like Woodburn, Rock Paper Rum. Beyond these existing or recently added brands, what is the long-term vision and specific plan for further expansion in the luxury segment, potentially, say, through new launches, partnerships, or acquisitions? How do you see the overall luxury portfolio evolving in terms of, say, size and brand mix over the next three to four years?
All right. Thank you. You would recall if you were on the call earlier, we had spoken about an approach which we called as a right-to-win approach and not just right-to-play. We had identified in the super premium and luxury segment about eight such opportunities, of which five are already up and running. Our framework was quite simple. We were looking at segments that were growing faster with targeted gross margins and fewer competitors. That has been our framework. The portfolio that you see today that is already out in the market will meet the test that these are the price point and the flavors at which we are seeing larger growth, which is an indicator of the fact that more and more consumers are gravitating to those flavors at these price points. We have already rolled out five brands.
We will also roll out three additional brands in FY 2026 that, by and large, complete our portfolio that we want to take to the market. The industry is about 400-odd million cases. The super premium to luxury segment is roughly 3%, but it accounts for nearly 20% of industry profit. That is why this high-margin, high-growth segment is of interest to us. In our assessment, this segment will more than double over the near-medium term. We are hopeful to get a high single-digit market share from this segment, which will give us disproportionate growth both in terms of revenue growth and also margin expansion.
Okay. That was helpful. Thank you.
Thank you.
Thank you. The next question is from the line of Kaustubh Pawaskar from ICICI Securities. Please go ahead.
Yeah. Good evening, sir. Thanks for giving me the opportunity. My question is again on Andhra Pradesh. In this quarter of the 20% volume growth or 32% volume growth, what we have achieved in P&A, what would be the growth contribution from Andhra Pradesh market itself?
If you give me a minute, I'll have to get the numbers out for a very specific query. In the meantime, I can confirm to you that the P&A growth for us has been across India, pan-India. Give us a bit of time. We'll have somebody pull out the numbers in parallel.
Thanks, sir. My second question is on margins. Second half, we have seen EBITDA margins recovering substantially. We have seen strong improvement in the gross margins. Our EBITDA margins sequentially have also improved. As a company, we are targeting around 15% EBITDA margins by FY 2028. The way the mix is improving, and we are also focusing on various backward integration strategies. Considering that, do you expect this 15% EBITDA margin by FY 2028, we can achieve it maybe a little bit earlier than what we are anticipating?
You're aware that there are multiple macroeconomic factors which could impact the margins. Of course, for FY 2026, we expect a neutral commodity cycle. Therefore, we believe that the gross margins will be broadly in line with what we have planned. Therefore, we should see expansion in EBITDA margins. I think clearly the plan as of now is to get to industry parity EBITDA of 15% over the next two years. What we have not baked into this EBITDA is the upside that we'll get on the back of FTA. We have not baked into this EBITDA the upside that we could potentially get from our luxury portfolio. What we have not baked into this is the potential upside that we'll get from our P&A portfolio, where we have said that from a 42% salience, we'll go to a 50% salience.
The focus is quite clear: get to the 15% EBITDA margin which is industry parity, and also expand the margin on the back of these three growth tracks that I've just spoken about. We've not quantified it for now.
What would be the constitution of the bulk alcohol imports for us and the overall raw material cost?
We are the largest importer of bulk scotch in India as an Indian company. We import scotch worth roughly about INR 100 crore with 150% duty, which means about INR 150 crore of duty. Therefore, if the duty was to come to half and then progressively reduce, it will reduce our cost, expand our gross margins, and we see this entire saving flow through to our EBITDA.
Right. And one last one if I can. The capacity expansion which you are planning to do at Punjab, it is additional to our overall CapEx plan of around INR 5.25 crore, right?
That is right. The capacity expansion in Punjab is a bottling expansion. The expansion that we've already announced is of P&A, which is the raw material that goes into our products.
Right. Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Aman Bhatti from Incred Capital. Please go ahead.
Hi. Thank you for the opportunity and congratulations to the ABDL team for a great set of execution. Sir, through our channel checks, we have found out that, I mean, you have been expanding in the Western Maharashtra region quite aggressively in terms of your Zoya, Gin, and Art haus, and it has been doing really well in this region. Going forward, are we looking at expanding in our existing regions or other regions? What are our strategies?
All the five brands that are in the super premium and luxury segment, the game plan is that by end of quarter one, definitely within quarter two, we expand and roll out into the top markets which account for almost 80% of the segment. We will see a fairly rapid distribution expansion of the super premium and luxury portfolio.
Okay, sir. So I mean, the contribution. Like now it's 50/50 P&A and mass premium. So we can see that going to 60/40 maybe in FY 2026?
The 50% salience is in value terms. The volume salience is about 40%, right? Your question is, will it go to 60/40? I see over the next two years that certainly is a possibility.
Okay, sir. Thanks. One question on our marketing spend. Can you give me an approximate figure in terms of top line? What is our marketing spend?
Our AMP as a percentage of NSV in the P&A segment is about 6%, which we plan to expand over the next two years, hopefully between 7%-7.5%.
7% - 7.5%. Okay. Got it. And sir, are we looking at our own Tequila brand anytime soon? Because obviously, we don't have a Tequila brand right now.
It's certainly a flavor that is of interest to us. We believe that it's a category that we need to learn a little better. We are in the process of getting a better understanding of the category. We definitely see ourselves participating in time to come.
Okay, sure. A question on our blended malt scotch. We are importing it for Arthaus , right, currently?
That is correct.
Okay. I mean, for our is there any plan of our own single malt whiskey and that would be 100% backward integrated, or what's the plan on that?
As you know, we are building India's first single malt distillery in the state of Telangana, where our current distillery is. This distillery will be operative in Q4 FY 2026, and that will allow us to participate in the Indian single malt market by year 2030. We are quite excited about the way we are building the distillery and the product development ideas that we have. By 2030, we should have our own Indian single malt from our own unit.
Okay. Sir, this single malt contains how many grains? I mean, it's barley with or other grains?
No. Single malt is only made from barley.
Single malt is barley, right? 100%.
Yeah. No other grain is used for single malt.
Okay. Okay. Thank you so much. Thank you.
Thank you very much.
Thank you. The next question is from the line of Sanjay Manyal from DAM Capital. Please go ahead.
Hi, sir. Congratulations on the good set of numbers. Just to understand about Iconic White, this brand has grown tremendously in the last few years in such a short span of time from the time of launch. What exactly has been the reason for such a huge success, and which states have been contributing to this growth?
The brand has been growing across all markets. Any large market, whether the market is UP, market of Haryana, Telangana. We briefly spoke about Andhra on the earlier question that I had. Across all markets, the brand continues to grow. Even in states like Odisha, we are seeing significant growth on the brand. What has happened over a period of time is that the brands that are operating in the segment have been there for more than 25 years. As part of our consumer insighting, we got two incredible insights about the fact that the slightly younger consumer, where they have complete trust in the existing brand, but they were looking at a brand that can talk in their own language, in their own code.
As you see, right from packaging design to where the AMP has been designed on this brand, it is keeping in mind the younger consumer. What has happened in a very large consumer base of the prestige whiskies, it has captured the imagination of the younger consumer. Also, we have positioned this brand in the market in between the Imperial Blue and the Royal Stag price point. It is able to get consumers both from the deluxe segment and the semi-premium segment. A little bit of research tells us that irrespective of the consumer it gets from Royal Stag or from Imperial Blue, which is the deluxe or the semi-premium segment, it is a younger consumer who are adopting this brand. By and large, our insight was that there is a large opportunity with the younger consumer.
They are looking at a brand that is designed to meet their expectations, their sensibility, and Iconic does their job. We are also adding a significant number of new consumers to the category. Since this brand is being favored by younger consumer, it also gets a disproportionate share of those who have decided to come into the category. That is really, in our view, the success of Iconic is talking to segmenting the consumer base and targeting a very, very specific set of consumers.
That's great. Just one more question on the FTA part. Is it possible for you to quantify the number, what kind of a benefit you will get because of the reduction in the bulk scotch taxes on bulk scotch? What I understand broadly is that because of the Diageo brands also getting cheaper, there will be increased competition from these foreign brands. Which brand in this price point basically would be probably at a INR 1,500-INR 3,000 or INR 4,000 sort of category where it will be competing with these foreign brands?
Once the FTA is implemented on an annualized basis, we expect duty saving of anything between INR 75 crore-INR 80 crore. That is the quantum of duty that will come down, which could translate to between 175 basis points to 200 basis points of margin expansion. That is the response to your first question. On the bottled product, I think for us, we have just about built a portfolio. Our route to market and our go-to-market is on the basis that we are new entrants in the segment. What part of this benefit is passed to the consumer and what part of this benefit is retained by companies as margin expansion is yet to be seen. We think it will be a combination of both. Once implemented, we really get to see to what extent do the MRPs come down.
Certainly, the MRPs will come down, leading to better expensibility. If you look at our portfolio, our Arthaus blended malt scotch will benefit from reduction in the duty and will make us more competitive because we are a BII. Therefore, for us, it is quite favorable for the portfolio that we currently have. However, we will get to know a more certain position once it is implemented and the market leaders do take some sort of a call in terms of how much to pass to the customer and how much to retain.
Okay. That's great. Just one last, if I can, Sujan, basically on the ENA sort of inflation. What I have seen over the last six-eight months, what I broadly understand, ENA prices have been stable. What exactly is your outlook on the future? If, suppose, if there is an ethanol price increase further in the new season, which will probably start in September, October, do you think that inflation still sort of can come back from the next year onwards? Or what is your basically view on the glass prices also, if you can elaborate a bit?
Sure. Ethanol can be made from maize, broken rice, and full rice, whereas portable ENA is made only from broken rice. It really depends on the FCI policy. In 19th January , they had announced access to full rice to the ethanol industry, thereby offering a better margin on ethanol produced out of full rice. We believe that the policy has worked well to meet the ethanol objective. It has worked well for ethanol manufacturers. Therefore, we do expect this policy to be rolled forward. If that was to happen, we expect that the commodity prices will remain fairly stable.
Okay. Okay. That's good. That's all from my side. Thank you very much.
All right. Thank you.
Thank you. The next question is from the line of Kunal Shah from Jefferies. Please go ahead.
Hi. Thank you for the opportunity and congratulations on a good set of numbers. My question is on the balance sheet bit. You see, the receivables have grown quite a bit to almost INR 1,750 crore. My question is, how much of this is the outstanding receivables in Telangana? And where do you see this number stabilizing in, let's say, the next 12 months or so?
Telangana overdues for us is roughly about INR 400 crore. One bit of good news is that from October, the entire expansion of receivable in Telangana happened in September because the payments were fairly choppy. They were unpredictable. From October onwards, Telangana has been paying the entire industry, including us, on time for the monthly billing. From October, we have not seen any increase in the overdue amount from Telangana. That is a bit of positive news. From the month of March onwards, we've also started to receive partial payment towards the overdue, which is also a step in the right direction. Where we are today, do we have a clear roadmap in terms of by when the overdues will get paid? I wish I had a crystal ball through which I could advise you.
The fact is that in March and April, both the month, monthly billing, plus a part of overdue, is being paid by Telangana. We believe, from whatever we understand, that this will only get better.
Understood. Any other specific reason apart from Telangana for this increase in receivables that we should be aware of?
Yeah. No. I think broadly, the increase is about INR 500 crore, of which about INR 300-odd crore is, about INR 300 crore is Telangana. There were some state markets, some other government-controlled markets where year-end receivables have gone up, but those are now getting paid. Those are now getting paid in April and May. Thereafter, in addition, our sales volume have gone up. So some bit of increase in receivables would happen on a natural basis. I do not think there is any other number that we need to be worried about.
Understood. Thank you for that. The second question is on finance cost. If I see in 2024 and even in prior year, you used to have this large INR 30 crore-INR 40 crore of interest cost on delay in payment of statutory dues. Can you let us know what's the number for this year and what's that related to and how is that changing?
Immediately after the IPO, we paid all the statutory overdues, which was around the 10th or 8th of July last year. Since then, we do not have any statutory overdues in our books. Everything is paid on time. Therefore, there is no interest cost associated to delay of statutory dues.
Understood. Thank you for that. Finally, any qualitative comment you would want to make on how all the new brands which have launched on the luxury and semi-premium side in the last one year or so are doing? I know it's too early for many of them, but any qualitative direction or some guidance which you can give?
I think two things I can say at this point of time. One is each of the products has a very unique blend and a proposition. In an experience-driven consumption economy, I think consumers would like to try out newer experiences. Just as an example, with Zoya, we have launched our watermelon gin, and we have launched our espresso coffee gin. This is basically the key consumer insight. The two big trends are cocktails and sipping. If you were at home, you want to enjoy a cocktail, you take the watermelon gin, put in a nice gin goblet, add a bit of a few cherries to it on crushed ice, and your cocktail is ready.
The espresso gin is all about taking a shaker, which you can buy off Amazon, put in the Zoya espresso gin, shake it up, and put in a martini glass, and you can sip it. One thing that I think we are extremely excited about is that the blends are unique, the extensions are unique, and consumers will definitely give it a shot. Second is on the packaging, be it Zoya, be it Arthaus , which are our own brands. I think we've received not just awards, but we've also seen qualitative feedback from the consumer. They just love the design direction. On the newer investments that we have made on brands like Woodburn, they are proven brands in the startup ecosystem, and they will benefit tremendously from our distribution and manufacturing footprint.
Those would be my two qualitative comments on brands that we build after and the brands in which we have invested.
Understood. Understood. The last one is on this JV which you have created. Any sense on when you'll start rolling out products and brands from that platform?
All super premium and luxury brands, let's just take a price point of INR 2,000 and above. So Zoya, Woodburn, Russian Standard, Arthaus , Kumori, all these brands will be marketed by ABD Micro. We now have a 50-person team in place to manage the brand, build new experience in terms of mixology and cocktail, to focus on key accounts and premium on-premise. From 1st April, the team is up and running, and hopefully, we'll have much more to talk two quarters down the line.
Understood. That's great to hear. Thank you. Thank you so much.
Thank you.
Thank you. The next question is from the line of Chintan Shah from JM Financial. Please go ahead.
Hi. I had two questions. One is on growth. Can you shed more light on growth specifically from the next one-year perspective as well as over the next three years? If you can talk a bit from the volume perspective as well as from the value perspective. The reason I ask this is because if you look from a volume perspective, right now, we have a brand, Iconic, which is largely driving the volume growth. Beyond that, in that prestige segment, I do not see any other brand which has been scaling so fast. Secondly, all the premium that we launched has all been resealed. I believe from a volume perspective, on our base, they will not be meaningful, at least from the next two to three-year perspective.
Putting that in context, if you can throw some light on volume and value growth for FY 2026 and over the next three years. That's the first question.
Okay. Thank you. I would break our portfolio into three specific segments or price points. Mass Premium, where we have our flagship brand, Officer's Choice. Our focus will continue to maintain its gross margin of 40%+ . We all know that the A&P spend on this brand is extremely low, so it generates a lot of cash for us. Therefore, our guidance or the way we are looking at the growth is high single-digit, but maintain our focus on the gross margin. In the P&A segment with Officer's Choice Blue, Iconic, Sterling V7, they are looking at driving double-digit growth. The combination of these two will give us a double-digit volume growth, but about a mid-double-digit value growth.
One important point, if I can point out something that we spoke about through quarter two and quarter three, is our margin governance model. One exercise that we carried out last financial year was really to look at state-brand combination and rule out state-brand combinations where we believe that the margins were below the targeted threshold. Therefore, we, by design, took, let's say, some volume cut in state-brand combination where the gross margins were not in line with the threshold. That reset was required one time, which has been done last year. Therefore, a bit of the sluggishness that you are talking about is on account of not just the market condition, but also the fact that we took some voluntary cut on volume where money was not being made. On the semi-premium, sorry, super premium to luxury segment, as you've rightly said, these are early days.
What we will see is, since the volume base is very small, it's immaterial to talk about growth because the growth will be 1,000%. The impact on the value growth, we will see by end of this financial year. If I was to sum up the guidance on mass premium, prestige and above, and super premium to luxury segment, a double-digit volume growth with mid-double-digit to higher value growth. That's how we are looking at FY 2026.
Okay. Over, let's say, three years, basically, we've tried to say that the value growth would be much higher than the volumes that currently we're looking at in FY 2026. Is that a fair understanding?
That's a fair statement to make.
Okay. Just one more follow-up on this. In that case, are we looking at any more addition in the prestige segment, something like Iconic, which can actually drive up the volumes, or the focus would be clearly to do more additions on the super premium to luxury side?
We have identified two opportunities. One of them is the semi-premium branding. I'm very happy to share with you that we have now launched Golden Mist in the state of Karnataka, which will then be followed in the other critical southern market. It's a high-growth, high-margin flavor within the deluxe segment, and that is something that we'll stay focused on. In time to come, we'll also look at participating in the semi-premium vodka segment. These two launches in the sort of semi-premium segment that we are focused on. In addition, we have a beautiful brand called Shrishti. It's an Indian brand with an Indian soul. The blend is made with something called Indian saffron. We know for sure that Indian consumers are now happy consuming, serving, and gifting Indian brands. We're quite happy with the way the product has shaped up.
These are the three brands that you will see in action in FY 2026.
Got it. Understood. Sorry, just one more follow-up on this. Iconic, basically, any sense specifically as to what could be the potential for this brand? I mean, where could it reach? I mean, we are at 5.7 million right now. What potential does it hold?
I'm trying to have several responses. I'm trying to figure out which one to give you. From the way I see the brand, it has the ability to be a market leader. It's just a matter of how fast and how soon.
Okay. Okay. Got it. Understood. Just one last question that is from a balance sheet perspective. While you clearly explained on the receivables side, there is a sharp increase on the inventory side as well. Why would that be? Could you explain that? Lastly, if we look at it like that, we started at INR 760 crore, then we raised it to a very period of that, and we are again back to INR 800 crore for reusers that you already explained. Going ahead over the next 12 months, how do we see the trajectory? Do we expect all this to normalize and go back to a dead swing status, or will it continue to have a significant portion of that on our balance sheet?
On the net debt, I think an important point to note is that our net debt, FY 2025 and FY 2024, is pretty much in the same range. The important point to note is that last year, the net debt of INR 749 crore was all working capital, right? Whereas the net debt as of FY 2025 of INR 766 crore has a portion of working capital, but it also has the investment that we have made into our CapEx program and acquisition. I think that's an important number to keep in the back of the mind. Of INR 766 crore net debt, about INR 182 crore is what we have invested towards CapEx and acquisition. Broadly, if you look at the working capital that is invested in the business, it is about INR 580 crore versus the INR 750 crore in previous year. In the presentation, it is slide number 12.
If you get a time to take a look at it, it will give you a full waterfall in terms of how the IPO proceeds were used, what has been the operating cash flow, and how it has been deployed. The investment into working capital has actually come down.
Okay. Got it. Just a clarification, what explains the increase in inventory?
The increase in inventory is largely in a few southern depots and one market of North. We will see this getting corrected within quarter one.
Okay. Got it. I mean, just one more follow-up. I mean, just one clarification. By the end of this year, what kind of net debt position should we look at? That's the last question for my side. Thank you.
Sorry, just one correction that I wanted to make. The inventory I think you're referring to is our packaging and raw material inventory. This increase is largely towards the Scotch that we are buying from a supply security point of view, and this is by design. Largely, we have a rate advantage and quantity that is available. That increase is largely related to a strategic build-up on the Scotch inventory that we have in mind.
Okay. Got it.
A new question. Tell me.
No, just the net debt position itself, what we are expecting by the end of FY 2026. Would the fundraising be largely to take care of that instead of setting this side?
The fundraising is an enabling resolution, and that's an important point to note. It's an enabling resolution. We feel that there could be opportunities that come our way, and therefore, we should be ready in terms of, you don't necessarily need permission. We will raise the fund as and when an exciting opportunity comes along.
Okay. Okay. Thank you so much for answering the question.
Thank you.
Thank you. The next question is from the line of Pritesh Chheda from Lucky Investments. Please go ahead.
I have two questions, both on the margin side. First question is, between the two quarters, quarter three and quarter four, if you see the margin movement, it is largely from the other expenses line, despite the fact that the Q4 side of the business is lower. Is it to do with a particular way where how costs are booked in your company? Because these are the first quarters that we have seen, three, four quarters. Is it to do with the quarterly phenomena and the way the costs are booked?
No, it is largely due to the fact that Q3 is a festive year, and significant A&P investments happen in Q3, and they come down in Q4. I think a significant part of the reduction that you see is related to A&P only.
Okay. Yeah. So it's the way these costs are booked. Okay. My second question.
Please go ahead.
No, you go ahead, sir. You finish your answer.
No, no. I was just saying that that's largely in line with the festive season and the non-festive. I was just doing a follow-up on that. Please go ahead.
No problem. Okay. My second question is, you had a—so this is on a margin bridge. Earlier in your calls, you said that 15% is the margin that we are looking at, and that includes two expansion items. One is the mix change because of the prestige and above rising in volumes, and second is the ENA integration. Over and above that, there is a third change which is coming as a Scotch benefit. Is it fair to assume that up to 15% margin is what the earlier two assumptions were? The third assumption which gets added and expands the margin is Scotch benefit, provided it is retained and not passed down. If it is passed down, then we restrict the margin to about 15% as of now as a margin bridge.
Right. I'll try and put this in perspective. Our FY 2025 EBITDA margin is north of 12%. The CapEx program that are currently under build are ENA, PET, and malt. ENA partial capacity is running 100%. Additional capacity is under approval. PET plant will be up and running in Q2 FY 2026, and the malt unit will be running in Q4 of FY 2026. We expect 100% benefit of this to come by March 2027, which is roughly 300 basis points coming from these three programs. On back of an exit of 12% EBITDA margin in FY 2025 and 300 basis point margin that will come on back of this CapEx program is where we are projecting a 15% EBITDA. What is not factored into this 15% EBITDA are three things which are covered. One, it does not factor the gain on bulk Scotch due to duty reduction.
What it does not factor is our improving P&A savings, and what it does not factor is our super premium to luxury portfolio, which is at early stage. Does that give you a—does that give you a bridge? How do we get to 15% and not part of 15%?
Okay. Now, on the ENA, at the time of IPO, we had this whole 100% own ENA program. So that goes through its implementation in this time frame with the CapEx or what happened?
With the CapEx that we have announced, we should get to about 66% captive ENA, which is one distributed in the state of Telangana and the other distributed in the state of Maharashtra. We need to have—we need to build another 16 million liters capacity for which we have identified the state where we want to go, and the work is on. That is it.
Okay. So that's how you mentioned 16 million liters is awaiting EC, and 16 million liters is under implementation.
Exactly. Exactly.
Okay. Okay. Okay. This explains a lot. Thank you, sir.
Thank you very much for your question.
Yeah.
Thank you. The next question is from the line of Harshad from Bandhan AMC. Please go ahead.
Hi, sir. Good evening. Thanks for taking my question. I have two questions. The first one is, if you were to look at the EBITDA per case, and directionally, basically, I wanted to understand how is Iconic's EBITDA per case versus the company average?
Iconic is still in a growth phase, both in terms of volume and in terms of the investments that are going behind the brand. Therefore, any guidance on what our current brand EBITDA is will be a little out of context. If I can understand your question better, maybe I can give you a more sharper response.
So basically, let's say that, okay, I understand that it's in an investment phase. Let's say gross contribution level, gross profit level, what would be the GD per case, let's say, directionally of Iconic versus the company average?
Iconic versus company average, Iconic would be about 3% lower than the company average at the point of time. Just to sort of give you a quick peek into how this will correct, first, as you would recall, we have launched this brand with the monocarton. However, within 12 months, after the 12-month period is over, which is part of our seeding program, we remove monocarton. As some of the newer markets like Andhra Pradesh and Delhi and many other markets got added in the last financial year, in this financial year and thereafter, the monocarton will be removed. That will improve the gross margin because that packaging cost will go away. Second, the margin.
How much will that be if you quantify that? Let's say the 3% lower.
What I'm doing is I'm giving you three things that will happen that should bridge the gap and get it to company average. First is going to be removal in a progressive manner. By end of FY 2027, we are through with the monocarton removal. Thereafter, all sales of Iconic will happen without monocarton. The second is the market bottle utilization. The market bottle utilization network sort of matures both in terms of volume, which now Iconic has achieved at 5.7 million cases. Secondly, it is in terms of developing the supply chain network because these bottles sort of flow from micro consumption point and then flows into a facility. The market bottle utilization for Iconic would also correct over the next, let's say, within this year, we should be able to get it to the company average, right?
These two combinations primarily, one is market bottle utilization, and second is the monocarton, and third is optimization of some fixed overhead. We'll get it in line with the company average.
Double-click on the market bottle utilization, and what exactly do you mean by that?
Essentially means like in the beer industry, a new bottle is created.
Return.
Yeah. So similarly.
Returns. Okay. Okay.
Returns.
It's bottle returns, basically.
Right. Return bottle.
That is basically slightly lower compared to the company average, and as basically you scale it up, probably you will get that too, company average.
Yeah. You got it. These three things will get the gross margin in line with the other brand.
The third thing you mentioned, I'm sorry, I just—the third thing you mentioned was? On this front?
Some fixed cost optimization.
Optimization. Okay. Okay. Okay. Beside that, your EBITDA per case, to come back to the company average, it would take some time as the investment basically would continue.
Yeah. With these three things, gross margins will be in line with the other brands. The A&P investment to NSV is about 6%, so the brand EBITDA will be in line.
As well. Okay. Got it. You spoke about the state brand mix, working on a state brand mix and cutting down on the state brands where it was a bit detrimental. If you could call out the top three state brand mix for us, what would that be?
The top three state brand mix will be the state of Telangana, the state of Andhra Pradesh, the state of Uttar Pradesh. These will be the three brands.
Sorry? Brand? I mean, state and brand, right? Telangana gets the Officer's Choice or?
The second brand, Choice. Therefore, it's a marketing brand in the state of Telangana, in the state of Andhra Pradesh, also UP. Second brand, which is becoming a big brand, Andhra. We started selling this brand only in the month of December, making month-on-month progress. Should hit a million case ARR over the next two or three months. Telangana is already doing extremely well, and same is the case with UP.
Got it. What—that's the key question. What would be this quarter's numbers, let's say, volume and value growth, except Andhra Pradesh?
Sorry. Which quarter are you talking about? Last quarter?
Fourth quarter. Yeah. Fourth quarter. Yeah. Fourth quarter's numbers, except Andhra Pradesh. What would that be?
For Andhra Pradesh?
I'm saying that the company-level growth is 20%-21% value and volume, right, at the company level. I'm saying if we were to exclude Andhra Pradesh, what would have been our growth in fourth quarter?
Okay. Give us a minute to calculate that specific number for you.
I mean, could you kind of talk about the CapEx outlay for 2026 and 2027?
Okay. So the specific response to your question is overall growth is 21%, and without Andhra, the growth would be between 15%-16%.
Got it. Thank you. Sir, last bit on the CapEx outlay for F2027?
CapEx outlay?
Yeah.
The INR 527 crore of CapEx that we have announced, roughly 25% has already been invested in FY 2025. 60% of this will be invested in FY 2026, and the balance 15% in FY 2027.
Okay. Got it, sir. Thank you so much.
Thank you. The next question is from the line of Asa from Boring AMC. Please go ahead.
Hello. So my question was related to QIP proceeds of INR 1,000 crore. How are you going to use that?
Ma'am, this is an enabling resolution. There is no plan to raise this money. The idea is to be future-ready. If an exciting opportunity was to come along, we should be able to exercise this option. As of now, it is an enabling resolution.
Sir, may I know, we have an IT assessment order. What does that pertain to, and what is our stance on it?
We have contested the IT order. We've been able to get a stay against that order, and we are within confidence that we should be able to have a favorable outcome.
Sir, could you please let us know if current Q4 PAT is sustainable going forward?
Current Q4 PAT is sustainable going forward. I think Q4 has one exceptional item of INR 11 crore at an EBITDA level, which is a write-back. Like I was explaining to you on the earlier question, Q4 also has a lower A&P spend, so Q4 should not be seen as a reference point for sort of forward outlook on PAT.
Okay. Got it. Thank you.
Thank you.
Thank you. The next question is from the line of Akhilesh Bhatter from Ikigai Asset Management. Please go ahead.
Thank you. Thank you for the opportunity. I want to understand the time to market it takes for you to launch a brand and the life cycle behind that, and for you to receive the feedback from the market if the brand is actually working, and for you to actually produce more on that brand. Can you please explain me the life cycle behind that?
That's an interesting question. Broadly, four or five critical phases. One is really a desktop stage in terms of which segment, which price point, what margin, what's the right to win, what's the sort of concept that will work with the consumer. It could take anything between six months to a year. It's backed by research. It's backed by first-hand insighting. It's backed by getting a better understanding of what we get as that right to win. The second phase really is packaging concept development, where it could take maybe up to another six months. Commercial production could take another three months. Pretty much, it could be between 18 months plus minus from an idea to a physical form in which the product is available. The third phase really is actual product testing. In parallel, of course, we are doing the blend development.
The third phase is really product testing, both in blend packaging, and addition communication design and communication testing. These are three phases. The fourth one that we follow as a discipline is we pick up two or three markets, and we do a prototype launch like we have done for Iconic. Currently, Shrishti is through as an example with the prototype launch. We were selling it in Haryana, UP, and in a market in East. We like to build what we call a playbook. Essentially, the idea is to make sure that as we scale the brand, we are reasonably sure on return on investment.
Once we believe that we have a playbook, is that when we start expanding into other markets, other co-markets, which could take, depending on the label approval cycle, because each state has its own requirement, and some states window open at different times of the period, could take up to 12 months. The fifth stage really is scaling up the brand. Broadly, from start to finish, it could be about a three-year affair from the time you conceive an idea to the time you actually launch it and then scale it up. For that purpose, having a robust pipeline of new product is extremely important because the market or the consumer would only get to see it when you launch it. For us to be able to come to that point of launch, it could take up to 18 months.
Got it. Thank you.
Thank you. The next question is from the line of Ishaani Kaluchia from NV Alpha Fund Management. Please go ahead.
Hi. So that's some great numbers. I'd like to ask about how you intend to compete with the other rising players in the same sector, for example, Tilaknagar Industries, Piccadily Agro, United Spirits, etc., and grow your own market capital.
Right. It is a very eclectic choice that you have taken because each of these companies has a very specific portfolio. Tilaknagar, as an example, is a largely branded player, operates in South. We have to think about competing with Tilaknagar only with our branded portfolio. We have developed a brand called Golden Mist, which has just got rolled out in Karnataka and will progressively roll out into other states. We believe that there is a need for an alternate brand in every segment. I am quite happy with the progress we made on Golden Mist. Piccadily, on the other side, operates largely in the single malt category, where we do not have products for now. On the back of our single malt distillery that we are building in Telangana, we will launch our own single malt.
That's a question for the future because it's a couple of years down the line before our single malt gets launched. Diageo, of course, has a very well-diversified portfolio. They operate in prestige whiskeys with McDowell's number one and with Royal Challenge in the premium segment, and thereafter the super premium and the luxury segment. As far as the prestige whiskey segment is concerned, we've already covered Iconic. We believe that the mega brands in these segments are more than 25 years old, and there is a place for a newer brand, and Iconic is sort of riding on that insight. As far as the super premium and luxury segment is concerned, the demonstrated consumer behavior is very different, which is about experimentation, which is about trying out a new brand, which is looking out for the new flavor. Therefore, consumers are actively seeking newer brands and newer flavors.
To our mind, the trick really is to constantly provide newer experiences. Earlier on, I spoke about Zoya. On the back of the Zoya launch, we also launched a Zoya Watermelon and a Zoya Espresso Gin. We are also working on a couple of very interesting other flavors that will fit into what we call either the sipping culture or the cocktail culture. These three companies would be, from a competition point of view, I think the focus will always be consumer back. Who is the consumer? What is the need that we can fulfill? How does the brand need to be designed? That remains a common theme irrespective of what segment we are operating in.
Follow-up to that question. Is there anybody that you do recognize as a direct competitor? Are you taking any?
Yeah. So the Alcobet category, unlike other consumer categories, is not driven by the penetration PCC core. When we talk about segment expansion, it is not about consumers who do not drink to tell them to drink or consumers who drink tell them to drink more. We have to recognize that the consumption in the Alcobet segment is driven by macroeconomic factors, which are around the social hazard, which is around education, digital literacy, access to social media. I think these are factors that really shape the market. Therefore, in terms of a question of what we believe the competition is, I think it is to do with how the society at large is adopting Alcobet as a category. We are seeing some moderation with the Gen Z consumer. It is quality over quantity. Therefore, our outlook is in time to come.
We need to start looking at value growth as a better measure of growth than just a volume growth.
All right. Thank you so much.
Thank you.
Thank you. The last question is from the line of Harshad from Bandhan AMC. Please go ahead.
Yeah. Hi. Thanks for taking my question again. Just one broad question. What would be the industry-level volume and value growth for fourth quarter in IMFL?
Which quarter did you talk about, sorry?
Fourth quarter. Yeah.
Just 10 seconds before I answer your question. The P&A segment grew just about 2% in quarter four, right?
2% in volume, sir? 2%?
In volume terms, we grew about 32. The overall industry was flat in quarter four, and we grew about 19%.
Overall, it's basically popular plus P&A put together was flat in terms of volume. In terms of value, sir? The same number?
The industry does not track value. The industry does not track value, so I'd go hazard again. I think increasingly, value should become an important KPI. Internally, we have started to measure value with a very sharp focus.
Got it. Got it. Just one last question is, for our company, for FY 2025, what would have been the growth for OCW and Sterling Reserve?
OCW, the mass premium whiskey, grew by about 13% last financial year. We did not grow, so we were the same volume by and large. In a degrowing 13% environment, we were able to hold on to our volume. If I may just remind that we did take some volume cut in markets where we felt that the gross margins were not in line. Therefore, we are quite happy that in a significant degrowth market, we have been able to hold on to our volume.
For Sterling Reserve?
Sterling Reserve degrew a bit last financial year, though the P&A segment had a single-digit growth. That is something that we are working on right now.
Okay. This degrowth is what, mid-single digit kind of or somewhere in that range?
No. It's been a double-digit degrowth for the brand. Like I said, we are currently working on addressing that gap.
Is there some bit of cannibalization by Iconic White, I mean, in your assessment, or that would not be the case?
Absolutely. The brand has gone to do 5.7 million cases. It has acquired consumers both from deluxe whiskey segment and from the semi-premium whiskey segment. We've not done any quantitative research. However, when we are in the retail outlet, then we ask the question to a retailer that, "Where is the growth coming from?" Typically, our sense is about 80% growth of Iconic is coming by people upgrading to Iconic from a lower price point, which is the deluxe whiskey price point. About maybe 20% is coming from younger consumers of a semi-premium segment. It has taken shape from all brands, including brands from our own portfolio.
Got it, sir. Thank you so much.
Thank you very much.
Thank you. As there are no further questions, I would like to hand the conference over to the management for closing comments.
Thank you very much for your time. I hope we've been able to address the questions that you have. We'll catch quarter down the line.
Thank you. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect the line.