Detailed Narrative
Strong Q2 FY26 Financial Performance
Allied Blenders reported a robust Q2 FY26, with consolidated income from operations reaching ₹995 crores, marking a 14.4% year-on-year increase. EBITDA grew by 23.6% to ₹130 crores, improving the margin to 13.1%. Profit after tax (PAT) saw a significant jump of 32.3% to ₹63 crores. Volume sales increased by 8.4% to 9 million cases, complemented by a 3.8% rise in realization per case, indicating effective product mix and pricing strategies.
Premiumization and Brand Momentum
The company's premiumization strategy continues to yield results, with the Prestige & Above (P&A) segment demonstrating strong growth. P&A volumes grew 28.8% year-on-year, increasing its salience to 47.1% from 39.7% in Q2 FY25. ICONIQ White remains a standout performer, doubling its volume organically and expanding its international footprint to eight countries. Officer's Choice continues to lead the Mass Premium segment, maintaining over 40% gross margins and driving cash flow. The refreshed Sterling Reserve B7 campaign, 'So Smooth Must Be Magic,' is reversing degrowth trends in priority markets.
Strategic International Expansion
Allied Blenders' international expansion has been impressive, growing its reach from 14 to 30 countries within 18 months, with a target of 35 countries by Q4 FY26. The company aims to achieve 1 million cases in the Africa market by FY28 and expects international revenue to contribute 12-15% of total value. ICONIQ White is now available in eight countries, and luxury brands like Arthaus and Zoya Gin have debuted in UAE duty-free markets, showcasing a high-margin export model with less working capital.
Backward Integration and Capex Program
The company successfully commissioned its PET bottle manufacturing facility in Rangapur, Telangana, in September 2025, with a capital investment of ₹115 crores. This facility is expected to produce over 600 million PET bottles annually, adding over ₹30 crores to gross margins and enhancing supply chain efficiency. Other capex projects, including the single malt distillery at Rangapur and ENA distillation capacity expansion at Aurangabad, are on track for operationalization in Q4 FY26 and Q4 FY27, respectively. The overall capex program of ₹527 crores is phased, with 60% allocated for FY26 and 15% for FY27.
Financial Health and Capital Management
Operating cash flows of ₹147 crores were generated in H1 FY26, reflecting strong profitability and working capital discipline. Net debt increased by ₹127 crores to ₹893 crores as of September 30, 2025, primarily due to capex. The average cost of borrowing reduced by 140 basis points to 8.2% in H1 FY26 from 9.6% in H1 FY25, supported by two credit rating upgrades. The company maintains its leverage ratios within stated guidelines, even during the peak capex phase.
Market Dynamics and Regulatory Landscape
The Mass Premium segment experienced 5% degrowth in Q2 FY25 due to regulatory intervention in southern states, though normalization is expected by Q3 FY26. The Maharashtra-made liquor policy led to a 20% decline in IMFL volumes, with management awaiting further clarity. Telangana overdues saw some recovery, with ₹100 crores received in October 2025, and continuous reduction is anticipated. The industry benefits from stable raw material costs and regulatory reforms in states like Andhra Pradesh, supporting margin stability and volume recovery.
Luxury Portfolio and Future Outlook
ABDM's luxury portfolio, including Zoya Gin and Arthaus, is expanding its presence in addressable markets and travel retail. The company plans to launch three new brands in H2 FY26 to complete its portfolio. The A&P spend is currently 4.5-5% of P&A NSV, with plans to increase it by 75-100 basis points year-on-year for the next 2-3 years. Management is optimistic about a positive outlook for H2 FY26, driven by the festive season and continued focus on profitable growth and sustainability.