Whalesbook
Allied Blenders and Distillers, India's second-largest spirits producer by volume, is managing inflationary pressures driven by the West Asia conflict. This geopolitical situation has increased costs for packaging materials like glass and polymers. The industry is seeking price adjustments from state governments to offset these rising expenses, which CEO Alok Gupta links to higher energy prices. Gupta anticipates these inflationary pressures are temporary and will stabilize in the coming months.
Premium Portfolio Drives Growth
Despite these immediate challenges, Allied Blenders is focusing on its premiumization strategy. The 'prestige and above' (P&A) segment, which currently represents 47% of the company's volumes and 57% of its value, is expected to significantly increase its share. The company aims for this premium portfolio to account for over 50% of volumes and 70-75% of value within the next two years, aligning with a growing consumer preference for higher-quality products. Key brands like ICONiQ White, Officer's Choice Blue, and Sterling Reserve are performing well, with ICONiQ White nearing leadership in its segment.
Strategic Investments and International Reach
To strengthen its operations and margins, Allied Blenders is investing approximately ₹1,000 crore in backward integration. This includes expanding its capabilities in extra neutral alcohol, malt, and PET manufacturing. These strategic investments are projected to increase profit margins by nearly 300 basis points by FY28 and an additional 100 basis points by FY29. Concurrently, the company is broadening its international presence, planning to expand from 24 countries in FY25 to 36 in FY26, with aspirations to reach nearly 50 markets soon. The recent India-UK free trade agreement is also anticipated to benefit profitability by lowering duties on imported scotch, potentially adding another 200 basis points to margins.
Financial Performance
In FY26, Allied Blenders achieved a record EBITDA of ₹568 crore, marking a 25.8% increase year-on-year. Profit after tax (PAT) rose by 13% to ₹220 crore, while revenue from operations grew 11.5% to ₹3,949 crore. The March quarter showed strong performance with revenue up 9.1% to ₹1,020 crore and EBITDA reaching a record ₹182 crore. However, quarterly PAT saw a 52.1% decrease to ₹38 crore, attributed to one-time costs. The board has recommended a dividend of ₹5.4 per share for FY26.