Radico Khaitan Q1 FY26: Record-breaking volumes

Continuing its momentum from the second half of last year, the regular segment gained further strength with volumes soaring 52 percent YoY to 5.4 million cases. The rise can be attributed to a favourable base, the resolution of most state-level industry problems, and recent adjustments in Andhra Pradesh's liquor licensing policy. The de-control of liquor retail business in Andhra Pradesh from October 12, 2024, has led to a considerable market share increase for Radico Khaitan in the region.

Revenues from the non-IMFL segment grew a healthy 12 percent YoY to Rs 436 crore, primarily driven by strong bulk alcohol sales. The management anticipates that non-IMFL revenues will remain stable at current levels in the upcoming quarters, as the Sitapur plant is operating near its full capacity.

Gross margins for the quarter expanded by ~ 200 bps YoY to 43 percent, benefiting from stabilised raw material prices and continued premiumisation efforts in the IMFL sector. Product mix changes caused a sequential drop of 50 bps QoQ. Despite a substantial 48 percent YoY increase in selling and distribution expenses, EBITDA jumped 56 percent YoY to reach Rs 231 crore.

Expanding into luxury, super luxury

With a 9 percent YoY growth, Radico Khaitan's total IMFL volume hit 31.4 million cases in FY25. Magic Moments Vodka, the flagship brand with a 60 percent share of the total vodka market, continued its strong performance, exceeding 7 million cases. Morpheus Super Premium Brandy achieved 1.2 million cases, and After Dark Blue Whisky reached 1.9 million cases.

The company is actively pursuing market expansion by establishing strategic collaborations in sports, fashion, music, and luxury sectors, and by filling product gaps with new competitive offerings, including the recent launch of The Spirit of Kashmyr, a luxury vodka.

Besides, the company is broadening the distribution of existing brands, such as Royal Ranthambore Heritage Collection Whisky, through CSDs (Canteen Store Departments) in Q4 FY25. Looking ahead, Radico's management plans to invest 6-8 percent of IMFL revenues in advertising and promotion for both established and new brands to boost sales.

Receding cost pressures

Radico's gross margins faced pressure in H1 FY25 due to elevated foodgrain inflation and glass prices. However, the company is now benefiting from moderating input costs, driven by a Rs 550 per quintal reduction in FCI (Food  Corporation of India) price reserve prices (Rs 2,250 for states and ethanol producers) and a 3-4 percent decrease in glass prices over the past year.

More importantly, grain prices are expected to remain stable due to the early arrival of monsoon. Consequently, these raw material cost savings are anticipated to aid Radico Khaitan's gross margins. Additionally, the use of captive ENA (extra neutral alcohol) from the Sitapur unit offers further scope for margin expansion, with the management targeting a 16-17 percent operating margin range for the medium term.

As of June 2025, Radico's net debt stood at Rs 410 crore, representing a decrease of Rs 163 crore from the previous quarter, primarily due to the receipt of overdue payments. The company anticipates that robust cash flows will aid further debt reduction throughout 2025 and 2026. For FY26, Radico targets a net debt reduction of Rs 150-200 crore, with a medium-term objective of becoming debt-free within 24 to 30 months.

Outlook and recommendation

Radico’s Q1 FY26 results reinforces its position as a top-tier growth stock in the Indian consumer universe. Over the medium term, Radico’s management is targeting a 14–15 percent growth rate due to the strong anticipated growth of the Indian alcohol beverage market, fuelled by changing consumer lifestyles and higher disposable incomes. However, the stock's current valuation of 65 times estimated FY27 earnings seems to reflect all future positives, suggesting limited room for capital appreciation over the next 2-3 years.