Allied Blenders and Distillers Limited (ABDL) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Allied Blenders and Distillers Limited Q1 FY '26 Results Conference Call hosted by Antique Stockbroking Limited. [Operator Instructions] 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.

Yes, thanks. It's our absolute pleasure to host the management of Allied Blenders and Distillers Limited for the Quarter 1 FY '26 Results Conference Call. 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 Q1 FY '26 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. Alok Gupta, Managing Director; and Mr. Anil Somani, Chief Financial Officer. Now, I would like to hand over the call to our MD, Mr. Alok Gupta, who will give you the summary of the company's quarterly performance before we open up for Q&A. Over to you, Alok.

Thank you, Mukund. Good afternoon, ladies and gentlemen. Thank you for all joining us today for the Q1 FY '26 earnings call of Allied Blenders and Distillers Limited. This quarter marks approximately 1 year since our public listing, and I'm pleased to share that ABD has entered FY '26 with strong momentum. We have delivered our fourth consecutive quarter of profitable growth, validating our strategy of prioritizing profitable volume growth, portfolio premiumization, cost focus and agile investment in backward integration to enhance margins. Our consolidated income from operations reached INR 930 crores in Q1 FY '26, representing a 22.5% increase over the same period last year. EBITDA grew at 56.4% year-on-year to INR 119 crores with EBITDA margin expanding to 12.8%, an improvement of 277 basis points on a year-on-year basis as compared to 10% in Q1 FY '25. Profit after tax for the quarter surged 5x to INR 56 crores as compared to INR 11 crores in Q1 FY '25. In the quarter, we delivered 8.5 million cases, up by 17.2% on a year-on-year basis, accompanied by a 6.2% increase in realization per case, driven by favorable product mix and price optimization. In the Mass Premium category, the overall volume growth was stable with sales volume maintained at 4.6 million cases in Q1 FY '26 as compared to Q1 FY '25, mainly due to controlled sale on account of continued adoption of state profit governance metrics. However, the P&A portfolio volume growth continues to outperform the industry, reflecting consistent progress in our premiumization agenda. The P&A category witnessed a strong growth of 46.9% across multiple markets. This growth resulted in increasing our overall P&A salience to 46.2% in volume terms and 55.8% of the sales volume, value in Q1 FY '26 as compared to 36.9% and 46.1%, respectively, in Q1 FY '25. Overall, the growth was not only witnessed in opening up of markets such as AP and Delhi, but also certain well-established states of North India. Now, coming to our overall EBITDA performance. The year-on-year performance was driven by continued strategic focus on maintaining a profitable brand mix across key states, continuous cost benefit on back of rate reset, packaging efficiency, stable commodity prices, particularly on ENA, resulting in improved gross margin by 448 basis points to 43.2% in Q1 FY '26 as compared to 38.7% in Q1 FY '25. On the OpEx front, the employee cost at INR 50 crores in Q1 FY '26, which is 5.3% of our income from operation as compared to INR 46 crores in Q1 FY '25, which was 6.1% income from our operation, which is mainly on account of setting up of ABD Maestro in Q1 FY '26 and our new distillery in Minakshi, in Maharashtra, which was acquired in third quarter of last year. The other OpEx cost of INR 238 crores in Q1 FY '25 is higher by 37.2% as compared to INR 173 crores in Q1 FY '25, mainly on account of higher promotion, sales and distribution of established brands and new brands in the Super-Premium to Luxury portfolio and certain increases in the state level. Overall, on a net basis, the EBITDA margin improved to 12.8% in Q1 FY '25 as compared to 10% in Q1 FY '25. Now, let me discuss about the performance of our key brand. ICONiQ White, the fastest-growing millennial spirits brand globally for second year in a row, continued to expand its reach across Indian market and has now earned 7 international markets. In just 30 months since launch, it has joined the ranks of the top 20 global whiskey brands, resonating strongly with the younger consumer and supported by our extensive retail distribution. During the quarter, the brand witnessed growth across all states in India, and we expect the strong growth momentum to continue. Our flagship brand, Officer's Choice, retained its #1 position in the Indian Mass Premium category and continues to be India's #1 exported spirits brand. It remains a critical driver of our profitability and cash flows, generating 40% plus gross margins and benefiting from scale, brand strength and efficient trade spends. We remain sharply focused on sustaining high-margin performance through continued operational discipline. For our regional power brands, Officer's Choice Blue, we are focusing on key markets to strengthen its presence while launching fresh and engaging campaign to connect better with the consumer. For the fourth millionaire brand, Sterling Reserve B7, we are currently focusing on driving new consumer trials and deepening engagement through sharp strategic campaigns. We recently did a campaign in Maharashtra. And based on the encouraging response, we are expanding this initiative to 5 other big states. The quarter also significant -- this quarter also had significant progress in expanding our Premium offering. We launched Golden Mist, a new prestige brandy in Karnataka in the month of April '25 and more recently in July '25 in Telangana. The brand is crafted using French oak cask aging and designed to cater the evolving premium consumption preferences. Meanwhile, ABD Maestro, our Super-Premium and Luxury brand subsidiary, is scaling rapidly with expansion -- expanding presence in key Indian cities and select international markets. Brands such as Zoya Gin, Arthaus Blended Malt Scotch whiskey and Woodburns whiskey are gaining traction among aspiration-driven consumers and are well-positioned to capture high-margin growth opportunities. We also expanded into the Super-Premium and Luxury vodka segment with launch of Russian Standard vodka through a partnership with Roust Corporation. This global brand is now available in key markets of Maharashtra, Goa and West Bengal. On the international front, ABD global footprint has expanded from 14 countries to 27 countries, nearly a 2x expansion, complementing our strategy to build a strong consumer franchise across geographies. In addition to our presence in Middle East and Africa, we have secured approvals for export to Canada, South America, New Zealand and to European Union region. Moving to our CapEx program. Our INR 525 crores CapEx program is progressing well, and we are on track. The PET manufacturing facility in Telangana is on track for commissioning in Q2 FY '26. We expect the commercial operation to start from September '25. The margin accretive benefits would start flowing in line with the expectation. The single malt distillery is progressing well towards a Q4 FY '26 launch in commercial operations. We will witness margin accretive benefits to start flowing from April 2026 onwards. The ENA distillery in Aurangabad acquired in December '26 commenced operation in February 2025 and is currently operating at 100% capacity. Regulatory approval for capacity expansion are under process. As already stated, these backward integration initiatives are margin accretive and are expected to support approximately 300 basis points of EBITDA margin improvement from Q4 FY '27 onwards. At the working capital front, strong focus on collection and inventory management has resulted in reduction in overall net working capital. We incurred CapEx payout in line with the planned CapEx phasing. With strong profit performance, net working capital optimization and planned CapEx-related payout, we generated free cash flow, which helped marginal reduction in our net debt to INR 754 crores as on 30 June '25 as compared to INR 766 crores as on 31 March 2025. This led to a marginal improvement in net debt-to-equity to 4.7x in June '25 as compared to 0.49x in March '25 and net debt-to-EBITDA from 1.5x in June '25 as compared to 1.7x in March '25. We continue to maintain tight control over working capital with strong focus on optimizing receivables. Additionally, industry-wide receivable from Telangana state is anticipated to normalize gradually, further supporting working capital stability. The external environment continues to support our strategic direction. Consumer sentiment remains upbeat with the experience-led consumption expected to fuel Premium category growth. The new tax regime has enhanced disposable income, further encouraging trading up behavior. Input costs, including grain, ENA and glass remains soft and are expected to stay stable. Most states have finalized regulatory updates, resulting in a relatively stable policy backdrop. The anticipated U.K. FTA is expected to improve margins, particularly beneficial for ABD as one of the largest importer of bulk scotch and will enhance accessibility of our Super-Premium and Luxury offering. As we look ahead in FY '26, ABD will remain focused on driving net sales value growth, strengthening operational excellence, advancing portfolio diversification, optimizing working capital and ensuring on-time execution of our projects. We are confident that ABD is well-positioned to participate meaningfully in India's evolving premium consumption story and deliver sustainable value creation. Thank you once again for your continued interest and support. We now open the floor for questions.

[Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama.

Congrats on very good numbers. My first question is on Golden Mist. You have entered the Prestige category. So I wanted to understand which markets you'll be focusing, which are the key competitors here? And if you could also comment on Maharashtra. I did hear your media interview. But in Maharashtra, post-tax hike, have most of the players passed it to the end customer? Or in many cases, the companies are absorbing the tax hike, which could impact the margins? That is the first question.

Thank you, Abneesh. Golden Mist is a brandy in the Prestige segment. The 2 key competitors in this segment are Napoleon Brandy and Mansion House. As we know that more than 95% of brandy sales comes from 4 southern states. We are currently available in Karnataka and in Telangana and are looking forward to launching this brand also in the state of Andhra Pradesh and other smaller territories like Pondicherry and Orissa, where we see sale of Prestige Brandy. That should all happen within this financial year. As regards Maharashtra, I think most of the marketeers have passed on the tax incident to the customer some reduction in the margin. And by and large, all the key competitors, the key players have tried to retain and protect their margins and minimize margin losses wherever they could. Like I said in several media interviews, I think for us to be able to give a view on the overall volume and margin impact, I think the only way to do is by having a greater clarity on the MML policy, which is yet to be announced by the government.

Right. Second question is, post IPO last few quarters, we have seen very good recovery in your margin profile in the P&A salience. So if you could talk about feet on street, what is the change in the last 1 year? And similarly, in terms of point of sale and on-trade premises, your visibility, what has gone in terms of efforts, what has gone in terms of the investment? And next 2 years, as you further scale up in terms of all these niche investments in terms of the brands and more launches, where do you see the brand spend, point of sale and feet on street also?

Sure. We have roughly 500 people feet on street. That's the total workforce involved in our sales operation. We cover more than 90% of the outlets which are permitted to sell alcoholic beverages. Fundamentally, post IPO, 3 changes have happened. Change number one that happened immediately prior to IPO, but got implemented in the IPO year is that, we moved from a volume target to profitable volumes to a margin governance metrics, and we redefined the brand and the SKU in each state where we wanted to grow to make sure that the capital is allocated behind profitable state brand SKUs. The second change that we made was that we realigned the sales promotion incentive for our sales team from volume to value with focus on P&A. And the third change that has happened starting this financial year is that, we have launched a new sales incentive initiative called [ Jeet ], which covers pretty much 90% of the workforce. We have put it on an app where each [ TSC ] can actually see the performance that he or she may be recording during the course of the month and essentially create greater visibility and greater pull and push towards their target. We have also, instead of annual targets, we moved to quarterly payouts. So essentially, these 3 things have happened. Focus has gone from volume to value within that focus on P&A. And now on back of the new program that we put in place, with better incentive, faster incentive, we are hopeful that we will continue to drive the growth that we are seeing in our business. As regards on-premise, I'll broadly divide on-premise into 2 types. One is key accounts and premium on-premise. The coverage of key accounts and premium on-premise will be done by ABD Maestro. Just as an example, now we have got listing with 3 of the largest national hotel chains, where the luxury products will get placed in their bars and in the mini refrigerator in the rooms. The traditional on-premise will continue to be covered by the ABD's team. I hope that answers your question.

Yes, quite helpful. Last question, India is seen largely as a whiskey market. Now, your 2 new developments, one is Golden Mist is a brandy offering. And similarly, Russian Standard Vodka again, vodka. Those are smaller opportunity and both have very strong entrenched players. Brandy, obviously, Tilaknagar is a big player and vodka, Radico is a big player. So wanted to understand why these smaller opportunity? And within these smaller opportunities, is -- are you targeting essentially again a bit more of the premium end where you would be able to really expand the market? And long-term, where -- how do you see your own whiskey contribution to sales? So what is the plan in terms of the diversification? Are these more of niche opportunities? Or do you think over 5 years, the whiskey contribution will be lesser in terms of diversification?

Well, at a macro level, contribution from whiskey over the last 30 years has remained about 65%. So I think we continue to love and enjoy whiskey as a flavor, and we do not expect significant changes in the flavor mix basket. Whiskey will continue to be north of 60%. Other brown spirits, brandy and rum will be about 30% and 5% is white. So I think pretty much that's a stable state over the last 30, 40 years. If you were to slice the industry, of the 410 million alcobev cases last year, roughly 160 million cases were at the prestige price point, which is a price point of, let's say, between INR 700 and INR 1,000. Of this 160 million, roughly 40 million is non-whiskey, which is brandy and vodka. Golden Mist operates at a prestige price point, which is roughly 16 million to 18 million cases, growing high double-digit, excellent margins. And by and large, it has got a sales concentration in the Southern region. So Golden Mist is a brand that will operate in a high-margin, high-growth prestige brandy market. In the Southern region, we also have a reasonably strong distribution. So it's not as large as whiskey, but in 16 million cases, a double-digit market share gives us an opportunity to create yet another millionaire brand. Similarly, when we were to look at Prestige vodka, which is another 15 million, 16 million -- 14 million, 15 million cases, again, a reasonable double-digit market share gives us an opportunity to build another 1 million brand. So I think these are smaller as compared to whiskey, but each of these opportunities gives us the ability to create another millionaire brand. As regards Russian Standard, Russian Standard competes with Super-Premium and Luxury vodka across the world. They sell this brand in almost 60 countries. And they compete with the global leading Super-Premium and Luxury vodka. Therefore, this brand helps us on the Luxury side, provide consumer another exciting option, whether it is in form of a sipping or cocktail or any other mode of consumption. So the Russian Standard does not compete with Magic Moment. It competes more with the like of Tito's, Absolut and GREY GOOSE.

One quick follow-up, last question. In both these 2 subsegments, you mentioned double-digit market share. That will be a very good achievement, but obviously not easy. What will lead to this? Because this is obviously a -- largely a media dark industry. And obviously, current entrenched players will not let it go easy. So what will lead to this double-digit share? And what is the confidence level in this?

So if you were to look at 2 trends in the alcobev industry, first trend is premiumization about -- if you were to go a little bit on history, premiumization was more visible in whiskey as a flavor. But if you look at last 2 or 3 years trend, premiumization is happening across all flavors. Therefore, it's happening in rum. It's happening in brandy. It's happening in, of course, all whites. Secondly, if you look at the growth of flavored variants within even rum and brandy, that indicates that consumers are increasingly wanting to experiment and experience newer variants. So I think the way we see the opportunity is that, yes, there is an established player there, but the consumers, especially the younger consumers would be looking at experiencing newer experiences. And therefore, the way we are positioning, for example, Golden Mist, it's more to talk to the slightly younger consumer who have adopted brandy as their preferred choice, but it talks to them in a language that they would relate with. So yes, it's an uphill task, but we are quite committed to make progress there. As regards to the confidence level, would not have launched this brand if the confidence level in our key consumer insight and our go-to-market strategy, we didn't believe we had a good chance of success.

The next question is from the line of Aditya Soman from CLSA.

Two questions from me. Firstly, thanks for your sort of detailed presentation, which really is fairly transparent and gives out a lot of data. But I wanted to just ask on -- you've laid out the pricing structure for P&A and Mass Premium and other brands and other price points. But I just want to understand how the margin structures also vary as we move from sort of Mass Premium to Prestige. If you can answer it on sort of a price per bottle or in terms of percentage margins, that will be super useful.

Sure, Aditya. So if you were to look at some of our listed peers, you would see that -- I mean, if you look at listed peers where the P&A share of sale is between 70% and 90%, the gross margins are roughly about 42% to 44%, right? So, our Mass Premium segment, which is Officer's Choice operates at a gross margin of north of 40%. So it makes the same margin as a percentage that any other P&A whiskey does. When we look at our P&A, our Prestige segment in whiskeys and in brandy as we speak, we are currently just a shade below 40%. And a quick response to that is that, some of the brands are new. As you know, the function of the margin here is in terms of market bottle utilization, some bit of [ LPB ] rationalization. So over the next few quarters, we are of the view that we should be able to cross the 50% hurdle rate on the P&A brand. As regards Premium and Super-Premium is concerned, that portfolio runs at gross margin close to about 55%.

That's very clear. And just in terms of the opportunity on the Super-Premium and, let's say, Super-Premium and Luxury, could you give us some sense of where you see this entire space being in terms of the number of cases for ABD in particular over, let's say, a 5-year period or what your aspiration would be?

So the segment -- the Super-Premium to Luxury segment, a price point of INR 2,000 and above is roughly 3% of the 410 million case market. So say about 12 million cases, right? It's growing at the highest rate in the alcobev space, high double-digit. On back of the India-U.K. FTA, some reduction in the BIO and the BII prices, and some bit of margin improvement in the BII scotch prices, our view is that this segment could more than double in the next 4 years. Therefore, from a 12 million case, the segment could be sitting north of 20 million cases. For us, this is a year of getting our portfolio ready, building capability in terms of distribution on key on-premise and understanding social media space and mixology and cocktails. And we built this whole team under ABD Maestro. I think the way we are looking at is that, of this 20 million cases, if we can get a high single-digit market share over the next 2 or 3 years, we'll be in a good space, right? However, I think by quarter 3 of this financial year, we'll have sort of a better sense on trend and time lines because we are now just about getting into distribution expansion.

Our next question is from the line of Kunal Shah from Jefferies.

My first question is on your volumes and the benefit that they have received from Andhra Pradesh and Delhi, which you mentioned in the opening remarks, if you can quantify it in some way, probably both on P&A and overall.

Let me have somebody work on this number. Is there another question that you have? Otherwise, allow me maybe a minute to come back to you on this.

Absolutely. Sir, the next question is, what's the total, let's say, cost base or OpEx that ABD Maestro will incur, let's say, on a full year basis? And let's say, 2, 3 years out, what are your revenue aspirations for this business? If you can give some directional insight on both?

Yes. So I think here is an interesting data point. For every 1% volume contribution from the ABD Maestro portfolio, the value contribution is really 9%. So that's the impact it has in terms of the value growth, right? This year, it's all about getting the portfolio right and building the go-to-market in terms of distribution and special services that -- or special skills that it requires in terms of cocktail and mixology. We have 5 brands ready now, and we are looking at adding 2 or 3 more brands to this portfolio within this year. So that we believe will give us the portfolio width that we've been wanting. It's a combination of whiskeys, both scotch whiskey, non-scotch whiskey, Indian whiskeys, gin, vodka and one other major white that we're looking at. And like I was responding to, I think, Aditya earlier that our outlook is that, how do we build a high single-digit to a double-digit, I would say, high single-digit, double-digit market share over the next couple of years. So the segment is currently 12 million cases and growing north of 20% year-on-year. We expect this segment to get bigger and bigger. So like I said, I think by H2, we will be in a better position to provide some indication on where we stand. But so far, the distribution expansion is on track.

Understood. And any comment on the cost structure? I mean, let's say, operating costs that this entity would have on a quarterly basis or a yearly basis?

So, the brands that are part of the ABDM, which are luxury brands, we are, for the next 2 years, following a very simple thumb rule that they need to be -- whatever money they make at a contribution level, we will reinvest in the brand. And therefore, the only expenses that will come is towards running the organization. And year 3 is when the brand or the business will become EBITDA positive. So first 2 years is going to be the years of investment.

Understood. Understood. The second question is on Sterling Reserve. So I remember last call, you had mentioned that the brand had seen declines in FY '25. And I heard your opening remark on some initiatives you're taking, but can you give more details? And by when do you see this brand turning around?

Well, I think on SRB7, we have put a very clear path to stabilize and grow. I think by end of H1, which we are already in quarter 2, we should see the brand stabilizing. And towards the festive season, we are hopeful with the marketing program we put behind this brand, we should start seeing the green shoots. On your earlier question of -- let me understand, your question is that, what part of our growth will come from Delhi and AP or individually, what will be the growth in these states?

No, sir, what -- let's say, if I were to take these 2 out, what would have been the growth for the business in volume terms?

If that's your question, just another 30 seconds. We -- I think the data then came to me was what is the growth in the respective states.

No worries, we can probably take it later. Yes. And then just one last bit on ICONiQ White. I mean, 5 million cases plus last year. Any sense you can give on where you see it this year? I mean, do you see any initial signs of now incrementally the brand plateauing out? Or I mean, anything on those lines, if you can share?

No, the brand continues to grow. It is on a very strong wicket. We are seeing quarter-on-quarter growth. And I will just request, what's the Q1 number for ICONiQ? So just to answer your first question that if you were to take Delhi and Andhra out versus the 17% volume growth, our growth would have been about 13%. So that's the contribution of Delhi and Andhra in the overall growth. And Q1, the brand has done roughly 2.3 million cases. As you would recall, last year, we had done 5.7 million. So in Q1, the brand has done roughly 50% of what we sold in full year. That will give you some indication of where the brand could head this year.

Understood. Understood. Understood. That's very clear. And just last one bookkeeping. I see a very sharp reduction in excise duty in the quarter. Any specific reason? I mean, has some state changed their…

Yes. This is a state of UP where the owners of excise duty has moved from the manufacturer to the wholesaler. Therefore, essentially, this is reflecting in the reduction of our gross sales value. On a like-to-like basis, if there was no change in the UP, you would have seen an incremental INR 300 crores, INR 350 crores of GST. But we are happy with this change because it also means that we've been able to release some of our working capital from the state of UP.

Our next question is from the line of Sanjay Manyal from DAM Capital.

I have a few questions specifically on ICONiQ White. I believe the contribution, what -- so I just want to understand what would be the contribution from the state of Maharashtra? And what would be the impact of this excise hike which has happened last month?

I will just give it to you. See, on Maharashtra, I deeply believe that only once we get the MML pricing, we really get to know where does IMFL sit. So very difficult to speculate what will happen to the industry, right? ICONiQ in the state of Maharashtra was operating at a price point of -- [ quad ] price point of INR 680, and now it is moving to roughly INR 900. So that is a change in the pricing. Relative competitors are Imperial Blue, which has also gone from INR 680 to INR 880 and McDowell's No. 1, which has gone from INR 640 to INR 900. So from a relative MRP parity, it continues to be competitively priced versus the benchmark competition. But there is about a 25%, 30% increase in the MRP. So we are yet to see and we're yet to see what impact it will have on the segment.

And from a Maharashtra state perspective, means ICONiQ White is a bigger brand and so what kind of contribution you have from the Maharashtra state?

So Maharashtra contribution is less than 10%. The number that I shared earlier of about 2.3 million, less than 10% comes from Maharashtra.

Okay. Okay. And secondly, you have launched this new brand…

If I can just add one point about ICONiQ Maharashtra specifically. Like I said, I will wait for the MML duty structure to be announced. I think the way I'm looking at ICONiQ specifically in Maharashtra is that, it has got -- the higher price point has moved from INR 780 to INR 1,070. So I think the way we'll have to understand this cascade in Maharashtra, not just at a price point level, but what will happen to consumer who were earlier at INR 780 who have now moved to INR 1,070, will they take something like an ICONiQ at INR 900 or spend INR 1,100? So I think consumer will be faced with these choices. And our view is that, fingers crossed, ICONiQ could actually benefit a little bit from this price change because as consumers from higher price segment start looking at what their alternatives are, ICONiQ being a newer and a fresher brand could benefit. But like I said, the jury is out. So just also keep in mind that the Royal Stag price point is moving from INR 780 to INR 1,070, Royal Challenge moving from INR 780 to INR 1,070. So movement from INR 780 to INR 900 is relatively easier versus INR 780 to INR 1,070. So just keep this in back of your mind. However, like I said, that what choices consumer makes, we will find out.

Sure. And you mentioned 2.3 million cases for the quarter, means can we say the saliency of -- means for the quarter-on-quarter is similar. So are we looking at anywhere between 9 million to 10 million cases for the year or maybe lower?

I wish I had a crystal ball to answer the question. But I've said this earlier and say it again, this brand has the ability to be a market leader. So, I mean, if you can see the performance of the brand, even in this financial year in context of where I think this brand could be, let me just answer the question.

Sure. Sir, secondly, on the overdues, what is our expectation that this overdues from Telangana by when we can expect that the full payment we can get?

It is status quo in Telangana. So regular payments are being released, overdues, a very tiny portion was released in the month of April and May. But June and July, we have not seen release of any overdue payment. So I think clarity will emerge after the Panchayat elections, which are slated in the month of August, but that's when the government will be available for reengaging on the Telangana overdues at an industry level. That is really what our understanding is at this point of time.

Sure, sir. And one last question I have about the U.K. FTA. What I believe that the custom duty reduction is very gradual over the next 10 years. So you think really it will benefit given the fact that over the next 10 years, this can be offset by the excise hikes by the respective state government, really a very...

Yes, the custom duty reduction is from 150% to 75% and thereafter reduction to 40% over the next 10 years. So there is one big reduction now to 75%.

That's immediately, you're saying.

Immediately. And then over the next 10 years, 75% needs to come down to 40%. So all the -- from our modeling perspective, we have taken the first 75% reduction. What happens thereafter, we have still not baked in or modeled into our projections.

Our next question is from the line of Kaustubh Pawaskar from ICICI Securities.

Congrats for good set of numbers. Most of my questions have been answered. Sir, I just have a question on one of your initial comments of 300 bps expansion in EBITDA margins from Q4 FY '27. So you mean to say whatever benefits which you are going to derive from backward integration would start flowing in from quarter 4 of FY 2027. Is it right understanding? Because some of the facilities we are going to start from Q2 FY '23. So initially, the view was like from Q2, some of the benefits should start flowing in and the incremental benefits what we are expecting should come in from Q4 of FY '27. So just wanted to understand that.

Absolutely right. The full benefit will come -- the full benefit will accrue from Q4 FY '27. Partial benefit from our ENA distillery in Maharashtra have already started to accrue and the PET project will start in September '25. So that benefit will start accruing. And by Q4 FY '26, our single malt distillery will be up and running. So benefit will start accruing. So accrual, we will start seeing accrual -- sorry, we'll start seeing EBITDA -- positive EBITDA impact starting Q2 FY '26, and it will scale up gradually, but the full impact will be visible to us in quarter 4 FY '27.

Sir, a follow-up question on ICONiQ. This quarter, we have seen 2.5 million cases of sales volume. So is it mainly because of the fact that we are expanding into various states or even the repeat traction to the brand is quite strong? So any understanding on that, sir?

So from a footprint expansion, ICONiQ was launched across all states of the country in the last financial year. So our footprint expansion is largely now in the international market. We have now shipped ICONiQ to about 7 new countries, and we'll expand the footprint going forward. But from a domestic play perspective, we had finished our entire national rollout in the last financial year. So the volume that you're seeing is just repeat consumer and newer consumer that are coming in.

Right, sir. Sir, any thought process on the other launches what we have done in the past 6 to 7 months, which of the brands you expect to be -- I'm not saying that it will be a next ICONiQ, but will it be closer to that, where you are seeing good traction?

So I think we are excited about all new brands. However, if you were to pick brands that will -- that can give us scale in terms of volume and are also high-margin, then I would say Woodburns as a brand, we're extremely excited about. It's a INR 3,000 MRP product. It's what I call is daily affordable luxury, which is INR 100 a day kind of a thing. So I think that's a brand we are really excited about. If you look at our Golden Mist brandy that we have recently launched in a large 15 million segment, high-margin, high-growth, we're extremely confident about that it can give us scale and the margins. We also have a hidden gem in our portfolio brand called Srishti, which is an Indian brand with the Indian soul. We are currently selling it in 3 markets of North. We are extremely happy with the early results that we have and the playbook that we have on the brand, and we'll expand it in the course of the year. The idea of picking up these 3 brands is largely from the fact that they will -- these 3 brands offer a scale and high-margin. Of course, the work that is happening on Zoya with its 2 flavor variant, which is Watermelon and Espresso has started to start to deliver good results for us. So we are excited, but I think these 3 brands can -- will give us scale and margin bump up.

Right. And sir, one final question on Maharashtra. Like you said that it is very difficult to comment on the impact as of now on the excise duty hike, maybe from the customer point of view. But on the HoReCa, are you seeing any kind of impact of saying like they are maintaining lower inventory? Or is there any down trading as you were talking about as an opportunity for you in institutional or HoReCa side of the business?

See, if you look at the Super-Premium -- Premium, Super-Premium and Luxury segment, the increase in MRP is marginal. It's not even -- it's single-digit from 3% to 5%, right? So the [ structure ] of the excise duty is such that it is increasing -- it has increased the excise duty on the Mass Premium and the Prestige price point has offered MML as a category, be it more affordable MRP. But in the Premium, Super-Premium and Luxury, there's hardly any change in MRP. Therefore, from a HoReCa perspective, we do not expect that this policy will impact any which way the current consumption pattern.

The next question is from the line of Harsh Shah from Bandhan AMC.

So firstly, if we look at your volume share of ICONiQ this quarter, there would be a volume degrowth, right? And a question here is that, even in the previous question, you've spoken about the brands you were excited about, right, Woodburns and Zoya and the other brands. But, I mean, how do we think of, let's say, brands which are already, let's say, which has crossed 1 billion cases like OC Blue or Sterling Reserve, how do we think of those brands? Because even -- I mean, they are so -- let's say, how do we think of spending behind those brands? How do we think of getting growth back in those brands?

So, Harsh, my earlier response was in context of the question that -- amongst the new brands that we are launching, which are the one we are excited about. So the response was in context of the new brands, not in context of the portfolio. So that's an important point I wanted to make, right? If you were to ask me brands that we are excited about, we are extremely excited about Officer's Choice. It's a flagship brand, largest exported brand out of the country. The margin governance framework has got our gross margins north of 40%, closer to 43%. This brand requires fairly low levels of [ LPB ] and promotional support. So net retained cash is very high. And we have -- our guidance is single-digit growth with focus on our gross margin because this really is a cash cost. So very, very excited. We are doing some…

This is Officer's Choice or Officer's Blue? Again…

This is Officer's Choice. I'll cover the entire -- I'll cover our brand. So there are different reasons for each brand, there's a different reason to be excited about. So that's Officer's Choice. We are doing some very interesting work in terms of innovation on this brand, which hopefully, quarter 3 we can talk about. So as market leaders, we are thinking about how do we expand the segment, how do we bring an excitement in the segment. So we're working on that. Officer's Choice Blue is used to sell more than 1 million cases in the market of Delhi. And because there was policy uncertainty in Delhi, we had taken a back step in Delhi and our volume were down to 10,000, 12,000 cases a month, which is about 150,000 cases a year. Now that the policy for Delhi has been announced for the next 9 months, we are ramping up Delhi in terms of our market share. And therefore, Officer's Choice Blue has always been a regional powerhouse. And therefore, there are 2 or 3 states. Delhi, of course, is the leading state here where we will see volume growth coming back on Officer's Choice Blue. The third brand, SRB7, we have covered, stabilize and grow, and we are targeting towards H1 able to stabilize the brand. And then from H2, we'll start seeing some green shoots on the brand. So that -- those really are our 3 core brands. I've covered Golden Mist and Srishti, which is a new brand in our portfolio. One more notable mention here would be that 2 of our Premium brands, especially Kyron, where we have 25% share in the domestic market, this brand is approved in the defense vertical. And this year, SRB10 and Kyron, we will focus on CSD as a channel. From the export footprint, again, the growth will come entire thesis in India and beyond, not just India. We have grown our footprint from 17 countries to -- 17 countries in FY '24 to 23 countries in FY '25. We are already operating in 27 countries, and we are looking at expanding our footprint further. So from 17 countries in FY '24, by end of the year, we're looking at, at least a 2x increase, which means at least 33 to 35 countries where we start exporting. So, like I said, different brands give us different opportunities. As far as ICONiQ is concerned, the market share it is getting, it is getting market shares from brands like McDowell's No. 1 and Imperial Blue and needless to say, even OC Blue. So we also see the 2 brands together as to how OC Blue and ICONiQ together are getting the market shares. So I hope that provides you a response to the question that you were looking for.

Got it. No, no. It's very helpful. And secondly, basically, I mean, when I look at your presentation, we are currently at 46% in terms of P&A volume share, right? And you've called out an aspiration to reach 50% P&A volumes in 3 years, right? So that is something which -- I mean, let's say, given the slide on your new launches, everything we are doing is in Prestige, right? So, I mean, this 50% would -- I mean, it's something which we should be there, I think, by the end of this year, right? And so, I mean, in terms of target, I think wouldn't the P&A volume contribution be much higher given what we are talking about doing in terms of ABD Maestro and currently what we are seeing in ICONiQ as well over the next 3 years. And 50% -- I mean, it's very -- I think, a low number. I mean, what are your thoughts on that?

No. When we had indicated that we would like to be 50% at that point of time, we were only 37% of P&A, right, which is FY '24. Of course, we ended the year with about 42%, we are at 46%. So we continue to grow the way we are growing and especially with the addition of Golden Mist and rollout of Srishti in many markets, we should be looking at closing down the gap between 46% and 50%. There is a massive amount of work that we are currently doing on Officer's Choice as a brand. And we are hopeful that -- and this is largely in the space of innovation and sort of engaging the consumer differently. So we are also hopeful that we are able to stimulate growth in this price point or in this segment, which is high single-digit. So honestly, if we are able to get Officer's Choice to grow high single-digit, we'll be quite happy with hitting 50% because it's really a big cash generator for us.

Got it. Even in terms of your margin bridge, right? So we are currently -- TTM basis, we are at 13% EBITDA and aspiration is 15%, right, over the next 3 years. So will that margin bridge be linear in a way that we see expansion every year? Or as you previously commented that this is a year of building your ABD Maestro portfolio, which would also mean that you would want to invest more in terms of brand building this year, right? So, I mean, will it be like taking 1 step back and then 2 steps ahead? Or will it be a linear journey?

So I think let's put it this way. We are currently, let's say, at about 13% EBITDA margin. There are 2 big levers of margin expansion. One is, FTA, which, let's say, Q4 of this financial year should come into play that itself should add about 200 basis point margin improvement. And second is the backward integration, which we have said by Q4 FY '27, we should realize the full 300% benefit, right? So it's a staged -- so it's not linear in many ways. It is linked to a very specific milestone. In addition, there are 2 areas of investment. One is on brands, both the ABD portfolio. We are looking at improving our A&P as a percentage of NSV by 100 basis -- 75 to 100 basis points this year and another 75 to 100 basis points next year to ensure that brands like OC Blue and Sterling B7 and ICONiQ continue to get the A&P support. So the numbers that I'm sharing with you is after providing for that investment, and also ABD Maestro, like I said, for the first 2 years is likely -- is not -- is likely to -- will need investments. And therefore, going from 13% to north of 15% is after providing for investments in the brand and also people, process and tech infrastructure, we are strengthening. We are moving from ECC to HANA, for example, this year. That's a big transition for us in terms of the tech platform. I earlier spoken about that how we are putting our sales force practices, including our sales incentive program, [ Jeet ], on our -- as part of our automation program, our risk practice, we are looking at investing in our S&OP digitization practice. So the numbers, the outlook that we've given on EBITDA is after providing for investments on our co-brands, investment on ABDM and also investment in people, tech and processes. So you will see over the next balance 7 quarters, you will see gradual progression on the EBITDA numbers.

Okay. Got it. And just 1 data point on -- I think 1 previous participant asked you about the operating, let's say, cost structure for ABD Maestro. I mean, do you -- can you share a number there? I mean, in terms of annual basis, F '26, F '27, what would be the kind of cost structure there in terms of OpEx?

I think a little early days. Like I said, I think on ABD Maestro, let's talk in quarter 3. We'll have a better sense on ABD Maestro. Right now, the focus in H1 is the portfolio, we are building 2 hubs for manufacturing. One is in Aurangabad, which is Maharashtra to service the market of West and South. The second hub is in Haryana. Haryana is the largest market in North. So second hub is in North, which is Saha, our unit in Haryana, which is going live this month -- has gone live this month. So brand manufacturing, the team is in place. Listing is on key accounts. We already have 3 large national hotel chains where we've got our listing. So I think the focus right now is just about getting the fundamentals in place so that we can grow from there. But I think Q3 onwards, we should be able to talk a lot more about numbers there.

Got it. And just one last question from my side. I mean, after this excise duty hike in Maharashtra. What's the consumer behavior which you are picking up? I mean, early days in the last 1 month?

Too early. The retail still has stock of the old prices, right? I think towards first week of August, the new MRP inventory will roll out. We are as keen as you are to understand what will happen in Maharashtra, but these are early days.

So fair to say in July had no -- July had very less primaries?

It's not about primaries. The distributor and the retail outlets were carrying enough and more inventory. So from a consumer point of view, let's say, if retailer was carrying x week of inventory and the distributor was carrying y week of inventory. Therefore, from a consumer point of view, even now in many markets, old MRP stocks are available. We have started to see the new MRP stocks coming on the shelves. So I think by 7th and 10th of August, we'll start getting the retail audit in terms of what's happening to consumer behavior. Anything that I tell you right now is -- will hold no good because it's a mixed situation, old MRP, new MRP.

Okay. My question was more from -- I mean, the primary, I mean, your sales to distributors, right? So was that -- I mean, impacted in July because of the stocking up of old MRP?

Everybody is impacted because everybody wants to understand what will happen in the market. Absolutely, goes without saying.

Our next question is from the line of Akhilesh Bhatter from IKIGAI Asset.

Sir, congratulations on a good set of numbers. I just have one clarification regarding your guidance for working capital this year. So you mentioned that Telangana receivables are again coming at a very slow pace. So how should we look at working capital this year? Would it be a big drag as similar to what it was last year?

No, not at all. I think operations, the EBITDA that we generate this year should be more than sufficient to meet the entire growth capital requirement for the business. In fact, it will leave free cash on the table. So the only reason we may need to borrow is for our projects that we've already discussed. But from an operation point of view, the business is self-sufficient and we'll generate free cash. And if the Telangana money was to go in, we'll see significant reduction in our net debt as well.

Our next question is from the line of Nikhil Kapoor from LIC Mutual Fund. [Operator Instructions]

Congratulations on a great set of numbers. Just 1 question. Most of my questions have been answered. Just one thing, I know too early days, but this new category of Maharashtra-Made Liquor that was talked about in the excise policy, would we be able to quantify if any benefits flow to us under this category?

The answer is yes. We have -- what this category will need is capacities, and we have -- we are geared up and ramped up our capacities in MML. So we definitely see an upside on the volumes.

Got it. But difficult to quantify it, too early days.

Policy is not out. So the reason is that, policy or -- only the duty structure is announced, which is INR 270 as base price. But until we don't get to see contours of the policy, it's very difficult to understand.

Our next question is from the line of Dhiraj Mistry from ICICI Securities.

Sorry, I joined a bit late. But I would like to know what is the growth rate, excluding, let's say, AP market and Telangana -- Delhi market, which was kind of a one-off and that market has reopened. Sorry if you have answered that question.

Not at all, happy to answer the question again. Our Q1 growth is 17%. And without Andhra and Delhi, this growth would have been about 13%, 14%.

Got it. Got it. And see, more from this like new product launches. So definitely, we have increased our accretion in terms of product launches in Luxury and Premium segment. But now that the incremental many players have been coming in this segment and this space is in which way is getting more crowded in a way. What is the growth trajectory, let's say, going ahead, you expect from this? And how the saliency of this or, let's say, the profitability of this segment would move in 3 to 4 years' period of time, especially when we are into investment phase in this segment?

Your question is related to the Super-Premium, Luxury segment?

Yes, yes.

So like I said, of the 410 million cases, the volume sale is about 3%, translating to about 12 million cases. It accounts for 20% of industry profit. A typical case, NSV is about 8 to 10x versus brands that operate in Prestige segment. Gross margin profile about north of 55%. Our outlook is, over the next 2 years, whatever money we make on the brands, we will reinvest in the brands. Therefore, we do not expect these brands to contribute to our EBITDA. There will be some costs associated with the organization and manpower, but the brand will take care of themselves from a marketing A&P point of view. And year 3, we are targeting the EBITDA -- for it to start contributing to EBITDA. But from a -- just a unit economics comparison, NSV is about 8x of the Prestige segment. Margins for us are, let's say, 40-odd percent on our ABD portfolio, where margins are about north of 55%, but that to on a much higher NSV. Therefore, over the next 3 or 4 years, we can get to a single-digit market share of 15 million, 20 million case segment. That's about 1 million cases. It should make a significant difference, both in terms of top line and bottom line.

Got it. Got it. And for next 3 years basis, it would be more of a margin dilutive from the portfolio level point of view or let's say, on an aggregate basis level?

For the first 2 years.

For the first 2 years. Got it. Got it. Okay. And sir, lastly, on this backward integration, the benefit of this, let's say, the PET bottle, which is -- should be finished in, let's say, a couple of months' of time, what kind of saving we are expecting on an annualized basis from this project?

The PET project alone should be annualized addition should be north of INR 30 crores.

Once again congrats on good sets of numbers.

Our next question is from the line of [ Nikhil Gupta from YU Capital ].

My first question is, I think, related to Rock Paper Rum. I think it's quite some time we have approved the investment. So what's happening on that front? Can you please elaborate?

Thank you for this question. It's just been getting the quarter 1 on track and growing, nothing else, just a matter of finding time. And hopefully, we'll announce soon.

Okay. So the investment has been already made or still in the signing phase?

No, we've not made any investment in the business so far.

Yes. So that's what I was trying to ask. I mean, I think we approved in the quarter 4.

Like I said, I think we just got busy with our quarter 1 operations, and therefore, it just -- we felt that let's just put all our energy behind getting the quarter 1 off on a good start. And the pending closure and the investment thereof, we'll focus in quarter 2 now.

Okay. And how are we -- what's our target, like how many cities we want to expand that? And what's the dream like what's the target strategy for that?

So this brand operates in sort of Premium, Super-Premium rum segment. The size of the segment is roughly 3 million cases. It has 1 notable competitor. So the idea would be over the next couple of years to target a double-digit or a higher market share. The relevant market in terms of numbers would be about 10 to 12. The brand is already registered and operating in 7 of those 12 markets. The balance 5, we will need to open up over the next few quarters. And we have distribution in place. So once we get this brand up and running, we should see quick results coming off.

Our next question is from the line of Naitik from AV Alpha Fund (sic) [ NV Alpha Fund ].

Sir, my first question is, when I actually look at your numbers and I compare Q-o-Q, while our revenues are sort of similar, but our expenses have increased. So just wanted to -- if you could quantify where we have spent the extra amount, that would be really helpful.

So we've had a slightly higher expense on people, creation of the ABDM team, also our Minakshi Distillery, also announced the increments for FY '26. So there has been an increase in our people cost. The second big element is higher investment in the A&P behind the brands. These are 2 big ticket items where bulk of the investments have gone in.

Got it, sir. And sir, just wanted one clarification. You mentioned that due to the U.K. FTA the import duty coming down, the benefits would be closer to 400 basis points. Is that, sir?

200 basis points.

200 basis points. Right. Got it, sir.

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.

Well, thank you once again for taking the time out. I hope we've been able to provide you data queries and clarifications to the extent possible. However, if there is anything that remains unanswered or you need a follow-up, please reach out to Mukund. We'll be happy to provide the data, and thank you once again for taking the time out.

Thank you. On behalf of Antique Stockbroking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.