Allied Blenders

Allied Blenders reported a robust Q1 FY26, with consolidated income from operations growing 22.5% year-on-year to ₹930 crores. EBITDA saw a significant increase of 56.4% year-on-year, reaching ₹119 crores, and the EBITDA margin expanded by 277 basis points to 12.8% from 10% in Q1 FY25. Profit after tax surged five-fold to ₹56 crores, demonstrating strong operational leverage. This performance was underpinned by a 17.2% volume growth to 8.5 million cases and a 6.2% increase in realization per case, driven by a favorable product mix.

The company's premiumization strategy is yielding results, with the P&A portfolio volume growing 46.9% and increasing its salience to 46.2% in volume terms (from 36.9% in Q1 FY25) and 55.8% of sales value (from 46.1% in Q1 FY25). New offerings like Golden Mist, a prestige brandy launched in Karnataka and Telangana, and the partnership for Russian Standard Vodka, are expanding the company's presence in the high-growth Super-Premium and Luxury segments. This segment, currently 12 million cases, is expected to double to over 20 million cases in the next four years, with ABD Maestro targeting a high single-digit to double-digit market share.

Allied Blenders' ₹525 crore CAPEX program is progressing as planned, with key backward integration initiatives nearing completion. The PET manufacturing facility in Telangana is on track for commissioning in Q2 FY26 (September '25), expected to yield over ₹30 crores in annualized savings. The single malt distillery is progressing towards a Q4 FY26 launch, with margin accretive benefits anticipated from April 2026. The ENA Distillery in Aurangabad, acquired in December '24, commenced operations in February '25 and is currently running at 100% capacity, with regulatory approvals for expansion underway. These initiatives are collectively expected to contribute approximately 300 basis points to EBITDA margin improvement from Q4 FY27.

The company demonstrated strong working capital management, leading to a reduction in overall net working capital. This, combined with robust profit performance, generated free cash flow, enabling a marginal reduction in net debt from ₹766 crores in March '25 to ₹754 crores in June '25. Consequently, the net debt to equity ratio improved from 0.49x to 0.47x, and net debt to EBITDA improved from 1.7x to 1.5x, indicating a healthier financial position.

Allied Blenders is aggressively expanding its market reach, with its global footprint growing from 14 to 27 countries, targeting 33-35 countries by year-end. Domestically, the company is focusing on strengthening its core brands; Officer's Choice, the #1 Indian Mass Premium brand, is undergoing innovation, while Officer's Choice Blue is seeing a ramp-up in volumes in reopened markets like Delhi. The company is also focusing on driving trials for Sterling Reserve B7 and expanding its presence in the CSD channel with Kyron and SR B10.

The company acknowledges the uncertainty surrounding the impact of the Maharashtra tax hike on consumer behavior and margins, as the full MML policy is yet to be announced. Additionally, overdue receivables from Telangana state remain a concern, with only a tiny portion released in April and May, and no further releases in June and July. Management anticipates clarity and potential normalization of these receivables after the Panchayat elections in August, which will allow the government to re-engage on industry-level issues.

Management projects a gradual improvement in EBITDA margin, targeting 15% within the next three years from the current 13% (TTM). This will be driven by two main levers: a 200 basis point improvement from the UK FTA starting Q4 FY26, and the 300 basis points from backward integration by Q4 FY27. The company is also investing significantly in brand building (75-100 bps increase in A&P as % of NSV this year and next), ABD Maestro, and technology infrastructure (ECC to HANA migration), with the first two years for new premium ventures being investment-heavy before they contribute to EBITDA.