Radico Khaitan Reports Strong Q2 FY26 Results, Premium Segment Drives Growth

Radico Khaitan has reported strong financial results for the second quarter of Fiscal Year 2026, reinforcing its position as a key Indian consumer growth stock.

Premium Segment Surge: The company's 'Prestige & Above' premium segment demonstrated remarkable performance, with a 22 percent year-on-year volume increase to 3.9 million cases. Value growth was even higher at 24 percent, boosted by the successful expansion of its luxury product offerings. Key brands like Royal Ranthambore Whisky (over 60 percent growth), After Dark Whisky (50 percent growth), and Magic Moments Vodka (20 percent growth) were major contributors.

Regular Segment Momentum: The regular segment also experienced powerful growth, with volumes escalating by 80 percent year-on-year to 5.0 million cases. This surge was attributed to a favorable base, resolution of state-level industry issues, and favorable policy changes in Andhra Pradesh, which helped Radico capture approximately 30 percent market share in the popular segment.

Non-IMFL Performance: The non-Indian Made Foreign Liquor (IMFL) segment reported a 27 percent year-on-year revenue rise, reaching Rs 446 crore. However, management anticipates this segment's revenue to stabilize due to the Sitapur plant operating near maximum capacity (95 percent utilization).

Expansion and Brand Building: Radico Khaitan is expanding its luxury and super-premium portfolio, with brands like Magic Moments Vodka exceeding 7 million cases and Morpheus Super Premium Brandy reaching 1.2 million cases. The company is actively pursuing market expansion through strategic collaborations in sports, fashion, and music, and by launching new products like The Spirit of Kashmyr luxury vodka. Investment in advertising and promotion is planned at 6-8 percent of IMFL revenues to support both existing and new brands.

Margin Improvement and Debt Management: Gross margins, previously pressured by food-grain and glass prices, are expected to improve. Favorable input costs, including reduced FCI rice reserve prices and lower glass costs, alongside a shift to premium products, are projected to boost operating margins by 150 basis points in FY26. The use of captive Extra Neutral Alcohol (ENA) from the Sitapur unit is expected to help achieve medium-term operating margins of 16-17 percent. Net debt stood at Rs 427 crore in September 2025, with significant cash flow expected in the latter half of the year to be directed towards debt reduction, aiming for a debt-free status within 24-30 months.

Outlook: Management forecasts continued growth at a 14-15 percent rate in the medium term, driven by evolving consumer lifestyles and tastes in India. However, the stock is currently trading at a premium valuation of 67 times estimated FY27 earnings, suggesting that much of the positive outlook is already priced in.

Impact: This news significantly impacts Radico Khaitan's stock performance and sentiment within the Indian alcoholic beverage sector. The strong results and positive outlook can boost investor confidence, though the high valuation warrants caution. The company's performance reflects broader consumer trends in India. Impact Rating: 7/10

Difficult Terms: IMFL: Indian Made Foreign Liquor, referring to alcoholic beverages produced in India that mimic foreign spirits. Non-IMFL: Alcoholic beverages not classified as IMFL, which may include traditional Indian spirits or other categories. FCI: Food Corporation of India, responsible for food grain procurement and distribution. Basis Points (bps): A unit of measure equal to one-hundredth of a percent (0.01%). Captive ENA: Extra Neutral Alcohol produced and used internally by the company for its own production needs. Operating Margins: A measure of profitability representing the percentage of revenue that remains after deducting operating expenses. Valuation: The process of determining the current worth of an asset or company.