Radico Khaitan Limited ($RADICO)

Ladies and gentlemen, good day and welcome to the Radico Khaitan Limited Q4 FY '26 Earnings Conference Call hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Mehra. Thank you and over to you, sir.

Thank you. Good evening, everyone. We would like to thank Radico Khaitan's management for providing DAM Capital with the opportunity to host Q4 FY '26 earnings call. Today, we have with us Mr. Abhishek Khaitan, Managing Director; Mr. Dilip Banthiya, CFO; Mr. Sanjeev Banga, President, International Business; and Mr. Sudhir Upadhyay, Chief Sales Officer. Now I would like to hand over the call to Mr. Abhishek Khaitan for his opening remarks. Thank you and over to you, sir.

Good afternoon, ladies and gentlemen, and thank you for joining us on Radico Khaitan's Q4 FY '26 Earnings Conference Call. FY '26 has been an important year for Radico Khaitan and in many ways, an inflection point in our journey. The business delivered a strong performance supported by disciplined execution, a richer portfolio mix and continued focus on value-led growth. During the year, we crossed 2 key milestones with net revenue exceeding INR 6,000 crores and EBITDA crossing INR 1,000 crores. These achievements reflect the sustainability of our business model, the strength of our brands, the investments we have made over the year and the growing scale of our premium and luxury portfolio. Our Prestige & Above segment continued to lead growth while our luxury portfolio delivered sales value of INR 475 crores, in line with our guidance. We expect to sustain this growth momentum and deliver 25% growth in FY '27 in this portfolio. Our recently launched luxury brand, Rampur 1943 Virasat Indian Single Malt and the Spirit of Kashmyr luxury vodka are gaining strong traction with consumers and the trade. In February this year, globally renowned whisky expert and author of the Whisky Bible, Jim Murray, was in India for an exclusive tasting event of Virasat. He also visited Rampur for the opening of our latest Stilt house. His earlier visit to Rampur was nearly 3 decades ago when our first malt plant was just a couple of years old. Our current single malt portfolio not only showcases the craftsmanship behind various expressions, but also reflects the growing international interest in Indian Single Malt. Alongside this, our broader premium portfolio continues to scale steadily across key markets supported by sharper execution and increasing consumer pull. Royal Ranthambore Whisky delivered an outstanding performance, growing over 50% during the year driven by strong demand across both civil and CNC channels. Magic Moments Vodka continued its strong trajectory with 21% volume growth during the year to reach 8.6 million cases and around INR 1,500 crores in sales value, further strengthening its leadership in the vodka category. During Q4, Magic Moments registered 28% year-on-year growth. New flavor innovations, including Flavors of India category, are contributing to this robust momentum. Going forward, we'll continue to add more flavors as we lead disruptive growth in the category. After Dark Whisky continued to deliver strong performance recording over 60% growth and crossing 3.1 million cases during the year. We also continued to deepen consumer engagement through focused marketing, on-trade activations and brand advocacy initiatives. The Royal Ranthambore limited edition pack celebrating India's sixth legendary tiger brought together premium storytelling with a strong message around wildlife conservation. Our experiential campaigns and focused digital engagement further helped us connect with younger consumers in a more authentic manner. As we have discussed earlier, the on-trade channel continues to be a strategic priority for us. Over the last 2 years, we have made significant progress in building a stronger foundation and the results have been in line with our expectations. In FY '27, we will further scale our on-trade agenda across advocacy, distribution expansion, key account partnerships and airports. These initiatives will enhance visibility, trials, consumer experience and premium brand activation, strengthening the reach and salience of our luxury and premium portfolios. From a financial performance perspective, the year has been encouraging. A better portfolio mix, relatively benign input costs and the benefit of scale have helped us to improve margins and returns. We will, however, continue to monitor the global environment closely especially developments in West Asia given the possible implications for supply chains and input costs. Looking ahead, the consumer environment remains supportive and we remain confident about Radico Khaitan's long-term growth opportunity. Our focus will remain on building our premium and luxury portfolio, investing behind the innovation and brand equity. During FY '27, we expect to grow our Prestige & Above portfolio volume by 20% and expect our EBITDA margin to expand by 125 basis points for the full year. With that, I would now like to hand over the call to our CFO, Dilip Banthiya, for a detailed review of our financial and operational performance. Thank you. Over to you, Dilip.

Thank you, Abhishek. Thank you, everyone, for joining us on this call today. Financial year '26 was milestone year for Radio Khaitan with robust operating performance translating into higher profitability, improved return ratio and enhanced free cash flow generation. The results demonstrate the power of our premiumization strategy, growing scale advantage, input cost stability and disciplined financial management. During quarter 4 of financial year '26, we delivered a strong all-round performance with total IMFL volume of 9.52 million cases reflecting a 4% increase year-on-year basis. Prestige & Above category continued its strong upward trajectory recording 28% volume growth. The performance was supported by strong brand momentum and premiumization-led product mix. Regular volume degrowth was due to a higher base in quarter 4 of FY '25 after the change in the route to the market in the state of Andhra Pradesh and the impact of policy changes in Maharashtra and Karnataka. On the profitability front, gross margin during the quarter was 48% representing an expansion of 450 basis points on a year-on-year basis and 150 basis points sequentially. The improvement was led by better product mix, softer raw material prices and ongoing premiumization. We continue to monitor the evolving situation in West Asia and confident of our margin expansion trajectory over the mid- to long term. EBITDA margin during the quarter stood at 19% expanding 565 basis points year-on-year, highest ever EBITDA margin reflecting the strength of our premiumization strategy, operating leverage and continued cost discipline. This margin performance is an important outcome of investment we have made over the years in building our premium and luxury portfolio. The improvement in profitability has also translated into stronger return ratios. Higher operating profit and better asset utilization have contributed to improved return on equity and return on capital employed. As the Prestige & Above luxury portfolio continued to scale, we expect further improvement in the overall capital efficiency of the business. Turning to the balance sheet. Net debt reduced by INR 329 crores during the year driven by improved profitability and cash flow generation. Our balance sheet remains strong and we are well on track to become debt-free in financial year '27. Capital allocation continues to be prudent and selective with ongoing CapEx largely directed toward maintenance, efficiency improvement and essential capacity optimization. In line with our commitment to the shareholder value, the Board has articulated a strong dividend policy with a minimum payout of 20% of profit after tax. This reflects our confidence in the cash flow generation of the business and maintaining adequate flexibility to invest behind future growth opportunities. Looking ahead, while we remain mindful of our external volatility; the cost environment, operating leverage benefits and financial discipline to provide comfort on margin sustainability and cash flow generation. Our focus will remain on driving profitable growth, strengthening the balance sheet, improving return ratio and enhancing shareholder value. With that, we now open the line for question-answer.

[Operator Instructions] The first question is from the line of Aditya Soman from CLSA.

Sir, 2 questions. Firstly, can you throw some light on sort of new product launch plans for fiscal '27, particularly in the Prestige & Above and luxury space? And second, your 125 basis point EBITDA margin expansion is fairly robust given the commodity environment. So one, how do you plan to mitigate the higher commodity costs? And is this margin expansion over full year '26 or 4Q '26? That's it for me.

To answer your first question about the new launches. If you see in the last year itself, we've launched 3, 4 brands in the luxury as well as the P&A category so we want to consolidate that. That will be our first objective and take it nationally. Like our Virasat Indian Single Malt, Spirit of Kashmyr right now it is in 10 states, we want to take it to 20 states. So that will be our prime focus. Plus we've launched new flavors of Magic like Jamun, Mango, Thandaai, which we are going to again take it nationally. And in the coming year what we feel we are going to launch is some more flavors in the Magic family and those will be also in the flavors of India category. Plus at the end of the year, we will be coming out with a tequila in D'Yavol Spirits. So these are our launch plans. And as far as the margin goes?

So on the margin front, Aditya, actually as you noticed that in last quarter we have improved our gross margin by 450 basis points and EBITDA margin by 565 basis points and we are quite confident to add 120 basis points to 125 basis point margin in the coming year '27. So this is on annualized basis. We have got the price increases in some of the states, which amount to be around 60 basis points. At the same time, product premiumization will yield us more than 200 basis points. So we will be more than mitigating the impact of the cost push. And thereafter, also, we are confident to deliver 120 basis point to 125 basis point margin expansion.

That is very clear. And just 1 follow-up on the margin. So will there also be some unlock given that you had a large number of new launches last year and so I'm assuming there was marketing spend behind that. So could there be some unlock in marketing spend as well given that the number of new launches is lower?

We have been actually consistent in our policy on spend in the marketing. And as we have always guided that with 6% to 8% is the bracket where we spend the marketing expenses depending on the new launches and our existing flagship brand. So we'll balance out in that. And as our top line has grown by 25% this year also. So the increase in top line will further increase the quantum of the marketing expense within that.

The next question is from the line of Vishal Gutka from ASK Investment Managers.

Congrats on a good set of numbers. Three questions on my side. First one, Karnataka state. Now with the new policy announced by the state, the pricing differential between regular and premium has come down. So how do you plan to capture that given that the gap has come down a bit. The pricing depreciation and differential that you have? Second question on West Bengal, now there's a change in the government that has happened. Do you think there could be a meaningful change in the way the market operates? And if you can provide a framework as of now how the market is operating as on date? And sir, the third question is on Bihar state. Earlier we were hearing rumors that prohibition could be uplifted. If you can provide an update that you're aware about?

This is Sudhir Upadhyay. So first of all regarding Karnataka, which you had asked. Yes, we have seen last time when Karnataka has rationalized the pricing for the premium brands, there was a significant increase which has come on the premium brands. And since we have the portfolio of the premium brands, which is like Rampur, Jaisalmer, Royal Ranthambore, et cetera; which is very well established there; we had also gained the advantage on account of this price rationalization, which has been done almost 1.5 years back. Now this time also we are anticipating that government is working on the similar line although the official announcement is not there. In that case if it is going to be there, we will certainly be benefited with that. Your second point is regarding the West Bengal. West Bengal, it's too early to preempt anything because there is a change which is recently done. So we will wait and watch on what is happening on the West Bengal and on basis of that, we will put the strategy there. We had a strong vodka base there so we will get the benefit of that.

Sir, is it an open market or is it regulated as of now, West Bengal? f

No, it's an open market right now. So they have a private retail picture there. But if there are any changes which is going to happen, then we will see accordingly.

And third one was regarding the Bihar. Bihar, yes, we will wait and watch. Before the prohibition, we used to have a large consumer base in Bihar and it is a significantly populated state. So we will wait and watch. In the case if anything happens in Bihar, we will get the benefit of it.

The next question is from the line of Harit Kapoor from Investec.

So I just had 3 questions. One was on the initial comments, Abhishek ji, on the unlock because of the distribution expansion on the luxury portfolio. My understanding was that a lot of this work you had already done. Just wanted to get your sense on how much more can this benefit, whether in terms of more outlets that you can still reach on the on-trade or maybe more product in those same outlets. So what's the potential still of that? The second question was on exports. I'm sure you would have taken some impact in the last 6 months because of tariffs, et cetera. Just wanted to kind of get your thought on how fast that segment can grow going forward and how much impact it could have had in '26? And the third question is on the margin bit, the 100 basis points to 125 basis points, does it also take into account the fact that -- are you already including the fact that there will be an India-U.K. FTA benefit for you possibly in the second half of this fiscal year? Those are my 3 questions.

To answer your first question regarding the expansion to the various states and on-trade, I think we see that especially with Virasat, Kashmyr; all this has a huge scope of expanding it. And on-trade also what we had told about 2 years back with our luxury portfolio has become a key focus area for Radico. So we are adding outlets by the day. And this year brand advocacy is one of our most important initiatives. So we are planning to have about close to 1,000 advocacy sessions in the on-trade. So I think all this put together, that is why we are confident that our luxury portfolio should grow by 25% in terms of value from INR 475 crores. And as far as export goes, I think Sanjeev will answer that.

Yes. In terms of the U.S. tariffs at 10%, it's not make or break especially for the luxury portfolio where the difference on the retail end would be about $5 to $6 a bottle and all. So that's not substantial. However, the U.S. market as it is as you would have seen from all the other players as well whether in the [indiscernible] space or anything else is on a slightly softer note. So we are all hopeful it will bounce back pretty soon and should not have any major impact on our luxury portfolio.

Regarding the margin expansion, as you said that U.K.-India FTA benefit. So 125 basis point expansion is inclusive of all. At the same time, there can be some pluses and some minuses. So we are conservative on our this thing that something goes on cost plus side and all that. 125 basis points should be delivered given the current scenario.

The next question is from the line of Abhijeet Kundu from Antique Stockbroking.

Congratulations on a great set of numbers. Just a follow-up on the previous question to just clarify. I mean excluding U.K. FTA and given the current environment, Radico is looking at 100 basis points to 125 basis points improvement in margins. Is that right to assume?

Abhijeet, actually as we said with the current scenario, I can't predict it goes much earlier than what it is today. With the LPG and other thing goes out of stock and some of the units of plasma or something disrupts with the production and all that. Otherwise we are pretty confident because we see this should not happen and the geopolitical situation also should be taken care of next 15, 30 days and all that. And we have a long-standing relationship with our supply chain. So we are pretty confident about continuity of the business. And given these circumstances and all, we are confident to deliver that until and unless there is something very, very drastically negative.

Okay. And sir, what I understand is with Sitapur and Rampur distillery, 50% of it is biomass dependent and less dependent on LPG. So on an overall basis, I mean things are getting better, but assuming that there are issues with LPG and LPG supplies and then there also -- that is one question. So what happens in that scenario? And second question is glass prices, are you seeing any inflation right now? I mean after your negotiations, what is the -- and what is your dependence on glass because a major part of it would be glass? And then there is a lot of alcoholic spirit companies have switched to hipsters and hence a dependence on PET bottles. So what could be the overall impact in the current scenario if it increases from the current level? Just slightly a view on that.

Abhijeet, actually your first point regarding my power and fuel balancing and all that. So it is largely, 90% of our power and fuel in both the plants, Sitapur and Rampur, is biofuel driven. So I'm not at all dependent on the LPG. So it takes care of itself and the biofuel is locally available and there are boilers, et cetera, and turbines which generate the power. So in both the plants, we are self-sufficient on our captive basis. Your second question regarding the glass. As I said earlier also that we have a long-standing relationship with the glass manufacturers. We don't foresee any impact on our glass supply. At the same time, there has been some inflation in the glass prices in the last month. Around 15% of the glass price has got increased. We have factored into our costing that and after that also, we're talking about the margin expansion. On your third point, as the trend is going around and Abhishek can speak much more on that. On the hipster pocket pack, it is a trendier pack and it is gaining momentum. So that is also reducing dependency on glass. So that is another feature which is coming in the demand point of view and consumer preference point of view and we are promoting that also.

Understood, sir. And on the top line front when I look at your growth and the sustainability of that, if we have to look at a 15% to 16% at least revenue growth for the next 2 years and about 11% to 12% volume growth, then a significant part of that would come from Magic Moments Vodka, After Dark, 8PM Black, I don't know how that is moving out. And there is a part of it which Old Admiral where you got benefited in Andhra. So if we have to look for the next 2 years, how would the scenario be in terms of your brand growth? I don't want any figures, but which would be the brand that would turn back to drive the larger growth? One is your INR 475 crores of luxury portfolio, which will grow at about 20%, 25% that we understand very well and that is doing very well. And then what about the other portfolio? And in addition to that, how have you seen the MML panning out? So has it settled down because that has impacted a part of Radico's volumes as well. So how do you see that panning out going ahead?

If you see last year, our growth of P&A has been 28% and vodka definitely what we are seeing is a shift towards the white spirits. Like if you see total market share of the white spirit in India is about 4.5% whereas globally it is 28% to 29%. So we have still a long way to get that conversion. And I think what we are seeing with the innovations of the flavor, et cetera, a lot of consumers are now shifting to the white spirit. So I think in the times to come or in the current year, which we are already seeing Magic will be a big driver of our growth, number one. Number two, After Dark also has grown very well. It has grown by 62% and we feel that it is gaining traction so growth will come from there also. And we had done a repackaging or retransformation of 8PM Black in the second half of last year and this quarter we grew by about close to 60%. So I think growth is coming from all these 3 angles. So we are very confident that our P&A category volume growth for the next year will be 20%.

The next question is from the line of Mehul Desai from JM Financial.

Congrats on a great set of numbers. Firstly, just wanted to -- while you did allude to Vodka segment and P&A segment seeing a strong growth, how should one look at the realization growth here? Because obviously the luxury portfolio is also growing pretty fast. Do you see this realization growth of low single digits that we saw in FY '26 for P&A, can that also increase? And secondly, how do you look at the regular segment growth on a steady-state basis?

So on the realization front as our P&A and especially luxury is growing faster than the even P&A so we expect that realization at volume and value delta will be in the range of 300 basis points to 400 basis points as an aggregate basis. And as far as your second question, regular segment in my opening remarks, I said is because of some policy and high base. This time, it has degrown in Q4. However, in the full year we've grown by 30% on the regular side also. But this year, we expect in the range of 3% to 5% growth in regular category.

That's a volume growth, right, 3% to 5%?

Yes, volume.

The next question is from the line of Rahul Agarwal from Ikigai Asset.

This Rahul Agarwal from Ikigai Asset. Sir, the question is related to earlier questions asked on growth. 20% P&A volume growth implies about 3.5 million cases roughly additional. Similar question what the earlier analyst asked on which categories and brands will contribute. You mentioned Magic Moment, After Dark, 8PM Black repackaging. Are these 3 category or brands going to be similar to contribute the 3.5 million cases? Is there enough market for that? So that's first question. And secondly, in terms of capacity, related question to the growth outlook. Suppose there's 20% growth, you said your CapEx is largely maintenance and optimization. So how are we placed in terms of in-house capacity across material, packaging, bottling, printing, stuff like that; you just highlight. Do we have enough to support this -- give more color on this 20% growth? That's the first question.

Yes. So the first question is regarding the 20% category -- 20% growth on the P&A side. Yes, you are right that these are the brands which will take it like Magic family is growing more than 22% as a whole and last quarter 28%, new flavors are adding a lot of spend to the Magic growth. Then After Dark, which is a large segment, it is an industry of 75 million cases plus so that is also adding. Royal Ranthambore, another brand which is also growing by more than 50%. And as a bouquet, as some of the brands are still in a very, very nascent stage and all that; we are confident to deliver 20% growth as a category -- full category as a P&A category. Second question is regarding the capacity. So actually around 60%, 65% of our capacity is outsourced by lease arrangements, et cetera, across India and 30% to 35% is being handled by us in our own plants. So we believe in outsourcing that with quality tie-up arrangements, et cetera. So we are confident that the CapEx, as I said, will be in the range of INR 150 crores to INR 175 crores, which will be largely on my internal capacity expansion and optimization, et cetera. So we will be doing that mix of that, but the capacity is not a constraint for the growth.

Got it, sir. And this entire 60%, 65% outsourced arrangements from a supply chain perspective, they could face some hiccups in terms of whatever they are sourcing components and material from. Of course cash is an issue and it could have some supply hiccups. In terms of our discussions with them whereas this outlook in terms of 20% growth also accounts for all the supplies on time to the vendors as well, right?

See, as far as the tie-up unit goes, all the material is procured by Radico. We are only converting it. So all the raw material is our this thing. So we don't foresee any problem in that.

Got it. And just lastly on employee cost, just as a direction when I look at over the last 4, 5 years, this number actually has grown much lower than what top line growth Radico has seen overall from a system level. Of course we've been investing into people and we've been training people inside the company itself. But going forward, do you still think this 15% cost CAGR for staff cost is enough to sustain this 20%, 25% kind of P&A outlook over the next 2, 3 years?

Yes. Our internal team is very strong. And second is the operating leverage is coming into play because as the turnover is increasing, you do not require the same number of manpower. So the operating leverage is kicking in, which is helping our margins also.

So it should continue in a similar way as what we have seen so far over the last 4, 5 years, right?

Yes.

The next question is from the line of Navani Naredi from Naredi Investment Private Limited.

Congratulations. So my first question is given rising health awareness, how are you adopting your portfolio like premium ready-to-drink low alcohol to capture Gen Z consumers and also diversifying the portfolio, which will reduce the dependence on Indian excise policy? That is my first question.

As far as the Gen Z goes, the white spirit is what the Gen Zs prefer and that is where our innovation of the different flavors of vodka is coming into play and that is helping us to get the Gen Z into the white spirits. What I told earlier, we see this white spirits expanding in lot of states now. So I think that is the trend we are seeing with the Gen Zs. As far as low alcoholic or RTD goes, as of now we don't have any major plans to get into it.

Yes. Because these days what I observed personally is Gen Z's focus is on they are very careful about what they're drinking and they are limiting their -- like they don't drink too much also. They think and then they act. So that was my concern like how are we thinking to modify our portfolio into nonalcoholic or low alcoholic beverages so that we can benefit in future. That is my concern.

You're absolutely right. So Gen Z what they are doing is everyone is like health conscious, responsible drinking, et cetera. So they drink less, but they want to drink the finest. That is why you see the P&A category is growing across India and that is the main trend.

Okay. So like no future plans of getting into another like low alcoholic drink like many of your competitors are also entering into those segments. So you don't have any plan to enter those segments, right, in future?

No, we don't have any plans as of now.

Okay. And another question is like Rampur Indian Single Malt and Jaisalmer Crafted and Magic Moments like these are getting lot of traction in global market like internationally also. So knowing that our share like international contribution to top line is around 8% to 9% only. So going forward, are we looking to penetrate even in a better way the global market scenario, how are we strategizing that forward?

Yes, the international market is a very important strategic market for us. And it's not only the international market, but even the global travel retail. That's very important. We are currently in 50-plus airports and our target is to cross 100 airports in quick time. In terms of the share of international business in the overall, it's thanks to our domestic business, which is growing at a very, very fast pace. The share keeps coming down so we're not complaining about it.

All right. That was my question. I really like to say this is the first time I'm attending an investor call and you're really doing a great job and all the best for the future.

The next question is from the line of Yash Patil from Dalal & Broacha.

Sir, you flagged the Maharashtra industry volume down by about 20% for MML for this year and sir, you launched MML through you R&D joint venture in January. So how is the R&D joint venture performed since launch? And what is your current market share in Maharashtra? And do you see the market recovering towards the original 2.4 million cases per month in Maharashtra?

See, as far as Maharashtra is considered, Maharashtra we have saliency of around 3% to 4% of our overall business. Yes, after the MML introduction, the IMFL industry has gone down. It has gone down by 20%, 25%. So gradually MML is stabilizing and we hope so that IMFL over a period of time should come back to the normal position. And since we are cutting vodka category and above there so premium and above will be stable for us.

The next question is from the line of Vinay Rawal from Choice Institutional Equities.

I had couple of questions, but they are more or less answered.

The next question is from the line of Dhiraj Mistry from Jefferies.

Sir, can you spend some time on Karnataka policy? How do we read that and what kind of price decline or hike we can expect across a range of products?

See, as we have said earlier that Karnataka is progressive -- Karnataka is on the progressive march. So as far as excise is considered, they have taken this step last year also where they have recognized the price of premium brands. And our brands like Rampur Single Malt, Jaisalmer Craft Gin, Royal Ranthambore, Sangam, et cetera, has been benefited in the larger way and other brands of the industry has also been benefited. It's a cosmo market at the end of the day so it has lot of consumption. Now in the second step also, government is also thinking on the similar line. But at the same time since the policy is yet not out, so we cannot say that. But as far as market and other things are considered, we can say that they are thinking on that line and they have seen a success of premium and above category increase. So overall saliency of the premium and above category has been increase in the last [ tier ] of that. So definitely we will look forward for rationalizing the brands further.

Got it. And sir, what would be the margin for non-IMFL business in this for the full financial year? And how do we see the growth as well as margin profile of non-IMFL business going ahead?

The margin in the IMFL business is around 20% plus, 20%, 21% for full year and non-IMFL it is in the range of 9%.

And how do we expect growth in non-IMFL business?

Non-IMFL business is growing at 7% to 8%, is a natural growth of the industry. As far as the bulk spirit is concerned, that will in due course of time start being consumed by us captively so that will get reduced. So proportion as of now also, the IMFL is constituting around 70% to 75% of the overall saliency of the top line. So we see a gradual shift to IMFL from non-IMFL.

Okay. And sir, last question is on CapEx. Now that we will become debt free in FY '27 and already you have announced that minimum 20% would be the dividend payout policy. How do we see the incremental capital allocation going ahead? Would we do further CapEx or would we be looking for inorganic growth or acquisition? How do we see on capital allocation?

As far as the first step we have taken on this is to have a minimum payout of 20% and in due course of time with the time passes and the availability of cash generation and free cash flow available, it will be looked into. However, if there is an opportunity which gives us more than 20% to 25% ROCE, we'll be definitely looking at that. But the point is we believe in organic growth rather than an inorganic growth. So as far as the acquisition or anything is concerned, that is at this point of time is being ruled out.

Okay. Sorry, but I don't know whether this question was asked or not. So in our assumption of 125 bps of margin expansion, do we take any benefit from U.K.-India FTA trade?

Yes, it's inclusive all because there will be some pluses and some minuses. We can't predict what kind of the global and geopolitical situation arise. So taking into account all these things, I think we are confident to deliver a 125 basis point improvement.

Okay. So that includes U.K.- India FTA rate benefit as well.

Yes.

The next question is from the line of Karan Kamdar from Choice Institutional Equities.

Congratulations on a really great set of numbers. So first question I had is what kind of pricing power do we have across markets at least our top markets? And if you can help me with what our top markets are in terms of salience. And when can we actually do the revisions? Are there any legal restrictions or not on pricing revisions? Secondly, I really appreciate the goal of reaching the INR 1,000 crore mark and we are saying 25% CAGR to reach it in 3 years. What kind of brands are our high conviction brands and what kind of geographies are we betting on?

So your first question is regarding the pricing power. So as you are aware that state excise policies generally when the industry represent about the reason for seeking the price increases and all that. In the scenario the state government considers now it positively because their concern is also the revenue and all that. As we said that 7 to 8 states has already given. This is a continuous process, which the industry associations keep doing with the state governments. And some of the talks are still on and all that because of the costs being faced by the industry. So that is -- I can't say that which are the states. But yes, it is an ongoing process. Regarding your second question regarding?

Sir, part 2, luxury market, what are we sort of betting on? What are our top brands that we are focusing on for turning INR 475 crores to INR 1,000 crores? And I'm sure we'll show luxury as a separate line item as well when we reach there. So what are we betting on in terms of brands and geographies?

Our guidance, first of all, is for the next year 25% not for 3 years. So next year, our guidance is 25%. After that, we'll see. But we are very confident on our luxury portfolio because we are seeing growth coming from everywhere.

Okay. So nothing -- no particular product or category that we are betting on?

No, Rampur Indian Single Malt the expressions of Rampur, Virat Indian Single Malt, Spirit of Kashmyr, Jaisalmer, Royal Ranthambore; all these brands.

Okay. Got it, sir. And sir, if you can just list out what are Top 3 states and what salience we have in those states. That would be very helpful.

So the Top 3 states are Uttar Pradesh, Andhra Pradesh and Rajasthan. And we are actually pretty well spread out on our saliency; North, South, everywhere, I think Radico is growing, but these are the 3 big states.

The next question is from the line of Nitin Awasthi from InCred Research.

One, I would like to know given that MML is right now established in Maharashtra and stabilizing and you have a JV there which is allowing you to participate within that industry and you've already lined up some pretty eye-catching products and given that the competitors within said segment would not always be backed by large companies such as yours. Given that, do you expect the JV in Maharashtra to take a substantial portion of this increasing market?

We are aiming about 10% to 15% of the MML category and we just launched it a couple of months back and the response to the brand is quite encouraging.

Yes, sir, that is definitely there. I've seen the products within the range and of course there is no debate that your products stand out across the line in that category. And given that this distribution strength, you could backing of the main company, the growth of course there is going to be substantially high if the entity stabilizes. Now here given that the growth is going to be coming from this segment and that's the market you are aiming at, is there more investment going to be made in the JV?

No. The JV is self-sufficient.

Okay. Even for this growth that -- even for this market share grab that you are looking at?

Yes, absolutely because it's more of creating the brand and the distribution leverage and the JV itself is throwing lot of cash. So I think there is no requirement of any investment there.

Understood. Sir, next question on the UP side, UP IML, we are always in Top 2, sometimes #1, #2. But financial year '26, where have we ended? Have we ended it at #1 position, #2 position officially?

We are #1.

Okay. Currently we have moved to #1. And within the space of UPML, the UPML segment, the growth there and how much market are we aiming to capture there? First of all, is the segment itself as exciting as the state policy makes it to be and other consumers also as excited about this segment?

I think our market share there is about close to 25%, 26%. And we are aiming at the normal growth what the market will be having. We are not looking at abnormal growth there.

Understood, sir. And in particular on the UPML segment, the excitement is there as the state makes it to be?

Sir, consolidated we are talking about 24%, 25% market share in UPML and UPCL. And this is our objective and our focus area core business is on the MSL side, which continues to grow in very, very strong double digit, 20% is our guidance and we continue to focus on that across markets.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Yes. So the current environment reinforces the strength and resilience of Radico Khaitan's business model, strong operating performance, margin expansion and improved return ratio and healthy cash flow generation with respect the quality of our growth and impact of the disciplined execution. With a differentiated premium-led portfolio, a robust balance sheet and continued focus on financial discipline, we are well positioned to navigate near-term uncertainties and sustain our profitable growth trajectory. We remain confident in road ahead and committed to creating long-term value for our stakeholders. Thanks for joining us today and look forward to connecting with you next quarter. Thank you.

Thank you. On behalf of DAM Capital Advisors, that concludes this conference. Thank you for joining us. You may now disconnect your lines.