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Organised liquor makers to report 12% jump in FY23 revenues, says Crisil report

New Delhi: India’s organised liquor industry is expected to report 12-13% growth in revenues this fiscal thanks to strong demand and consumers buying more expensive spirits, according to a report by Crisil released on Tuesday.

Crisil expects the industry to record revenues of 4.45 lakh crore in FY23. The industry reported a 15% jump in annual revenues in the previous fiscal.

“Growth will be driven by a rebound in tourism and hotel industries, rising disposable incomes and the premiumisation trend. The premium segment (more than 1,000 for a 750 ml bottle), is expected to grow at over 20%, albeit on a lower base. On the other hand the price-sensitive mass consumer segment, comprising liquor priced below Rs.700 per 750 ml bottle, which contributes over 75% of revenues, will see volume growth of 5-7%,” said Rahul Guha, director, Crisil Ratings.

Crisil studied 33 liquor companies, which account for roughly 15% of industry revenues. The liquor industry can be broadly divided into distillers and brewers. Distillers produce Indian-made foreign liquor (IMFL), accounting for 65-70% of the industry’s revenues, while brewers produce beer, which accounts for 25-30%.

Crisil expects operating profits of distillers and brewers to increase by 100-150 basis points (bps), helped by softening input costs. Credit profiles will remain strong, with leaner balance sheets on the back of significant deleveraging in the past three fiscals, it said in the report.

“Extra neutral alcohol (ENA) and barley comprise 55% of input costs for distillers and brewers, while packaging materials such as glass, plastics and labels contribute the rest. While packaging costs have moderated, ENA prices are expected to remain high, restraining distillers from any major margin. On the other hand, brewers will benefit from lower packaging costs and the sharp correction in barley prices,” it said.

After rising by more than 20% in the previous fiscal, barely prices have fallen by over 25% in the first half of this fiscal.

“With favourable input costs and strong revenue growth, brewers will see profitability expand by 250 bps, while distillers will clock a 70-80 bps improvement this fiscal. Overall, the industry will see a 100-150 bps expansion in operating profitability this fiscal,” said Jayashree Nandakumar, director, Crisil Ratings.

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Updated: 05 Dec 2023, 12:26 PM IST

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