Tilaknagar Industries Ltd. (TI.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tilaknagar Industries Limited's Q2 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and thank you for joining us on Tilaknagar Industries Quarter 2 H1 FY '26 Earnings Conference Call. We have with us today Chairman and Managing Director, Mr. Amit Dahanukar; and President, Strategy and Corporate Development, Mr. Ameya Deshpande. We shall commence with views from Mr. Dahanukar on the strategic performance, and he'll be followed by Mr. Deshpande on the financial highlights, after which we shall open for question-and-answer session. Before we commence, kindly note that the call could contain certain forward-looking statements and a detailed disclaimer has been included in the results presentation that has been uploaded on the stock exchange website. I would now like to invite Mr. Dahanukar to make his opening remarks. Over to you, Mr. Dahanukar.

Good morning, everyone. Happy to have you all join us on this earnings call to discuss the quarter 2 and H1 FY '26 results. The second quarter maintained the strong growth trajectory of recent quarters, underscoring the continued success of our premiumization strategy and focused execution. Our brands building on a robust first quarter, enjoyed healthy consumer traction across key markets. During quarter 2, our volume performance was strong with growth at 16.2% year-on-year. Our NSR increased from INR 1,193 per case in quarter 1 FY '26 to INR 1,215 per case this quarter, demonstrating a 1.8% growth on a quarter-on-quarter basis. The Southern region has seen strong growth momentum in quarter 2 with market share improvement for TI in most of the key markets. The market share gains were driven by the strong performance of our existing portfolio, which continued to take share from competition and by incremental gains from the introduction of our brands in new territories. On the portfolio front, our luxury and super premium portfolio is showing promising signs. Monarch Legacy Edition Brandy, our first luxury foray was launched in Odisha, Kerala and Karnataka market and has also been recently introduced in Hyderabad Duty Free. Monarch Legacy Edition Brandy is now available in 6 states, and we will continue to expand its presence across more key markets, further cementing our premiumization journey. We have expanded distribution through our usership agreement with Spaceman Spirits Lab in quarter 2. We have started the distribution of SSL portfolio in Odisha and Puducherry markets and also have started exporting the portfolio to select international markets. We will continue to leverage our distribution strength to scale the reach of Spaceman brands across certain Indian states and international markets, unlocking significant value over the coming quarters. As on date, we own 21.36% of SSL with a clear intent to increase our stake in times to come. Our mass prestige portfolio, led by Mansion House Brandy and Courrier Napoleon continues to deliver strong performance. We remain committed to ensuring that Brandy's share of voice reflects its leadership in market share. As mentioned previously, we are stepping up our A&SP investments, which are already beginning to shift consumer perception positively. With continued focus on marketing and innovation, we are confident in positioning Brandy as a more aspirational and inclusive category. While Brandy continues to anchor our portfolio, we are seeing strong traction with Mansion House Whiskey in the semi-premium whiskey category. The brand is now available in Northeastern states, West Bengal, Odisha, Telangana, Puducherry and Kerala, and we will continue to widen its distribution footprint across new markets. Before I hand over to Ameya to take you through the financial highlights, I will briefly talk about the progress we have made on the Imperial Blue acquisition. We have achieved a major milestone in the acquisition of the Imperial Blue business division from Pernod Ricard India. The Competition Commission of India granted approval for the transaction on 7th October 2025. We have made substantial progress on the integration front with a number of talented professionals joining us across various functions, further strengthening our organizational capabilities. The transaction is expected to be completed in quarter 3 FY '26, and we look forward to welcoming Imperial Blue into our fold. During the quarter, we also announced a preferential issue of equity shares and warrants for an amount of INR 2,296 crores. During the quarter, we received INR 986 crores from the preferential issue on account of equity subscription and 25% of warrant subscription. The fundraise saw strong participation from both marquee institutional investors and the promoter group. The Imperial Blue acquisition will be funded through an almost equal combination of equity and debt, ensuring a prudent and well-balanced capital structure. Since the deal has not yet closed and remains subject to confidentiality obligations, we continue to be unable to share additional details currently. And hence, we kindly request that participants refrain from asking any further questions related to this matter. I will now hand over to Ameya to take you through the operational and financial performance in greater detail.

Thank you, and a very warm welcome to everyone joining us today. I'll walk you through our financial highlights for Q2 and H1 FY '26. As mentioned by Mr. Dahanukar, we have sustained our strong growth momentum and our revenues for the quarter stood at INR 398 crores with underlying volume growth of 16.2%. And revenue adjusted for subsidy income growth of 9.3%. For H1 FY '26, we cropped a net revenue of INR 807 crores, growth of 17.4% year-on-year. Our net sales realization per case grew 1.8% to INR 1,215 in Q2 from INR 1,193 in Q1. We have seen sequential growth in NSR since Q3 FY '25. Q2 also marked another strong quarter in our profitability journey with EBITDA of INR 60 crores. Adjusted for subsidy income of INR 10 crores in Q2 FY '25, the EBITDA growth was 8.2% year-on-year. EBITDA margins for Q2 FY '25 came in at 15.1% and for FY '26 first half stood at INR 155 crores, reflecting a margin of 19.2%. And adjusted for subsidy income, the margin was 15.1% compared to 14.9% for the corresponding period last year. Once the Imperial Blue deal closure is achieved, we will come back with revised margin guidance on the combined business. On the input side, ENA and glass prices have remained stable, and we are hopeful of a continued conducive input cost environment. PAT for Q2 stood at INR 53 crores. Adjusted for subsidy income, PAT grew 10% year-on-year. For H1 FY '26, PAT, excluding subsidy, grew 24.5% to INR 103 crores from INR 82 crores in H1 FY '25. Our net cash position as of September '25 stands at INR 1,086 crores on account of proceeds of INR 986 crores from a preferential issue of equity and 25% of warrant subscription. With that, I would now request the operator to open the call for Q&A.

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

Two questions. My first question is in your key markets, if you could talk about, is there any increase in competition because the other players are also saying that they want to go bigger in Brandy. And specific on Andhra market, if you could tell us in the earlier government, how was your market share and overall regulations and the opening up, how that has impacted. And in second year of opening up, every other player is quite confident that good double-digit growth should continue. What will be your take on your growth in Andhra market? That is the first question.

So as far as Andhra market is concerned, Abneesh, we are seeing good growth in Andhra market. Ameya can comment on the specifics. But in terms of market share, exit market share with the earlier regime was approximately 10% and currently, it stands at around 12%. So we have seen an improvement in our market share.

Yes. No, that's correct. I think the way the industry has shaped up, right, basically with retail becoming private as well as increase in the store timings, we have seen significant growth in the overall industry in the state. The state, essentially in the first half of this financial year in terms of volumes has increased -- has grown by more than 20%, right? Now obviously, as we move forward, this growth will taper down for the industry on the back of a higher base. But having said that, we do foresee good growth coming out of the industry with us growing at a faster rate.

And you would have gained market share from local players in Andhra?

Yes, we would have gained market share predominantly from local players. So it is the pan-India players who have come to the fore in the category or other in the industry.

Sure. Last question, in Maharashtra, any color you can share because overall, the freight factors are much higher. What is your take on the industry? And anything you can share on your numbers?

So difficult to share right now in terms of how we see it evolving. It's a very new, I think the MML has been introduced only about 1 month ago. So for our existing portfolio, which is very limited, it has limited impact. But going forward, we have to watch this space to see how it evolves. And just from an industry perspective, the industry from our understanding has degrown by around 20%, the IMFL industry, right? But having said that, September was actually the first month where volumes grew sequentially on a month-on-month basis. So if that is some kind of indicator, then so we had read. But essentially, like Mr. Dahanukar said, still pretty early days. So not -- we will refrain from talking too much about it.

One follow-up there. We understand pricing of MML is quite aggressive. In terms of would you be able to participate there? And what are the regulations, what are the entry barriers there? Who are the key players in MML?

So as regards to MML, we are looking at it very closely, and there are certain considerations as per the policy, which are being assessed. So for the moment, we will refrain from commenting on our participation in this segment.

And who are the key players?

There are a few local players who have come into this segment right now.

[Operator Instructions] The next question is from Harsh Shah from Bandhan Asset Management.

My question again was on Maharashtra Made Liquor. So is it that the point regarding [indiscernible] investments, which is mentioned in the policy document, somehow, I mean, the point of -- bone of contention for us? Or let's say, if that would not have been, would we participate in [indiscernible]?

So as I had mentioned earlier, Harsh, we are looking at it very closely. There are certain considerations as per the policy, which are being assessed. So for the current moment, we will refrain from commenting on our participation in this segment.

But what would be, I mean, the considerations which basically, I mean, apart from this foreign holding, which would stop us or would you want us to invest in this segment?

So Harsh, there are certain internal considerations that we are looking at. So kindly allow us to not talk about this for the moment. At the right time, we'll speak about it.

Okay. So I just wanted to know, is it more internal? Or is it more policy-related, which we basically -- which is being considered currently?

Yes. So internal deliberations on the policy-related matters.

[Operator Instructions] Next question is from Karan Kamdar from Choice Institutional Equities.

So I just wanted to ask about an update on the Prag project. What are plans and what do we plan to manufacture there? And what kind of capacity are we expecting in the first year?

Yes. So the thing over there is that, as we have mentioned in our disclosure as well, the Prag capacities are being expanded from around 6 lakh cases per annum to around 36 lakh cases per annum. So it's a fairly large project, right? But the reason for undertaking this project is given the strategic importance that Andhra as a state has for us. It is the largest state for us in the current scheme of things. And even with the impending acquisition of Imperial Blue, it will only get bigger, right? So from that perspective, a very critical project. In terms of time line, we have disclosed that this will be done over a 12-month period, right? So whilst we have made the payments for the license fees and all of that, in relation to the CapEx outlay that we had mentioned, right, around INR 59 crores, INR 34 crores has already been paid in Q2. And we have also started placing orders for the balance equipment. You should be looking at commissioning of this project by the first half of FY '27.

Okay. Got it. So any plans to sort of -- I understand we have like a usership agreement with Spaceman. Will we also be able to manufacture Spaceman Spirits products at the Prag Distillery? Or is that not in the plan currently?

As of now, not contemplated.

Okay. Okay. And just one last question, if I can. How do you see this synergies expanding with Spaceman and Imperial Blue? Like do you see any synergies coming in? I understand you wouldn't want to talk about Imperial Blue, but just on the Spaceman bit, what kind of synergies do you expect?

Yes. So the synergies are -- have already started, right? So as mentioned by Mr. Dahanukar earlier in the opening remarks, under our usership agreement with Spaceman, we have already started distributing their products in certain states, and that will only expand in times to come, right? But beyond just distributing Spaceman brands, what it also does is at a very practical level with our own intent and vision for our super premium and luxury portfolio, it enables us to have a bouquet and a basket of premium, super premium products that we can go to the market with, right? Essentially, with the Spaceman portfolio, Tilaknagar Industries is going to be present across all major categories in IMFL, right? So that will be brandy, gin, rum, vodka as well as whiskey that we have alluded to earlier that we are going to be launching a new luxury whiskey fairly soon.

[Operator Instructions] Next question is from Chetan from Systematix Group.

Just one question on Andhra. So how do you see the saliency of brandy in AP going ahead, say, with national players who have entered the market? And I believe the brandy saliency was around, say, 30%, 35% in the state. So if you can comment on this?

Yes. So you are right, it's around 30%, 35% the saliency of brandy in Andhra market.

Yes. And how do -- like do you think like will this reduce grow going ahead like with the national players coming in?

See, the thing is we already have a good number of quarters behind us, right, with -- since the new policy. So it's been almost a year now with the new policy coming in. And frankly, that's enough time to see any kind of change that could have happened in the industry, and we really haven't seen much change from a saliency perspective, right? Whilst whiskey continues to remain the larger category in terms of volumes with brandy being a close second, that position still persists, right? It continues. So we haven't seen anything change dramatically from a category shift perspective.

Next question is from Heer Gogri from Choice Equities.

I wanted to understand, are there any new brand launches in the pipeline? I believe Samsara has 2 new flavors upcoming. And you also mentioned the new luxury whiskey. Do we have any time line for it?

So the luxury whiskey will be launched in this quarter and the 2 new extensions of Samsara, which you are alluding to, that is the Jamun & Pink Salt and the Mango & Jalapeno that's already been launched in Goa. So that is already in the market right now. And soon to be rolled out in [indiscernible]. So we will also pick up those brands for our distribution. Currently, we aren't doing that because we don't distribute in Goa for Spaceman. But yes, we'll be introducing those brands soon enough.

Okay. Got it. And any guidance on the overall market and Tilaknagar in the coming quarter that you can share?