Ladies and gentlemen, good day and welcome to Allied Blenders and Distillers Limited Q2 FY 2027 Results Conference Call, hosted by Antique Stock Broking Limited. 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. I now hand the conference over to Mr. Abhijit Kundu. Thank you, and over to you, sir.
Thank you. It is our absolute pleasure to host the management of Allied Blenders and Distillers Limited for the Q2 FY 2027 results conference call. Over to Mr. Mukund, Head of Investor Relations for the proceeding. Thank you.
Thanks, Abhijit. Good evening, everyone. Thank you for joining our Q2 FY 2027 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. Amar Sinha, Managing Director, Mr. Ramakrishnan Ramaswamy, Chief Financial Officer. Now I would like to hand over the call to our MD, Mr. Amar Sinha, who will give you the summary of the company's quarterly performance before we open up for Q&A. Over to you, Amar.
Thank you, Mukund. Good evening, everyone, and thank you for joining us today for ABD's Q2 and H1 FY 2027 Earnings Call. In the first half of FY 2027, ABD has continued to build a stronger, a sharper operating model and a clear focus on building a future-ready spirits company. Our priorities remain consistent: premiumization-led growth, stronger consumer engagement, disciplined execution and backward integration, and prudent capital allocation. Q2 FY 2027 performance overview. On a consolidated basis, income from operations stood at INR 1,152 crore, reflecting growth of 15.8% year-on-year and 17.1% quarter-on-quarter. Q2 FY 2027 marked an important milestone for ABD, with quarterly volumes crossing 10 million cases for the first time. Total volume stood at 10 million cases, compared to 9 million cases in Q2 FY 2026, representing growth of 11.1% year-on-year.
The growth was broad-based across mass premium and others and Prestige and Above, with all four millionaire brands also growing on a sequential basis, complemented by growth across key domestic and international markets, including the defense channel. This strong momentum was visible through the first half of FY 2027, during which we achieved record monthly sales on three occasions, culminating in our highest-ever monthly volume of over 3.5 million cases in September 2026. Gross margin stood at 45.3%, an expansion of 90 basis points year-on-year, driven by a profitable brand mix across cases and higher realization per case, complemented by backward integration benefits from PET bottle manufacturing despite the impact of global supply chain disruptions. Reported EBITDA stood at INR 143 crore, up 10% year-on-year and 19.2% quarter-on-quarter, with EBITDA margin at 12.4%.
The margin was lower by 66 basis points year-on-year, reflecting our continued investments in core brands and the newly established super premium to luxury portfolio. PAT stood at INR 69 crore, up 9.7% year-on-year and 52% quarter-on-quarter. Profitability continued to be impacted by global supply chain disruptions, with an estimated impact of INR 29 crore during the quarter. On a like-to-like basis, excluding this impact, gross margin would have been 47.9%, an expansion of 342 basis points on year-on-year basis. EBITDA would have been INR 172 crore, higher by 32.3% on year-on-year basis. With EBITDA margin at 14.9%, an expansion of 186 basis points like-to-like, PAT would have been INR 91 crore, higher by 44.3% on year-on-year basis.
This reflects the underlying strength of our operating performance, supported by premium mix improvement and disciplined execution. For H1 FY 2027, income from operations stood at INR 2,135 crore, up 10.9% year-on-year, and EBITDA at INR 263 crore, up 5.8%. Reported PAT for the half year stood at INR 114 crore compared to INR 119 crore in H1 FY 2026. Excluding the INR 53 crore impact of global supply chain disruptions during the half year, like-to-like EBITDA would have been INR 316 crore, higher by 27.1%, and like-to-like PAT would have been INR 154 crore, higher by 29.8% year-on-year. Now let me discuss the performance of the Mass Premium and Others and Prestige and Above segments. Mass Premium and Others. We delivered a strong quarterly performance in Q2 FY 2027 in the Mass Premium and Others category.
The net sales value was INR 468 crore, up 15.9% year-on-year and 21.1% quarter-on-quarter. The volumes grew 15.5% year-on-year and 17.7% quarter-on-quarter to 5.5 million cases. Realization per case improved to INR 848, up 0.4% year-on-year and 2.9% quarter-on-quarter. The overall volume growth was driven by strong growth in the brandy category in the state of Andhra Pradesh. Post receipt of relevant approvals in Q4 FY 2026, we have aggressively rolled out the brand in Andhra Pradesh, which is one of the largest brandy markets in India. With strong consumer response, we have been able to achieve near double-digit market share in the state in the Mass Premium category. We witnessed robust growth in the whisky category as well, led by strong bounce back of our flagship brand, Officer's Choice Whisky.
The growth southern region, which was well supported by eastern regions and exports market. Officer's Choice remains a strong cash flow generator, retaining its leadership in India's Mass Premium whisky category and its position as India's number one exported whisky brand. Portfolio premiumization and brand momentum. Premiumization remains central to ABD's growth strategy. During Q2 FY 2027, Prestige and Above sales grew 13.4% year-on-year and 7.5% quarter-on-quarter to INR 605 crore. Volumes stood at 4.5 million cases, up 6.1% year-on-year and 3.8% quarter-on-quarter. While realization per case improved to INR 1,339, an increase of 6.9% year-on-year and 3.6% quarter-on-quarter. The segment contributed 56.4% of value sales in Q2 FY 2027 as compared to 56.9% in Q2 FY 2026. On sales volume basis, the segment contributed 45% in Q2 FY 2027 as compared to 47.1% in Q2 FY 2026.
The P&A contribution was marginally lower due to higher growth in the Mass Premium and Other segment, resulting into higher sales. ICONiQ White continued to lead this momentum. The brand delivered 3.2 million cases in Q2 FY 2027, up 20.6% from 2.6 million cases in Q2 FY 2026, with average monthly volumes continuing to exceed 1 million cases. Overall, in H1 FY 2027, ICONiQ White has grown by 26.8% on a year-on-year basis to 6.2 million cases. ICONiQ White is now operating at a meaningful scale, supported by domestic market penetration, the defense channel, and an expanding international presence. It also continues to be recognized as the world's fastest growing millionaire whisky brand for three consecutive calendar years, CY 2023, CY 2024 and CY 2025. Let me provide you with an update on our other millionaire brand, Officer's Choice Blue.
As per stated plan, we launched a refreshed identity and premium packaging of the brand from September 26. It features a sleeker bottle, a transparent label with matte gold foiling, and an embossed trusted since 1988 marker. This has been rolled out across Uttar Pradesh, Maharashtra, Haryana and West Bengal and has received an encouraging customer response. We will be launching in more markets in phases. Additionally, we have seen a sequential improvement in Officer's Choice Blue brand's monthly performance. With the pace of year-on-year decline moderating progressively, resulting in quarter-on-quarter growth during Q2 FY 2027. New launches. In September 26, we launched the Indian Edit to strengthen our premium whisky portfolio. The brand blends Indian malt and grain spirits with fine scotch malts and features packaging inspired by Indian heritage.
It is available in Maharashtra, Haryana, Uttar Pradesh, Assam, Tripura, Rajasthan, and Goa, with further expansion planned, and has received encouraging response from trade partners and consumers. Super premium and luxury portfolio. ABD Maestro continues to be an important platform for our super premium to luxury ambition. In its first year of operations, that is FY 2026, we have established a differentiated portfolio of 10 brands with unique positioning across whisky, gin, vodka, and rum categories. In the current year, the focus is on expanding the width of distribution, deeper penetration in addressable markets, and strong consumer engagement. The super premium to luxury portfolio is now present in about 80% of its addressable markets in India and has expanded internationally to seven countries, namely Australia, Canada, Ivory Coast, New Zealand, Rwanda, Sierra Leone, and the UAE.
During the quarter, we continued to invest in brand building and distribution initiatives to strengthen the visibility and positioning of the ABD Maestro portfolio, supported by our dedicated premium execution team focused on key accounts, on-premise presence, mixology-led activation, and social visibility. The portfolio continues to receive strong recognition at international and national levels. ABD Maestro has won more than 35 global awards and recognitions since its inception in FY 2026. These initiatives are aligned with our broader strategy of building brand equity, increasing premium touch points, and these global recognitions is establishing ABD Maestro as a credible player in the super premium and luxury segments while creating long-term value for our brands. Our international business remains a strategic growth opportunity.
ABD has expanded its footprint to 42 countries in Q2 FY 2027, compared to 36 countries in Q4 FY 2026, with expansion in European and African markets and Australia during the year, reinforcing our position as one of India's leading spirits exporters by volume. Exports continue to be an asset-light and high profitability model for us, with superior working capital efficiency compared to the domestic business. We remain focused on deepening our presence in existing markets while selectively expanding into new geographies. in August 2026, we announced our first overseas local production arrangement for Officer's Choice in Malaysia through an asset-light co-bottling model with an established local partner. This marks an important step in our expansion in Southeast Asia, enabling faster market entry with limited capital deployment while maintaining oversight of product quality and brand standards.
The company intends to evaluate the phased introduction of additional brands under this framework over time, in line with market response and route to market readiness. ABD will continue to evaluate similar asset-light production partnerships across select international markets based on market opportunities and strategic fit. Our international growth continues to be driven by our Millionaire brands, alongside the expanding presence of ABD Maestro's super premium to luxury portfolio. Backward integration and CapEx progress. Backward integration r emains an important pillar of ABD's transformation roadmap. Our CapEx program is focused on improving supply security, reducing structural costs, and supporting margin expansion over the medium term. We have undertaken backward integration projects in key markets of Telangana, Maharashtra, and Uttar Pradesh. Let me provide you an update on the same. In Telangana, the PET bottles manufacturing facility at Rangapur commissioned in FY 2026 continues to be EBITDA accretive.
In October 2026, we commissioned our captive malt distillery at Rangapur with an investment of about INR 75 crore and an annual capacity of about 4 million bulk liters. It is integrated with our existing manufacturing complex, which also houses an ENA distillery, an IMFL bottling unit, and the PET bottle plant. The malt distillery will support the captive malt requirements of our growing Prestige and Above portfolio, reduce dependence on external sourcing, margin accretive from in-house manufacturing, and support the development of our future single malt whiskey portfolio. In Maharashtra, in our subsidiary Minakshi Agro Industries, Aurangabad. The bottling unit project is progressing well and is expected to be operational in the next couple of months. ENA distillery expansion. We have received the environment clearance from the authorities, and currently the construction is under progress. Overall, the expansion project is on track to be operational in H1 FY 2028.
In Uttar Pradesh. U.P. is one of India's fastest growing spirits markets, is central to ABD's growth plans. The company has announced an overall investment of over INR 600 crore in the state. In January 2026, we acquired non-operating assets for about INR 70 crore and immediately undertook the upgradation of the bottling unit for about INR 40 crore in Moradabad. In October 2026, we commenced commercial operations at our bottling facility with an initial capacity of 6 million cases per annum. It strengthens our in-house bottling capability in one of our key markets and is expected to improve service efficiency while delivering cost benefits through higher in-house bottling and savings on franchise fees of INR 27 per case. In August 2026, the company announced setting up a 66 million bulk liter per year dual mode distillery with an investment about INR 293.5 crore in U.P.
Expansion of bottling capacity from the existing capacity of 6 million cases per year to an aggregate capacity of 13 million cases per year by establishing a new fully automated bottling unit, refurbishment of the existing 13 million bulk liter per year molasses distillery, and acquisition of additional land for the proposed expansion with an investment of about INR 202 crore. Across Telangana, Maharashtra, Uttar Pradesh, and Andhra Pradesh, our strategic investments are intended to deepen in-house ENA, malt, PET, and bottling capabilities. These initiatives are expected to improve supply security, drive structural cost efficiencies, and support EBITDA margin expansion over the medium term, including an expected margin benefit of approximately 300 basis points by FY 2028 and a further 150 basis points in FY 2029. Other markets. In addition to the key mentioned markets, we continue to evaluate profitable growth opportunities in other markets as well. Cash flow and balance sheet.
Operating cash flow generation stood at INR 269 crore in H1 FY 2027 compared to INR 147 crore in H1 FY 2026. Net debt increased by INR 292 crore - INR 1,273 crore as of September 2026 compared to INR 981 crore as of March 2026. The increase in net debt was predominantly for CapEx projects of INR 351 crore during the half year. As a result, net debt to EBITDA stood at 2.2x and net debt to equity at 0.8x, marginally above our stated framework of below 2x and 0.75x respectively, due to milestone-based payments for certain CapEx projects. We expect these metrics to be within the stated framework on a full financial year basis. We are also pleased that India Ratings and Research has upgraded ABD's rating by two notches to IND AA-/IND A1+ with a stable outlook. We remain focused on disciplined capital deployment.
Our CapEx program is planned to be funded through internal accruals and debt while maintaining leverage within our defined framework through the investment cycle. External environment. The external environment continues to support overall industry growth. Premiumization remains a structural trend in the Indian spirits market, supported by evolving consumer preferences and increasing acceptance of higher quality products across categories. The India-U.K. Free Trade Agreement is positive for ABD as it supports margin improvement and improves sourcing flexibility for the higher end portfolio over time. However, recently, some uncertainties have been raised by government authorities on the import duty of bulk scotch under the applicable HSN codes. The industry association, CIABC, has taken up the matter with the relevant government authorities for an early resolution, as clarity on the applicable duty structure will be important for the industry to fully realize the intended benefits of the India-U.K. FTA.
At the same time, we remain watchful of inflationary pressures, geopolitical developments, and input cost volatility. Global supply chain disruptions continue to have an impact during H1, with an estimated impact of INR 53 crores. Our underlying business fundamentals remain resilient, and our medium-term margin levers remain intact. The regulatory environment also remains supportive, with most key state policy updates in place. We expect further momentum from the Telangana policy and anticipated price revisions, and we are seeing improving sentiment on the gradual clearance of outstanding dues in Telangana. Outlook. Looking ahead, we remain focused on driving premiumization-led growth while protecting the quality of margins. Growth will be supported by continued momentum in ICONiQ White, growth in our other millionaire brands, an increasing contribution from the ABD Maestro portfolio, the scale-up of the Indian Edit in premium whisky, and new opportunities in identified white spaces, including Deluxe Vodka.
With the festive season ahead, we expect the top-line momentum to continue. For Officer's Choice Blue, our focus remains on a comprehensive brand reset through the packaging innovation undertaken to regain salience and strengthen competitiveness within the Prestige and Above segment. For Sterling Reserve B7, our priority is to strengthen its premium positioning and rebuild brand momentum within the Prestige and Above segment. Marketing efforts will be directed towards deepening consumer engagement, enhancing brand salience, and improving relevance across key consumption occasions, thereby supporting a steady improvement in performance. As already stated, we are targeting a new packaging rollout in Q4 FY 2027. Overall, we expect the top line to grow in line with the stated guidance of mid-teens. We will continue to invest behind our core brands, super premium to luxury portfolio, and organizational capabilities while maintaining FY 2027 EBITDA margins broadly in line with FY 2026.
This will be supported by premium mix improvement, backward integration benefits, operating leverage, and disciplined cost management, even as we absorb the short-term impact of supply chain disruptions. To summarize, our strategic priorities are clear. Build on the strength of our core brands, accelerate premiumization, scale our super premium and luxury portfolio, expand internationally, and strengthen structural margins through backward integration. Supported by a stronger portfolio, a committed team, disciplined execution, and a future-ready operating model, ABD is well positioned to deliver sustainable and profitable growth over the medium to long term. Thank you once again for your continued interest in ABD. With that, we will 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 touchtone 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 Dhiraj Mistry from Jefferies. Please go ahead.
Yeah. Hi, good evening, sir. Thank you for your detailed presentation. I have only two questions. One is that if I look at ICONiQ White volume on a sequential basis, in Q1, it was around 3.1 million cases, and this quarter it is 3.2 million cases. Quarter -on -quarter, the volume growth has not or more or less has remained flat. How do we expect going forward in ICONiQ White, or is that brand has reached to the mature level?
Thank you for your question. See, I think if you look at the growth of ICONiQ, we did 10.7 million cases in FY 2026. In Q2 FY 2026, which is last year, we did 2.6 million cases, and in the corresponding period now, we have done 3.2 million. There is a growth of 20.6%. However, Q1, the volume was 3.1 million This is just an aberration. The plan for ICONiQ during the current year is to reach a level of close to 14 million cases, which is in excess of 25% growth by the year end. Just to make a point here, ICONiQ White has started clocking more than a million cases every month from the first month of the current fiscal. The growth of this brand is likely to continue.
Got it, sir. Second and last question is on CapEx front. We have announced quite a few CapEx over the last two years period. Is it safe to assume that the CapEx intensity, or let's say the further CapEx announcement would be on hold, or you would be looking at further CapEx, and in which segment you would be looking for that?
See, it's like this, that we have embarked upon a journey of approximately INR 1,600 crores of CapEx. Till FY 2026, we have just spent 25%, and over the next three years, we will spend the balance. In the current year, we've spent about INR 300 crores. We are spending this money for supplies security, for building bottling capacities, enhancing ENA capacities with having our own malt plant. The PET plant is already operative and is EBITDA accretive. Other than maintenance capital, which is a routine matter with any liquor business, right now, we don't see anything beyond the INR 1,600 crores being incurred.
Got it. What would be the maintenance CapEx on an annualized basis, leaving apart this backward integration CapEx?
With this kind of CapEx journey that we have undertaken and with 40 manufacturing plants all over the country, our annual CapEx maintenance capital, or CapEx, would be in the region of INR 75 crores-INR 100 crores per annum.
Thank you. Thank you very much, and all the best for future.
Thank you.
Thank you. The next question is from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah. Thank you. Two questions. First is on the asset-light model, which currently a pilot project is happening in Southeast Asia. How will be the revenue recognition for you, or you will recognize the revenue and share some costs with the third party?
I am sorry to interrupt you, sir. Your voice is not clear. Can you please use a handset?
Yeah, I am using handset only.
Okay.
Is it clear now?
Yes, sir. Please go ahead.
This is on the tie-up in Malaysia, Southeast Asia. How will you recognize the revenue? Is there a royalty involved, or you will be sharing some cost with them, and revenue will come to you only on the pilot?
It is like this, it is like a contract bottling unit. We are sending our raw material and packaging material from India, and we will get back our business surplus, which will reflect in other income.
Okay. In Karnataka, lots of liquor companies, alcohol companies, both beer and spirits, are seeing explosive growth. If you could tell us how you Karnataka, because you see the growth of ICONiQ White.
Your voice is not actually clear. Could you mind-
I am on the line.
Yeah. Could you please repeat your question?
Sure. Karnataka, how has been your growth? The other spirits companies and beer companies have reported very strong growth, explosive growth there. How is your growth in Karnataka, and how has been the overall pricing changes because regulations have changed in Karnataka for both ICONiQ White and Officer's Choice? How is the growth, and how is the overall competition in those two segments?
Just to fill you in, the Karnataka market is approximately 65 million cases per annum, which is 50 lakh cases per month. ABD is a small player there, with about 40,000 - 50,000 cases per month. Premium brands in Karnataka are just about 10%-12% of the market. Brands below the premium segment have taken a price cut by reducing the alcoholic strength of the product. It is yet to be seen how the market really evolves. As far as ICONiQ is concerned, we have started seeing growth over the last two months. We will be able to gauge the real result over the next six months only.
Understood. Another question, it's been around six months since you have been in the company.
Sir, your voice is again breaking. Can you repeat your question?
I am sorry for this. Am I audible now?
Yes.
Yes, sir.
Sorry, sir, for that. It has been six months since you are in the company and four months since you have been MD, Amar . What have been the key changes which you are happy about? What are the key bottlenecks still there? The Tamil Nadu state, if you could talk about that, because that is opening up. What is your sense on that market, say, next two years?
Okay, let me first tackle the question relating to Tamil Nadu. Tamil Nadu is the biggest phenomenon that is likely to hit the liquor industry. It is a lease of fresh air that will take place. We anticipate the market to open up, which it has already started. New brands are getting registered. It is a market which is in excess of 50 lakh cases a month, one of the largest markets of the country. With market liberalizing and opening up, we feel that just like U.P. had evolved as India's best alcohol market, it is Tamil Nadu that is going to do the same magic. I think we are seeing value accretion and margin accretion in the times ahead. It will happen not only to us, but all companies in the alcobev space.
Actually, I have been in the company for six months now, and I started taking charge from month 1, so technically four months, but six months in action. My focus is totally on driving top-line growth, top-line profitable growth, and execution of ABD's journey, which is going to be value and margin accretive in the years to come. I must tell you that ABD is undergoing a transformation journey for the next two years. Premiumization is going to actually pick up pace. There are markets in which I feel some growth will happen. First, I would like to say that the company is poised for a value-led growth rather than just volume. I have been trying to mentally tune the entire set of people working with me on profitable volumes. Actually, ABD anyway did 36 million cases last year.
But if we have to achieve our ambition of crossing the 50 million mark by FY 2029, which is what is the goal we have set for ourselves, we have to achieve profitable growth. Premiumization journey has to pace up with ICONiQ, which will be the growth driver. We will achieve from 14 million cases this year that I plan to do, we will hit 20 million cases in the next two years. That is the goal that we have set for ABD internally. As you know, Officer's Choice Blue and Sterling Reserve B7 are power brands, which are powerful in select states, but put together, they are more than 5.5 million cases, which means huge volume. These brands need to be revived. Officer's Choice Blue in its new form to be distributed and built upon in the months ahead.
In fact, the high point was 6 million in 2022. We will scale up volumes of these brands in the next two years. The Indian Edit in the premium whisky segment, super premium whisky segment, has been launched. The brand delivers high contribution. It has been in seven states now. The reports that we are getting is extremely encouraging. So we see a future in this brand. We hope to maintain leadership position of Officer's Choice Whisky, which contributes to 40% market share, and a gross margin of 45%. ABD Maestro luxury portfolio needs hard work. Last year was launch and placement. We had a sales turnover of INR 20 crores. This year, we would end up doing INR 40 crores. So it is moving in the right direction. This year, we need to expand distribution, create visibility, and consumer engagement.
With the distribution of retail having been merged with ABD, it will get more power to the portfolio. So this is as far as brands are concerned. The next bucket I see is for CapEx and backward integration. We talked about it in my opening speech, ensure that all backward integration is completed on time so that they become EBITDA accretive by FY 2029. It is an ambitious INR 1,600+ crore journey, which will give us 300+ basis points in EBITDA margin by FY 2028, an additional 150 basis points by FY 2029. We have spent 25% up to FY 2026, as I said, and the rest over the next three years. As far as brands is concerned, the sales and marketing people, as concerned, the manufacturing and quality people, their mindset is being completely tuned to the ambitious growth, and profitable objectives with premiumization.
There are one or two other important areas that I would like to highlight, which we are working on. Travel retail creates visibility for the right TG for premium and luxury products that need focus. ABD Maestro is available in five travel airports currently, which we will expand further. As far as exports is concerned, in FY 2026, we hit 36 countries. In Q2 of FY 2027, we have reached 42 countries. Our objective that we have internally is to reach 50+ countries over the next 12 months. There is another bucket, which is CSD in paramilitary. The defense in paramilitary business has huge potential. We need to harness that. We have listed four new products this year, and they are expected to give us good returns. There is a whole lot of work happening. The entire ABD team is working collectively.
There is a huge mindset change, and it is eventually going to benefit the company.
Sure, sir. Thanks a lot for the detailed answer. Thank you. That is all from me.
Thank you. The next question is from the line of Mihir Shah from Nomura. Please go ahead.
Hi, sir. This is Mihir Shah from Nomura. Thank you for taking my question. Firstly, congrats on an overall good performance. However, the anomaly is if you see the Prestige and Above growth, it grew only by about 6%, while mass premium grew much higher at 15 odd percent. Wanted to understand what led to the slowdown on Prestige and Above growth, and what led to the acceleration in the mass premium. That is my first question.
I would first say that growth in the mass premium is 15.5% in volume terms and 16% in value terms year-over-year. Brands in whisky and brandy have been responding very well in the southern markets, which contributes to more than 60% of the country's alcobev business. You would be glad to know that we started late in Andhra Pradesh, but we have reached a 10% market share today in Andhra as far as brandy is concerned, which is the largest brandy market. Telangana Old Monk whiskey de-growth has been arrested in the last quarter. Officer's Choice remains the largest exported brand from India, leaders in GCC markets, and growing fast in African markets. Officer's Choice is a brand I said that delivers 40% market share and a 45% gross margin. So it was important for us to concentrate on this brand and grow it from here.
It is a cash generator, which funds growth and premiumization. You will see a complete brand reset with a completely new packaging look and feel and marketing communication by Q3. So Officer's Choice will rule the market once again. We will remain focused on volume growth from this segment, which will be in the months ahead. Now, you asked me why is the P&A growth lower. P&A volume growth is 6% year-on-year, but value growth is 13.4%. Obviously, because the saliency of mass premium with the revival of this segment has improved in Q2, the saliency of P&A looks smaller, but the value growth is 13.4%. P&A growth largely is driven by ICONiQ, which has reached to 10.7 million cases in FY 2026. It is a large base also. But you will realize that the best has yet to come. The season is about to begin. The season ratio is 40/60.
This year, we plan to sell 14 million cases, and the large volumes are going to happen in H2. You would be aware that ICONiQ has emerged as the world's fastest-growing premium brand and a millionaire brand for three consecutive years. OC Blue, launched with new packaging, is responding very well. De-growth is getting arrested since Q2 over Q1. Sterling Reserve planned for a brand reset in Q4 in the months ahead. Indian Edit launched in seven states, good reports from the market. ABD Maestro's nine luxury products are being focused on with integration of retail sales with ABD. Therefore, if you will realize that there is a huge headroom for growth, we remain focused on taking P&A volumes to a 50% + saliency level and 60% + value saliency in the next one year. Brand will remain focused on delivering mid-teens to high teens plus growth in volume H2.
Which brand you said will deliver mid-teens to high teens? I think to reach 14 million cases, ICONiQ will have to grow by 30%, actually.
Yes. We have, as the season is yet to begin, there are huge marketing plans in the annual, and we don't see it as a problem because, see, let me explain one thing. I've told you that every month we are clocking more than a million cases. If I don't do anything, I will still hit 12 million cases. To reach that 14 million, we have to stretch out as far as activations are concerned, which we will do.
Understood. Suffice to believe that the 20% decline in P&A ex of ICONiQ will get addressed with the new refurbishing of packaging, et cetera, that you're doing.
Yeah.
The step-up in volume growth that we have seen in mass premium is likely to continue given Officer's Choice has seen a turnaround, and there also, we are expecting a refurbishment in packaging by 4Q. Would that understanding be correct, sir?
Your understanding is absolutely bang on. I would again like to say that Officer's Choice Blue, Sterling Reserve B7 not even having achieved the packaging change, and Officer's Choice. All three, for the first time, have seen a further growth. I am hoping that over the next one and two years, these brands should see a reasonable level of growth. Further, there are brands like Indian Edit, which will add to the pace of growth. Of course, ABD Maestro brands will also see some growth in the alcobev business. There are a lot of things. Plus, I must tell you that the wide space to make the P&A look more attractive is the launch of a vodka, which will happen before the year ends.
Understood, sir. That is clear. Secondly, I just wanted to understand, one looks at the mass premium whisky market or the popular whisky market, competitive intensity there seems to have heated up with McDowell's also relaunching with a refreshed liquid, actually, along with packaging. Imperial Blue also is getting aggressive. You are stepping up the pedal. How should one see this space now, and what, in your view, are you seeing on the ground between who's winning the tussle here at this point of time. Any light would be helpful.
See, I must tell you something, that the reality is that while premiumization is a talked-about subject globally, the fact is that any country in the world has a market at the lower end of the pyramid. Similarly, in India, out of 440 million cases, roughly 55% is the brands below the premium segment. And the good thing for us is that if you go back quarter one, while the whole industry declined, ABD grew by 2.5%. In this quarter also, we have shown a decent growth. So this 40% market share in the mass premium market, I think we are the leaders. Despite any competition that is coming in, we will continue to strengthen the brand because it already has a brand equity. We only need to put in some more focus.
We are not scared of competition, but we'll just concentrate on elevating our position in the market over the next two years.
Fair point, sir. Thank you for that. Lastly, on margins, if you see the impact on gross margins this quarter, was quite a bit. Wanted to understand with the benefits of higher P&A growth, India-UK FTA benefits, et cetera, coming in, how should one think about the gross margin profile in the second half? Also maybe some backward integration benefits will start kicking in as well. Any light on how your margin profile will shape up in the second half?
Yeah. I will tell you what. See, as I said, we have had a gross margin of 45.3% in Q2, and it was 46% in Q1. Roughly, if you ask me, I would say that before anything, the market that will evolve in the season should give a margin accretion of say, 100 basis points in H2. I did tell you that in FY 2028, when our backward integration starts fructifying and in FY 2029, we will add between 400 and 50 basis points.
Got it, sir. Thank you very much, and wishing you all the best.
Thank you, sir.
Thank you. The next question is from the line of Harsh Sheth from ICICI Securities. Please go ahead.
Yeah. Hi. Thanks for the opportunity, and congratulations on crossing 10 million cases in the quarter for the first time. Most of my questions have been addressed. Just a couple. On Maestro, I understand it is in seeding phase and small relative to overall business. But, since the investment behind it is now a visible line in the margin, could you give us a broad sense of the annual spend and how the 6,000 premium touchpoints and 80% addressable market coverage are tracking against the plan? And importantly, at what point would you expect it to start contributing meaningfully to the EBITDA margins?
Let me tell you, first of all, as I said that last year we clocked INR 20 crore turnover. This year we will do INR 40 crore turnover.
Last year.
Sorry. We did INR 40 crore last year, and INR 80 crore is what we will do this year. Another point is that exit of FY 2026, we were in 5,500 premium touchpoints. This year, from here, it will only continue to grow. Why? Because the sales efforts of ABD Maestro has now been integrated with ABD, and that will give more power to distribution. We are hoping, out of the 100,000 universe, 20,000 universe is roughly all key accounts, on-premise, premium outlets. We hope that with this integration with ABD, we will be able to better handle the challenges ahead.
Sure. And sir, one follow-up. How should the EBITDA margin trajectory look like as we scale up the Maestro portfolio?
See, I will tell you if I have to give you a guidance. In FY 2027, I have told you that we have been facing the challenges of the West Asia war crisis. If it was not there, my EBITDA margin would have been 15%. So I have lost 250 basis points of EBITDA margin because of the West Asia crisis. But nevertheless, by the close of FY 2027, we hope we will be able to do as well as what we did in FY 2026 despite the challenges. And then there is no looking back next year onward.
Sure. Secondly, on the Indian Edit, our recent launch at INR 1,550 price point in Maharashtra. It sits in same band as some of the very well-established premium whiskeys. How are you thinking about the H2 rollout beyond seven launch states? And is the consumer you are targeting here a trade-up from Sterling Reserve or a recruit from a competing brands?
No, so see, there are multiple brands in the premium whisky segment in India now. When a consumer walks into a town outlet, he doesn't ask, "ABD, is this brand or that brand?" He asks for his brand. I think we will get consumers from different brands that prevail, especially brand. There are many, I don't want to name the brands, but you all are all aware. There are multiple choices, and we'll attract consumers from these super-premium whiskies and premium whiskies.
Sure, sir. That's it from my side. Thank you and all the best.
Thank you. The next question is from the line of Abhishek Shankar from ICICI. Please go ahead.
Yeah. Thanks for taking my question. Hope I'm audible. I just want to-
Yeah.
Get a light on the margin part. We see that the conflict in the West Asia continues. There is no fixed outcome that has come out yet. What impact are you seeing early into Q3, whether this supply chain disruption impact will continue ahead for the next two quarter, at least say one quarter? How are the early trends you are seeing in the festive season? Just wanted to get clarity on the margin part and the festive trends.
First of all, I must tell you that the inflationary pressures are still on. We are only hoping that Q4 will be much better, but right now the pressure is on. There are several margin drivers. We have this seasonality in operating leverage in H2. We are looking at bettering the premium mix of the brands with the launches like Indian Edit, and vodka is also likely to come. Backward integration is going to give us margin accretion because we have started production as we speak in Uttar Pradesh, with our bottling plant that we acquired, which is a big one. This is going to be highly margin accretive. First of all, before anything, whatever we produce in that plant, we get a franchise fee waiver of almost INR 27 a case, and there is this capacity right now is 6 million cases.
By Q4, we are planning to expand the capacity to 13 million cases. You can understand the margin in the next, say, six months that we will gain from this initiative. Then we are also undertaking some value engineering with our packaging material because in difficult times, we need to reexamine where we can save some money. The India-U.K. FTA is likely to give us 70 basis points this year. Right now, there is an upheaval, which all of you are aware, but I think it is a bigger issue. Both the countries' governments are in talks. We have made a representation, and I think, I am being optimistic, that it will get resolved over the next one month. In any case, we have stocks which will last us till early December. By that time, we hope it will all get resolved.
Yes. Thank you. Thanks for the detailed outlook. That is it from my side.
Thank you. The next question is from the line of Nitin from HDFC Securities. Please go ahead.
Hi. Thanks a lot for taking my question. My first question pertains to the cannibalization risk. How are we looking to address the portfolio cannibalization? Our ground checks indicate that traditional brand volumes have largely cannibalized or to an extent cannibalized towards ICONiQ White, and now we are looking to relaunch our portfolio offerings like OC Blue we have launched, and we will be doing SRB7. So I just want to check what all measures we are taking to sort of protect volumes in the brand. That's the first question.
So please, I would very humbly like to make a small correction to your understanding. The regional brands are not cannibalizing into ICONiQ White. First of all, ICONiQ White is hitting more than a million cases every month. So this has never happened in the past. It's happening now. Secondly, as I said, we will hit close to 14 million cases this year, which we stick to our guideline. And the season is about to begin, and there are many more activations and marketing communication plan for the brand. So cannibalization will not take place as of now ICONiQ is today looked at as a superior value for money in that segment. And competition, I would say, to ICONiQ is facing certain challenges, which I don't want to describe, but there are some opportunities which are going to be available to us.
Thanks a lot for the explanation. My question was pertaining to, in the past, we have seen volume declines in OC Blue and Sterling Reserve B7. So I just wanted to check on if there was any cannibalization to ICONiQ White or what was a missing element in the past which have affected the growth. And now with the relaunches, how confident we are with the growth journey ahead.
See, I will tell you something. ABD went for an IPO in the year July 2024. Prior to that, we were facing many challenges. The brands were not being nurtured. It was not being marketed. I think most of the brands suffered in that, during that period. After 2024, after the IPO took place, we are only expanding. We are bringing in more brands. We have set up ABD Maestro. We are premiumizing. We are exploring more new opportunities, more new brands. I think we have enough resources available to us now, which was not available earlier. Without being aggressive, I think I was not there in the past. I am here now with a lot of my experience, which will also benefit the company's portfolio. I will do my best.
Sure, sir. This is quite helpful. My last question pertains to this sort of aggressive CapEx plan. This quarter also net debt to EBITDA exceeded 2 x threshold we have set. In going ahead, how confident we are with respect to sort of managing the funding of our CapEx through debt and internal accruals?
Yeah, see, the point is that premiumization is helping us to manage our profitability and working capital pretty well. If you see, my operating cash flow in H1 FY 2026 was INR 147 crores. Operating cash flow in H1 FY 2027, it is INR 269 crores. I am generating more cash. We hope the company is becoming healthy. I think we have no doubt that the financial metrics that we talk about as per our stated guidelines, by the end of the year, when the CapEx program starts fructifying, we will fall in line.
Sure, sir. This is helpful. Thanks a lot and all the best.
Thank you.
Thank you. The next question is from the line of Karan Kamdar from Choice Institutional Equities. Please go ahead.
Yeah. Hi, sir. Congrats on a good set of numbers. What I wanted to know is, what is your pricing strategy going forward, given that costs have risen? How do we see the conundrum of raising prices across various states?
See, as far as pricing strategy is concerned, you know that liquor industry doesn't allow you to change price when you want or whenever there are inflationary pressures. But one of the most important things is, if you look at the history of the last three-four years, the government has been very responsive to the industry pressures and has given price increase in most states of the country over maybe the last three-four years. We are constantly making representations about the inflationary pressures. We hope that over the next 12 months, some states will justify. The latest on the cards that should happen is Telangana, where the dialogue is on, the whole industry is under pressure. So Telangana is one, and there are many other states that we are trying to get a price increase through the Association of Alcoholic Beverage Companies.
I think something will fructify.
Got it. Sir, would this price increase be sufficient enough to cover the cost overrun due to the conflict? When can we see margin accretion happening? If we assume that this cost base continues for the next six months - one year, when can we see margin accretion happening?
See, I will tell you, I have a simple calculation. I just told you that what I have lost is 250 basis points because of this West Asia crisis through inflation. I am very sure that my CapEx journey, my premiumization journey that we have undertaken, will more than offset the inflationary pressures. First of all, this inflationary pressure is going to be temporary. It has lasted for six months. Maybe it will last for another three months. We will be able to pull through. We do not see it as a challenge.
Got it. Sir, one last question, if I can. I just want to say congrats on the opening of the malt distillery. What I wanted to know is, by when can we start selling or using the malt from the facility after maturation? How soon can we see the malt go commercial?
Great question. First of all, the malt distillery that we have set up in Telangana is state of the art, and it has a capacity of 4 million liters per annum. We have set up a state-of-the-art maturation hall, so we will start maturing what we produce, and in three years' time, it will be ready to be used as a malt. However, we import or buy a lot of fresh malt to blend into our products. That we will start seeing in a span of 12 - 15 months. This will all become margin accretive.
Got it, sir. Thank you so much, sir, and all the best. Thank you.
Thank you.
Thank you. The next question is from the line of Ishani Kacholia from NV Alpha. Please go ahead.
Hi. To increase your brand visibility, are you going to be increasing your spending, if so, by how much? Could you shed some clarity on how much revenue you own through each of your existing distribution channels and if you are planning on expanding your distribution channels?
No. See, the distribution channels in the liquor space are restricted, and you cannot do beyond. If you look at the retail, it is over 100,000 outlets, which will continue to be 90% of the state is being handled by us in terms of our presence. Then we have CSD and paramilitary, where we have made an entry with four brands this year. That will be an area of growth. Then we have exports, where we have expanded from 36 - 42 countries. We will go to 50 countries in the next 12 months. We have got all these channels, and then we have got premium on-premise, which will be tackled with the premiumization journey that we have taken. I think we are pretty much there, and all we need is the right strategy to make it successful with so many brands.
All right. That is great. I am rooting for you guys. All the best.
Thank you.
Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments. Please go ahead. Thank you, and over to you, sir.
For taking your time out and participating in our 2Q FY 2027 earnings call. Happy to address further questions. You can reach out to me or Amar as well. Thanks again.
Wish you all the best.
Thank you. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.