Indian alcohol cos can raise a toast to higher sales and better margins: ICRA

ICRA, a leading credit rating agency, anticipates a promising outlook for the Indian alcohol beverages industry in the fiscal year 2025. Projections indicate a revenue growth of 8-10% for domestic alcohol companies, with Indian-made foreign liquor (IMFL) companies expected to lead with 11-13% revenue expansion. Beer companies are also forecasted to experience a revenue increase of 9-11%, primarily attributed to a rise in volumes. Vice President and Co-Group Head – Corporate Ratings at ICRA, Mr. Kinjal Shah, underscores the potential margin improvement, driven by the moderation in packaging material costs and price adjustments by state governments. Despite challenges like fluctuating grain prices, the industry is expected to benefit from a favorable climate forecast for beer consumption in Q1 FY2025.

ICRA maintains a stable outlook for barley prices, a key raw material for beer production, despite potential challenges such as increased minimum support prices and higher procurement rates. However, factors like grain diversion towards ethanol could affect prices of extra-neutral alcohol (ENA). Meanwhile, the agency observes a marginal softening in aluminum and soda ash prices, offering some relief in input costs. Additionally, ICRA foresees a moderation in working capital requirements for industry players, supported by lower input prices and reduced funding needs. This positive trend is expected to maintain strong credit metrics for ICRA's sample set, bolstered by healthy accruals and limited debt addition amidst minimal capital expenditure plans.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.