RADICO Q1 FY25 earnings call.
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Revenue
₹1,137 Cr
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Revenue YoY
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EBITDA
Pending
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Radico Khaitan delivered a mixed Q1 FY25 with strong premiumization offsetting macro headwinds. IMFL volume declined 4% YoY to 7.07 million cases, but Prestige & Above volumes surged 14.3% YoY with value growth of 19.1%, now constituting 43.4% of the mix versus 36.5% a year ago. Gross margin compressed 210bps YoY to 41.5% due to severe grain inflation (335bps impact), though sequential stability was maintained via price hikes (+170bps YoY impact). Management acknowledged Q1 ad spends were anomalously low (~8% annualized vs typical 7-8% guidance) due to election-related delays, promising catch-up in subsequent quarters. The new luxury launches (Rampur Asava at INR 10,000, Sangam World Malt at INR 4,000-7,500, Jaisalmer Gold Edition at INR 4,000-7,000) demonstrate execution capability. The regular category decline remains a structural concern. Management reiterated FY26 debt-free target and 15-16% EBITDA margin ambition. Key risks include persistent grain inflation, Telangana receivables normalization, and intensifying competitive activity in prestige whiskey segments.
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Guidance to track
- Management reiterated its medium-term target of 15-16% EBITDA margin by end of FY26, driven by ongoing premiumization and price increases. Gross margin was 41.5% in Q1 FY25, down from 43.6% YoY due to grain inflation headwinds.
- Management confirmed annual ad spends should be in the 7-8% range. Q1 FY25 was an aberration with significantly lower spends due to muted industry growth, policy delays, and elections. Expects catch-up spending in Q2-Q4.
- After completing major expansion CapEx (INR 80-90 crore remaining in FY25), steady-state maintenance CapEx will be INR 70-80 crore annually from FY26 onward.
- Some southern states are planning to rationalize liquor duties, which management views as positive for industry volume growth. Additionally, some states are considering price increases which will provide further pricing support.
Risks flagged
- Grain price inflation impacted gross margin by 335bps YoY. Although management sees worst of inflation potentially over (MSP increase may limit downside), government FCI rice allocation decisions remain pending. Crude grain prices at INR 28,000+ ton remain elevated.
- Analyst raised concerns about MNC and regional players launching new brands in the INR 1,000-2,000 upper prestige whiskey segment, which is highly profitable and volume-dense (particularly in Maharashtra). Management acknowledged competition but stated it is 'not worried currently' and remains focused on luxury launches.
- Regular category volumes declined significantly, impacted by both strategic rationalization (low contribution, input cost pressure) and state-specific excise policy delays. Management guided for muted growth at 4-5% aspirational, with this segment remaining a 'sizable part' of portfolio.
- Analyst raised concerns about proposed restrictions on surrogate advertising for liquor brands. COO stated they 'respect the law' and are 'geared up' to follow guidelines, noting it may benefit organized players with innovative ground marketing. Revenue model requirements for brand extensions add compliance complexity.
Key quotes
- As far as the industry goes, I think we've seen the worst of the inflation, and I think now onwards, it will be same or it will soften.
- The ad spends that we have always guided would be in the area of 7% to 8% annually. The first quarter this year is an aberration.
- Our commitment remains to a focused portfolio of premium brands driven by consumer aspirations. This is reflected in the strong prestige and above category volume growth of 14% year-on-year.
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